As a seasoned researcher with over two decades of experience in blockchain technology, I have witnessed the evolution of cryptocurrencies from their infancy to their current prominence. The upcoming Cardano-Bitcoin bridge based on the Grail protocol presents an intriguing development that could reshape the landscape of decentralized finance (DeFi).
The impending Cardano-Bitcoin linkage utilizing the Grail methodology could potentially mark the beginning of offering Decentralized Finance (DeFi) tools reinforced by Bitcoin, according to papers detailing the bridge’s foundational protocol. In simpler terms, this collaboration might be a preliminary move towards enabling DeFi applications that rely on Bitcoin for security.
On October 24th, it was revealed that Emurgo, who supports the development of Cardano, is collaborating with the developers of Grail and BTCOS to build a bridge between their respective platforms.
In a subsequent post on platform X, Charles Hoskinson, the creator of Cardano, explained that the system will eventually support Decentralized Finance (DeFi) apps backed by Bitcoin. Furthermore, he mentioned that due to Babel fees, developers working on Bitcoin can create Hybrid Cardano/Bitcoin applications using Aiken and settle transaction costs in bitcoin.
On November 16th, a post I made was taken down, however, a similar sentiment was captured by user Al’O and broadcasted via his channel, which I found quite insightful.
A number of Bitcoin enthusiasts expressed doubts about the feasibility of securing decentralized finance (DeFi) applications within the Bitcoin network.
Critics argued that previous “Bitcoin Layer 2s” didn’t provide users with the freedom to withdraw their Bitcoin at will, as it required the approval of the network administrator. These critics are wary that the upcoming Cardano/Bitcoin integrated network might follow a similar pattern.
Nevertheless, documentation regarding Grail indicates that it permits Bitcoin users to withdraw funds directly to Cardano, bypassing the need for approval from its validators.
Smart contracts on Bitcoin
Grail is a concept that draws inspiration from a previous notion called “BitVM,” as detailed by its creator, Robin Linus, in a whitepaper published in the year 2023.
The paper suggested the development of a Bitcoin-based “optimistic rollup,” resembling Ethereum’s Optimism, Base, or Arbitrum, by implementing a server that records either “0” or “1” for each piece of data. It was proposed that complex games such as chess, go, or poker could potentially be played on Bitcoin using this setup.
The Grail document, released in April, indicates that Grail is developed based on the BitVM concept, and it’s important to note that the initial BitVM setup facilitated a massive number of intricate transactions, eventually rendering its usage as a bridge cumbersome due to these complexities.
As a data analyst, I employ the concept of zero-knowledge (ZK) proofs to streamline the data storage requirements for Bitcoin. This innovative approach allows me to minimize the amount of information that needs to be retained, thus simplifying the system’s overall complexity.
The final product is a system designed for users to transfer Bitcoin into a secondary network without relying on the trustworthiness of its security mechanisms. Essentially, this implies that users can withdraw their Bitcoin (BTC) from Cardano, regardless if Cardano’s servers are controlled by a malicious user.
Creating hybrid apps may take a long time
As a crypto investor, I understand that after the implementation of the bridge, creating Decentralized Finance (DeFi) applications backed by Bitcoin on Cardano might require some time. In a now-deleted Reddit post, Hoskinson mentioned that developers would need to learn Cardano’s Aiken programming language to build these hybrid Bitcoin/Cardano apps.
Because the majority of Ethereum DeFi (Decentralized Finance) developers possess expertise in Solidity, it means that creating new applications is not as simple as copying and pasting existing ones on Ethereum. Instead, they’ll need to write fresh code for these new applications.
In the video shared by Al’O, Hoskinson expressed that the task at hand is considerable, demanding, and will require integrations with digital wallets among other things. However, he considered the effort necessary due to the significant value of approximately $1.5 trillion present in the Bitcoin market.
Withdrawals can still be blocked
CryptoMoon spoke to Edan Yago, co-founder of Grail developer BTC OS. Yago said that withdrawals from the bridge could still be blocked if 100% of its verifiers collude maliciously.
To gain control of the Grail system with ill intentions, it’s essential that you possess all the nodes,” he explained.
Still, he said, this is “a stronger security assumption than Bitcoin,” since Bitcoin only relies only on the assumption that the “majority of miners [or hash power]” are honest.
According to Yago, the bridge offers a higher level of security compared to existing Bitcoin pegging mechanisms. Since vast amounts of capital, roughly equivalent to trillions of dollars, are tied up in Bitcoin, it’s crucial that we strive for a more secure system. Yago further emphasized:
The majority of Bitcoins are inactive today due to owners’ reluctance to entrust third-party, centralized entities for cross-chain transfer services. We propose that a secure vault or bridge like Grail, reinforced by zero-knowledge cryptography and backed by Bitcoin miners, could offer the most trusted native crypto storage solution. This would encourage more users to utilize their Bitcoins.
OP_CAT as an alternative for Bitcoin DeFi
The Grail isn’t the sole method aiming to safeguard Decentralized Finance (DeFi) applications using the Bitcoin network. Another approach, known as “OP_CAT,” also makes this claim. However, implementing OP_CAT necessitates a soft fork in the Bitcoin node software, which some Bitcoin nodes are hesitant about adopting.
Nevertheless, Eli Ben Sasson, CEO of StarkWare, has expressed his support for this change and anticipates its launch “within the upcoming year.
In response to inquiries about OP_CAT, Yago explained that it doesn’t significantly alter the fundamental security expectations related to the bridge.
He doesn’t support adding OP_CAT to Bitcoin, since he believes that it is “quite risky.” He said:
“OP_CAT can quickly become very cumbersome in terms of transaction size, and even chains like Fractal that have created a Bitcoin fork with OP_CAT activated are finding that it brings its own complexities to solve.”
Nevertheless, he mentioned that if OP_CAT was introduced, it could potentially alter the structure for verifying zero-knowledge proofs in Bitcoin. However, it wouldn’t fundamentally affect the operation of the bridge.
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2024-11-18 17:04