Let me tell you about BitVM, a new computational paradigm designed to express Turing-complete Bitcoin contracts, as explained in the white paper available here: https://bitvm.org/bitvm.pdf
This does not require any changes to the network's consensus rules. Instead of performing computations on Bitcoin, they are simply verified, in a similar manner to optimistic #rollups.
A prover makes a claim that a given function evaluates certain specific inputs to a specific output. If this claim is false, then the verifier can perform a succinct fraud proof and punish the prover. Using this mechanism, any computable function can be verified on Bitcoin.
A substantial commitment in a large program within a Taproot address requires significant amounts of off-chain computation and communication, but the resulting on-chain footprint is minimal. As long as both parties cooperate, they can perform arbitrarily complex off-chain computation and state without leaving a trace on the chain. On-chain execution is only necessary in the event of a dispute.
BitVM creates a new design space for more expressive Bitcoin contracts and off-chain computation. Potential applications include games like chess, go, or poker, and in particular, the verification of validity proofs in Bitcoin contracts. Moreover, it might be possible to link BTC to foreign chains, construct a prediction market, or emulate new opcodes.
The main downside of the model proposed here is that it is limited to a two-party framework, with a prover and a verifier. Another limitation is that, for both the prover and verifier, significant amounts of off-chain computation and communication are required to execute programs. However, these issues seem likely to be resolved through further research.
In conclusion, BitVM is an intriguing proposal that could potentially enrich the Bitcoin ecosystem by enabling the execution of more complex computations on the blockchain. However, like any innovation, it must be approached with caution. While promising, this technology still requires thorough research to confirm its viability and effectiveness. In summary, BitVM could represent a significant advancement for smart contracts on Bitcoin, but its true potential remains to be determined.
