DLC, smarts contracts on Bitcoin

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  • Introduction
  • What is DLC?
  • How do DLCs work?

1. Introduction

One of the biggest criticisms made by those who participate in platforms other than Bitcoin, is the limited programming capacity that there is in this network. That’s why the idea of DLCs (Discrete Registration Contracts) brings great expectations. This technology will expand the capacity of programming transactions in Bitcoin. That is, the ability to create better scripts and smart contracts on Bitcoin.

Read on to learn more about DLCs and how they can improve Bitcoin. You’ll also understand why the developers continue to bet on the capabilities and potential of this crypto currency.

2. What is DLC?

A Smart Contract is a software or decentralized digital program that is created with the purpose of registering the agreements and terms that are established between two or more people. Its main characteristics are that the program monitors that these agreements are automatically fulfilled once the conditions of the same are met. And the best thing is that it does it in a completely decentralized way without the intervention of a third party. A simply great idea, although with several years on top. In 1995, Nick Szabo was already talking to us about it, as the creator of the concept.

However, the idea was at that time impractical, until Bitcoin came along, and the blockchain technology. Bitcoin was the first crypto currency to run smart contracts (Bitcoin scripts are just that), although in a rather limited way. However, the arrival of Ethereum changed everything. This platform took the concept of smart contracts to a new level, and nowadays, nobody doubts that.

But what happened with Bitcoin? Well, for many years, Bitcoin didn’t modify its Bitcoin Script to make more complex smart contracts. However, times are changing and developers now aim to add better functionality in that sense. That’s where DLCs, or Discrete Registration Contracts, come in.

Simply put, a DLC is a smart contract that is implemented over the Bitcoin network. These can be used to record agreements and terms that will be fulfilled upon the occurrence of a future event. This is where the novelty comes from, because Bitcoin has kept a low profile so far regarding the use of intelligent contracts. A fact related to the simplicity of its code for implementing scripts (Bitcoin Script).

In many media outlets you can read the recent 1 Bitcoin bet between Chris Stewart and Nicolas Dorier about who will win the presidential election, Trump or Biden, registering the agreements of this bet by using a DLC in the Bitcoin main network.

Although the bet is quite curious, the novelty of this event is the demonstration that the developers make to implement smart contracts on the Bitcoin blockchain. This fact leaves evidence of the potential of the main crypto-currency platform in the world.

Bitcoin enthusiasts welcome the wide horizon of opportunities that are opening up with Bitcoin’s advances in this path, and it foretells the advent of an era of great new features that will enhance the capabilities of the Bitcoin Network in this field.

3. How do DLCs work?

The operation of a DLC begins when two people interested in establishing the DLC contract, set its terms and agreements that will be executed by the contract. From there, the contract waits for its activation according to the scheduled events. These events and their monitoring are controlled by a series of oracles.

Once the details of the contract are agreed upon, the persons involved in this contract send the funds to a multi-signature address. With the deposit made, the oracle signs the contract with the hash that points to the person or persons who benefit from the contract. This hash will allow the beneficiary or beneficiaries to withdraw the funds from the contract.

However, all the details of the contract are registered in one address of the Bitcoin blockchain. At this point, it happens just as it does in Ethereum, giving us the assurance that the contract is unchangeable. These contracts are issued as a standard multi-signature transaction, which gives discretion to this type of intelligent contract. This is possible because DLC obfuscates the smart contract in such a way that it is not possible to know whether it is a normal transaction or a smart contract.