In August 2017, the Bitcoin developers implemented Segregated Witness (SegWit) and released a beta version of the Lightning Network. This technological innovation allowed to increase the efficiency of Bitcoin, namely to increase transaction bandwidth and reduce the commission fees. Other features that will improve the work of the Bitcoin network are also being prepared for release in the near future.
Application: Increase scalability and privacy
Release date: probably at the end of 2018 (test version)
The MAST, or Merkelized Abstract Syntax Trees, is a simple but promising innovation that was made possible by the introduction of SegWit. MAST will increase the scalability and confidentiality on the platform by changing the method of records of smart contracts in the blockchain. Now everything is fixed in one block, and this is not safe since all information is stored in one place. In addition, the data array overloads the block itself, and transactions become slower as a result.
The technology developed by the experts Russell O'Connor, Pieter Wuille from Blockstream and researcher Peter Todd of Bitcoin Core, will allow to break smart contracts into separate parts based on two existing concepts. MAST is a symbiosis from an abstract syntax tree (AST) that will break a smart contract into parts, and a hash tree, or a Merkle tree. This will reduce the size of the data in the block and check the origin of these split parts of a smart contract on the example of any hash in the tree.
MAST is offered in two Bitcoin development projects, or BIP, Bitcoin Improvement Proposal. In document BIP 114 (introduced in September 2017), developer Johnson Lau identifies a new type of witness program that uses a hash tree to encode the mutually exclusive branches in the script. But still, BIP 114 has some differences from MAST, and, as Lau himself says, it is better to mention his development as a Merkelized Script.
“This proposal is a simplified and special case MAST. Instead of encoding individual operations, the Merkle root encodes mutually exclusive conditional script branches. Although this is not a full implementation of MAST, it provides the same level of privacy and O(log n) scalability,” says Lau.
Another implementation of MAST is implied by the developer Mark Friedenbach in BIP 98, 116, and 117 (advanced form 116). Friedenbach explains the work of the technology in BIP 117 or Tail Call as a means of performing unlimited code paths.
“This achieves a form of generalized MAST enabling decomposition of complex branching scripts into a set of non-branching flat execution pathways, committing to the entire set of possible pathways, and then revealing only the path used at spend time,” as the developer states.
Technology: Schnorr Signatures
Application: the replacement of the existing Bitcoin signature algorithm (ECDSA)
Release date: in a few years
The Schnorrs are named in honor of their inventor Claus-Peter Schnorr. The replacement of the digital signature algorithm of the ECDSA was the main wish for many users and developers of Bitcoin for a long time. In 2016, developer Gregory Maxwell analyzed the available options in his study and proved that using Schnorr can reduce the size of transactions by 40%.
The effectiveness of the new method will be achieved through two innovations. The first is that by using the "native multisig" technology the Schnorr will allow aggregating multiple transaction signatures into one signature. This will simplify the execution of transactions financed, for example, from three different accounts, and will transfer them all to one receiving party. This will reduce the size of transactions and reduce network bandwidth by 25%, therefore, spam attacks will no longer be a priority.
The second innovation from Schnorr is to increase the privacy of multi-type transactions by aggregating signatures in these transactions, which masks the original signatures for a common key. This will also reduce the size of multi-segment transactions because there will be only one signature for each transaction. In addition, verification of Schnorr signatures is faster than ECDSA verification.
In 2012, at the time of the invention, the Schnorr algorithm was not standardized because the original patent was not applied to it. The general outlines of the system have long been substantiated from a mathematical point of view, only the documentation is lacking. Despite the technical readiness, however, several years ago, multi-level transactions that used the Schnorr algorithm for anonymity of information were cracked by the cancellation method when an attacker interfered with the network and simulated the public key of the interested parties. After that, developer Pieter Wuille presented his decision to avoid this problem in the form of gaining control over a multisig account (2 in 2 in this case) using only one of several existing signatures.
Application: improve the confidentiality of Bitcoin
Release date: approximately three years
A team of developers from Stanford University, University College London, and Blockstream, consisting of Benedikt Bunz, Jonathan Bootle, Dan Boneh, Andrew Poelstra, Pieter Wuille, and Gregory Maxwell, developed short-term evidence for Bulletproofs transactions in 2017. They promise to improve the confidentiality of Bitcoin by hiding the number of transactions, leaving the addresses of the sender and receiver wallets public. Bulletproofs evidence do not require any trust between the parties. Thanks to this, users can use the technology to run their own businesses.
"Bulletproofs is better, it is shorter, more efficient, and three times faster than the old system. Confidentiality of money and ease of use is the main requirement for all currencies," Bunz said at a speech earlier this year.
Short evidence and anonymity of transactions have already attracted the attention of Monero and Litecoin, which are considering the possibility of using the protocol in their own blockchain.
