Foresight Ventures: Think Outside the Block「Arweave and Bitcoin Smart Contracts」

Quick Takes

  • Storage-based Consensus Paradigm smart contracts are the optimal solution for DApps in the Web3 era, providing high performance with uncapped TPS, while ensuring data traceability and monopoly-free.
  • The essence of smart contracts is not to avoid risk, but to allow a reasonable distribution of risk among the people involved in the contract. The oversight issue of smart contracts can be addressed by DAO and open source.
  • Arweave is a Layer0 network with permanent storage, on which SCP applications can be built not only to store data and data interactions trustfully, but also to host front-end pages trustfully, without censorship and performance limitations of the blockchain.

1. Smart Contracts

original definition

  • Smart contracts have implicit conditions.
  • We can take the example of a vending machine. A user buys a pizza with 1000 bitcoins, and the terms of the contract are a certain amount of bitcoins can be exchanged into a certain amount of pizza. The implied term is that the pizza will not give you diarrhea after you eat it. These implied terms are enforced by the food safety laws of the country where the vending machine is located. In the blockchain world, our enforcer and watchdog is the entire blockchain network.
  • The essence of smart contracts is not to avoid risks, such as untrustworthy computing environments and untrustworthy storage. Rather, it is to allow the people involved in the contract to allocate risk in a reasonable manner.
  • The risk allocation of a smart contract is only valid under certain conditions. The premise is that there must be a mechanism for handling defaults. In the blockchain space, this mechanism for handling defaults is, naturally, a blockchain network such as Ethereum. We’ll talk more about this later.
  • Another advantage of smart contracts is transparency.
  • We can take into account all the complicated details of the contract through open source code, so that we don’t have to go back and forth to finalize the details of the contract for an event that only has a 0.1% chance of occurring.

smart contracts now

2. Colored Coins

colored coins introduction

colored coins features

  • Hitching a ride of Bitcoin:
  • Colorcoin uses the Bitcoin blockchain as its backbone, employing a storage-based consensus, using Bitcoin’s Metadata as the database for storing transactions. It leverages the advantages of Bitcoin, such as unforgeability, ease of transfer, robustness and transparency, resulting in an unprecedented level of security and ease of operation of real-world assets.
  • All of the advantages of Bitcoin, colored coins gets them. While miners maintain the Bitcoin network with countless amounts of computing power, the security of the colored coins project is ensured. The only flaw may be that the Bitcoin “database” may be a little slow to read and write data.
  • Probably the earliest example of NFT for securities:
  • Colored coins was created in 2012. Although colored coins are made up of bitcoins, they can represent a variety of assets and have a variety of uses, including property, coupons, and shares in issuing companies. Each colored coin is also different and may represent a different share. In this way, colored coins are exactly like NFTs.
  • And this primitive but complete NFT project is made possible by Bitcoin’s rudimentary scripting language + Metadata + storage-based consensus. Imagine, with this design, we could replicate all sorts of jpeg NFT projects right on the Bitcoin chain. The revolutionary part of this is that colored coins was born in 2012, a year after Ethereum with its Turing-complete language and EVM was just conceived by Vitalik. This was very much ahead of its time.

RIP colored coins

3. RGB and Taproot

RGB introduction

RGB with Taproot

4. Storaged-based Consensus Paradigm (SCP)

SCP introduction

SCP advantages

  • unlimited performance
  • Smart contracts are computed off-chain and perform just like traditional Web2 applications. The off-chain server can carry a large number of complex transactions. The TPS purely depends on the performance of the server or client machine providing the computation service and the technical architecture used to build the DApp. You don’t need to worry about the performance limitations of the blockchain itself.
  • trustworthy storage
  • With the feature of the underlying blockchain, the data of SCP is stored on the blockchain, and the blockchain is used as a hard disk to obtain the characteristics of data tamperability and traceability. Therefore, blockchain gives trustworthiness to the data.
  • 0 barries in development
  • Any language can be used to develop off-chain smart contracts, with no additional learning costs for developers (learning to use the Arweave HTTP API or Bitcoin scripts certainly doesn’t count). This also avoids the disadvantage of having no or having only rudimentary programming language on the Bitcoin or Arweave.
  • composability
  • By keeping the smart contract completely off-chain, it does not pollute the essence of the blockchain and keeps the by design of the blockchain. At the same time, by layering functions, SCP’s smart contract is composable. The SCP does not have to be on Arweave, but can be modified to access another chain, for example migrating from Arweave’s Permaweb directly to Bitcoin’s Lightning Network. This is important in the future of multi-chain interconnection. All in all, composability in the software age is as powerful as compound interest in finance.

