Ever since cryptocurrencies were first introduced to the public, there's been a divide that everyone has kind of accepted. The two major cryptocurrencies are Bitcoin and Ethereum, and they differ based on how they are used. Bitcoin is used to store value and trade, while Ethereum is the crypto of smart contracts.
There's a long story of why this was the case, but we may finally see smart contract features introduced to Bitcoin as well. There's been talk of it for years now, but it seems that Bitcoin developers have actually taken the steps needed to do it.
Why does it matter?
Bitcoin is known as the largest and most widely used cryptocurrency. However, Ethereum is a crypto with the widest applications when it comes to decentralized finance and automated payments. For instance, the crypto gambling platforms overview shows that platforms with the most innovative smart contract payments are always based on Ethereum.
Introducing such smart contract features to Bitcoin was something users have long been asking for. It would change the dynamic between the two biggest cryptocurrencies and, therefore, the whole crypto landscape. This also means that cross-chain platforms would become more common.
What are Smart Contracts?
Smart crypto contracts are self-executing agreements with the terms of the contract directly written into code. They operate based on blockchain technology, and there's no need for intermediaries, such as banks or governmental institutions.
Smart contracts ensure transparency, security, and efficiency by eliminating the potential for human error and manipulation. The contracts utilize cryptographic principles to verify and execute transactions. Using smart contracts reduces cost and increases transaction speed.
OP_CAT
OP_CAT is a code that was once a piece of Bitcoin and that allowed for the use of smart contracts. In an interesting piece of internet lore, the code was removed by Satoshi Nakamoto, the founder of Bitcoin, in 2010. The mysterious Bitcoin founder thought that OP_CAT would bring excessive memory usage issues and expose Bitcoin to vulnerabilities.
That's how Bitcoin evolved into what it is today, and over time, Ethereum took on the role that it has today. In recent years, OP_CAT has been talked about as a way to improve Bitcoin and make it possible to build more things with it.
A BIP Number
BIP refers to a Bitcoin Improvement Proposal. Once a code project gets a BIP number, it means that it's under discussion among the developers and that there's a process involved for actually turning it into a reality. OP_CAT got a BIP number, meaning that it's not in the early stages of development.
It's important to state, however, that this means that the change will happen soon or at all. However, it does mean there are actual discussions among the Bitcoin developers about finally introducing smart contract features to Bitcoin.
Does Bitcoin need to be more Like Ethereum?
Bitcoin has been doing quite well as it is now, and after the halving and the introduction of ETFs, it's been on a fast rise. However, the technology behind it hasn't felt exciting for the past ten years. This may sound like a bad thing, but for some, it also means that technology has been stable all this time.
Many feel that there's nothing wrong with different cryptocurrencies performing different roles in the market. Others, however, still have the same concerns that Satoshi Nakamoto had all those years ago and that not having smart contract features was a good move.
Time for Innovation
The developers behind the new proposal, BastionZero co-founder Ethan Heilman and Botanix Labs lead software engineer Armin Sabouri, claim that it's the right time for innovation and that the changes that have already taken place in the crypto world address Nakamoto's concerns.
“Having worked with Bitcoin for a really long time and having built a number of protocols on top of it, one of the big problems I kept running into is that variables in the programmability of the network can't really be combined,” Heilman said.
Adding this functionality would help the building of vaults – a type of Bitcoin smart contract or “covenant” that puts constraints on how a Bitcoin can be spent.
How is the Process going?
We're at a very early stage of the process. However, getting the BIP number is still the furthest idea that has come to fruition. There's a combination of technical, security, and community consensus considerations that need to be made before the idea goes any further.
The goal is to create a broad agreement among the developers about the safety and utility of the protocol before taking additional steps. It's important to note that the public will be involved in this discussion more than ever before – partly because of how important Bitcoin is for the economy and partly because of how important this innovation is.
A Difference in Philosophies
Adding a new feature that would make Bitcoin competitive against other cryptos may seem like a no-brainer, but those who disagree see it as a difference in philosophies. When Bitcoin was first introduced, it was made as an alternative to traditional fiat currencies.
Therefore, it was made to store and represent value just as fiat money would have. In such a view, smart contracts are a completely different breed from traditional cryptocurrencies, even though both use blockchain.
Introduction of Non-fungible Tokens
When non-fungible tokens were introduced for Bitcoin, the public met with a similar backlash. Many claimed that it changed the fundamental nature of Bitcoin and turned it into something new. In a way, it did, and NFTs had their role to play, but Bitcoin continued to be the most widely-used cryptocurrency.
If that experience is to be used as an example, the same thing will happen with the introduction of Bitcoin smart contracts as well. There are always those who oppose innovations, even in progressive industries such as crypto.
How would it affect the Market?
The introduction of a whole new set of Bitcoin features will dramatically change the market. However, it won't happen overnight. The introduction of EFTs was also expected to change the industry right away, and it did, but after a month, the industry adjusted, and the hype died down.
The bigger question is how the parts of the industry that depend on Ethereum will change. Bitcoin will take a bite out of that market, but it's not likely that most Ethereum users will give up on it anytime soon. Predicting long-term trends is almost impossible with crypto, as there are a lot of moving parts.
To Sum Up
Bitcoin, traditionally used for value storage and trading, may integrate smart contract features, bridging the gap with Ethereum. Smart contracts and self-executing agreements on blockchain ensure transparency and efficiency sans intermediaries.
The proposed OP_CAT code, once part of Bitcoin, resurfaces for this purpose. With a Bitcoin Improvement Proposal (BIP) underway, discussions contemplate technical, security, and community consensus aspects.
Some view this move as essential for innovation, while others see it as a philosophical departure from the original Bitcoin idea. Anticipated market impact suggests a shift, albeit gradual, with Bitcoin potentially encroaching on Ethereum's territory. However, long-term predictions aren't easy to make in the crypto market.