"Bulletproofs are stunning! The technology works. The Monero confidential transactions hide the amounts involved. To ensure the balance of the transfer and withdrawal of funds, we use commitments with algebraic properties. It is also necessary to secure each amount by proving the range. It allows any user to verify that the obligation is an amount within a certain range and does not disclose anything other than value," says Monero representative Sarang Noether after testing the Bulletproofs test version.
But, despite the successful implementation of the test version, there is as of yet no specific date for the introduction of technology into the Bitcoin network. One of the developers, Pieter Wuille, believes that it is too early to use Bulletproofs.
"I'm very happy to see Monero experiment with technology long before it'd ready for Bitcoin, but it has problems of its own. The RingCT approach has far worse scalability issues (unprunable txouts), and the privacy it grants is not perfect either," commented Wuille one user after his article.
Application: improve the confidentiality of Bitcoin
Release date: unknown
Another development aimed at increasing the confidentiality of Bitcoin is called Confidential Transactions (CT), and it proposes to make the transaction amounts of Bitcoins visible only to the participants of the transaction. CT was introduced for the first time by co-founder and CEO of Blockstream Adam Beck at the Bitcoin forum in 2013.
"In addition to the obvious direct use of CT, the technology will help realize some functions, namely, raise the effectiveness of the idea of such cryptocurrencies as Zerocoin," suggests Beck.
Thanks to CT, transaction amounts become privatized without harming the work in the public protocol of Bitcoin, where the verification of the amount can be performed by additively homomorphic obligations, or through the method of cryptography. CT allows transferring private data without increasing the transaction size. Developers using this technology hope to solve the problems of low productivity, excessive costs and new cryptographic assumptions.
Four years later, researcher Gregory Maxwell announced that he had reduced CT transactions from 16 times the size of conventional Bitcoins to three times the size.
"With these optimizations the size is reduced to 128 bytes per two bits plus 32 bytes; about 40% of the prior size. My approach also allowed a public exponent and minimum value so that you could use a smaller range (e.g., 32 bits) and have it cover a useful range of values (though with a little privacy trade-off). The result could give proof sizes of about 2.5KB per output under realistic usage," as Maxwell sums it up.
Like Bulletproof technology, CT does not have any exact date when it can be added to Bitcoin. But there are already those who want to implement this technology in the network. According to the author of Litecoin, Charlie Lee, confidential transactions will be added to their blockchain immediately after CT is ready.
"I'm excited to see progress on Confidential Transactions. Fungibility is the only feature of good money that Bitcoin/Litecoin is missing. I look forward to adding this to Litecoin when it is ready. And this can be done with a soft fork. Stay tuned," said Lee to the developers of CT.
Technology: Sidechain Projects
Application: safe use of tokens in the blockchain
Release date: unknown
Sidechain is a new mechanism (or development group) that allows safely using tokens and other digital assets from one blockchain in another separator block and, if necessary, return to the original blockchain. The functionality of Sidechain has a huge potential for expanding the capabilities of existing networks. Therefore, at the moment, several technologies of this direction are being developed at once.
The first technology is Liquid Network. The Canadian project is a private centralized sidechain, so some of the company's developers can gain access to the blockchains. The advantages of Liquid are that the technology allows for making instant transactions while maintaining confidentiality (built-in ST) and the ability of users to store liquid funds outside the crypto exchange, as well as conduct audits in real time using a secure protocol.
For the successful operation of Liquid Networks, ultimate trust is required from a group of parties and government assurances, in accordance with which the rules and provisions for consensus are respected.
The project was announced in 2015, and the mainnet beta version was released in May 2017. Now this development is tested in BTCC, Bitfinex, Paycase, Unocoin, and Zaif. There is no final release date, but version 1.0 may be released in 2018.
The second technology is RSK (formed from the word "rootstock"). It is another group of sidechains consisting of 30 companies, which plan to implement smart contractual functionality and almost instant payments to Bitcoin. Like Liquid, RSK uses a federated system where the custodians monitor the Bitcoin traffic between the RSK network and the Bitcoin network using the SBTC (smart Bitcoin) token, which is pegged to BTC in a 1:1 ratio.
RSK smart contracts are programmed on Solidity, and the RSK virtual machine is fully compatible with Ethereum. The RSK network is provided with proof of work with the same algorithm as Bitcoin Proof of Work. According to the developers, RSK technology can scale up to 100 transactions per second.
The third technology is Drivechain, which was invented by Paul Sztorc in 2017. This sidechain is currently mothballed, and is waiting for the moment when 95% of Bitcoin miners will approve the soft fork. Drivechain plans to allow the linking of several blockchains to the Bitcoin blockchain. In general, the methods for achieving this goal are similar to RSK. But, unlike this company, Drivechain is flexible to and allows for creating individual sidechains depending on the block size or privacy functions.