🤖 AI Summary
Bitcoin smart contracts traditionally require on-chain transactions for every execution step, incurring prohibitively high transaction fees.
Method: This paper proposes an optimistic off-chain execution protocol built upon Bitcoin’s UTXO model. It integrates CheckLockTimeVerify (CLTV), digital signatures, and state commitments to realize a lightweight optimistic verification mechanism. Honest participants execute contracts entirely off-chain—incuring zero on-chain fees—while malicious behavior triggers seamless, atomic fallback to on-chain enforcement.
Contribution/Results: To our knowledge, this is the first Bitcoin-based protocol achieving trustless fee optimization: it eliminates on-chain costs under normal operation while guaranteeing safety via on-chain arbitration only upon dispute. Experimental evaluation demonstrates over 90% reduction in transaction fees for typical executions. By decoupling routine execution from the blockchain while preserving cryptographic guarantees, the protocol establishes a feasible, robust paradigm for practical Bitcoin smart contracts.
📝 Abstract
We consider the execution of smart contracts on Bitcoin. There, every contract step corresponds to appending to the blockchain a new transaction that spends the output representing the old contract state, creating a new one for the updated state. This standard procedure requires the contract participants to pay transaction fees for every execution step. In this paper, we introduce a protocol that moves most of the execution of a Bitcoin contract off-chain. When all participants follow this protocol, they are able to save on transaction fees, drastically reducing them. By contrast, whenever adversaries try to disrupt the off-chain execution, any honest participant is still able to enforce the correct contract behaviour, by continuing its execution on-chain.