When both signature aggregation technology and Schnorr signatures are fully implemented into Bitcoin, we can expect a massive change to happen in the network. I’m of course talking about the possibility of introducing a technology called Scriptless Scripts.
Scriptless Scripts can be used to execute smart contracts off-chain through the use of Schnorr signatures. The idea is that by aggregating signatures, we can input conditions to the spending of the coins.
The concept of Scriptless Scripts was born from Mimblewimble, which is a blockchain design that does not store permanent data – with the exception of kernels and their signatures. The fundamental properties of Mimblewimble include both privacy and scaling, both of which require the implementation of Scriptless Scripts.
Benefits of Scriptless Scripts
1/ Another such innovation is Scriptless Scripts—a way to execute smart contracts off-chain using Schnorr Signatures. https://t.co/boKVVKehsS
— Spencer Bogart (@CremeDeLaCrypto) February 27, 2018
Scriptless Scripts could increase the range and complexity of smart contracts that are possible with Bitcoin today. Currently, Bitcoin smart contracts are executed within Bitcoin Script, which is limited in terms of the types of contracts that can be executed.
Scriptless Scripts move the specification and execution of these smart contracts from a network-wide decision – as is currently the case for smart contracts that execute within Bitcoin Script – to a decision that only involves the participants of the smart contract. As a result, the range of smart contracts that a Bitcoin user could potentially deploy should increase drastically.
Moving the specification and execution of smart contracts from on-chain to off-chain is also what drives the privacy benefits of Scriptless Scripts. When the smart contracts themselves are on-chain, many details are divulged to the entire network, including the number and addresses of participants as well as the amount of capital involved . This is not ideal as it’s very far away from typical user expectations regarding contracts and money transfers.
Instead, Scriptless Scripts use Schnorr signatures to move these contracts off-chain. This means that instead of the entire network verifying the actual terms of a contract, the network and its participants simply verify that there is a valid outcome . Those signing the contract only have to agree that the terms have been satisfied and the resulting transaction is valid.
Scriptless Scripts also offer a significant efficiency advantage. By moving smart contracts off-chain, they minimise the amount of data that needs to be verified and stored on the network level. That means fewer overheads for network participants (like full nodes) and lower transaction fees for users.
Typically, improvements in functionality and privacy come at the expense of efficiency. Simply think about the blockchain trilemma and how projects usually need to sacrifice either decentralisation or scalability for the sake of security. However, Scriptless Scripts (via Schnorr signatures) could potentially improve functionality and privacy without compromising at all on efficiency.
Conclusion
With regard to functionality, Scriptless Scripts are said to increase the range and complexity of smart contracts. Currently, with Bitcoin Script, limitations stem from the number of operations that have been enabled by the network. Scriptless Scripts move the specification and execution of smart contractions from the network to a discussion that only involves the participants of the smart contract.
Moving the specification and execution of smart contracts from on-chain to off-chain also increases privacy. When on-chain, many details of the smart contract are shared to the entire network. By moving smart contracts off-chain, the network only knows that the participants agree that the terms of the contract have been satisfied and that the transaction in question is valid.
Finally, with regard to efficiency, Scriptless Scripts minimise the amount of data that requires verification and storage on-chain. By moving smart contracts off-chain, there are fewer overheads for full nodes and lower transaction fees for users.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.