SCP potential problems

  • Is the ecosystem of SCP incomplete now?
  • We mentioned earlier that SCP was inspired by SmartWeave.
  • The core of SmartWeave is Lazy-execution, which runs through all the transactions stored on the chain on the client side when it has to get the latest state. SmartWeave is Arweave’s official smart contract solution, and SmartWeave is a concrete implementation of SCP, so any project that uses SmartWeave is actually using SCP, including the aforementioned colored coins and RGB, which are both implementations of SCP.
  • Currently, almost all projects in the Arweave ecosystem are designed to use SCP. Interestingly, KYVE recently moved from SmartWeave to EVM smart contracts, primarily because their business is inherently cross-chain, so they are rushing to embrace the EVM ecosystem. Maybe the secondary reason is that they think the Arweave ecosystem is still too young. But in fact, everPay, Pianity, Verto, have all made big moves in the SCP ecosystem recently, and we will discuss them in a little more detail later.
  • Enforcer and supervisor of contract execution and computational consensus?
  • At the beginning of this article, we started our discussion on the definition of smart contracts without explaining in detail the issues of supervision and computational trustworthiness in the execution of SCP smart contracts. In the EVM smart contract, the supervisor and enforcer is the Ethereum network. In SCP, since the smart contract is running off-chain, the blockchain network cannot supervise the execution of the smart contract. But in the Web3 era, we have a solution that fits well: DAO + open source.
  • We can use DAO to decide and supervise the execution of off-chain smart contracts and transactions for uploading onto the chain, while everyone can try to run through all the results (off-chain smart contracts are written in “normal” programming languages, almost any device can run them with JS with browser, Java with JVM) with the open source smart contract content and publicly available on-chain data, to compare whether the result is correct or not. With such a supervisor, it is absolutely guaranteed that smart contracts are supervised and computationally trustworthy. After all, compared to some highly centralized chains and some centralized commercial closed-source Layer2 solutions, this approach is very Web3.
  • How decentralized is SCP? Is an off-chain smart contract still a smart contract?
  • There is no requirement for a smart contract to be storage-trusted or computationally trustworthy from the beginning. By definition, SCPs are fully compatible with every concept, except that there is no fully unified EVM compared to Ethereum’s Layer1 smart contracts. We cannot limit our imagination to only on-chain VMs. In general, although some smart contracts are programs on a decentralized network, they are still relatively centralized in some ways. The owner of the on-chain contract itself can have some access controls to do some dangerous operations.
  • Beyond that, almost no one will actually look at the contents of a smart contract line by line, or care about the trustworthiness of the execution or storage. This brings us to the question of technical ethical balance. In the era of Web3, can programmers who know how to code suppress ordinary users? We’ve already been suppressed in Web2. So an off-chain smart contract with DAO oversight and open source code that can be repeatedly run by users is not just a smart contract, it is a very secure and trustworthy and decentralized smart contract.

5. SCP Ecosystem on Arweave

highlighted projects

  • everPay: real-time cross-chain payment protocol
  • As the originator of SCP, everPay has been pushing this smart contract design pattern in the developer community on Arweave. EverPay itself is a high performance implementation of this design pattern. Instead of implementing SCP directly with SmartWeave, everPay uses other high performance implementations and is actively arranging DAO organization and nodes for off-chain smart contracts.
  • Recently everPay released a high performance Arweave txs synchronizer for golang concurrent programming Arsyncer. Also everPay is recently promoting an off-chain high-performance AMM based on the SCP design pattern. EverPay continues to lead the Arweave SCP ecosystem with very cutting-edge design and technology.
  • DeFi’s data ecosystem
  • has been optimizing SmartWeave through excellent architecture and cutting-edge technology in the Arweave ecosystem. They have developed multi-layer design and browser multi-layer caching SmartWeave to reduce the unnecessary reloading and running of transaction data, which can greatly optimize the performance of client contracts. Alternatively, a trusted user can generate a snapshot of the transaction state to reduce the transaction computation. Recently they have also been working on incorporating WebAssembly technology into SmartWeave to improve the security, performance and readability of contracts.
  • Pianity: music NFT exchange
  • Pianity is a music NFT platform that proposes a model to bring collectors a certain annualized revenue. The Pianity platform generates fee revenue from primary sales and secondary trading of music NFTs, and then distributes the revenue to each user who holds an NFT based on the ratio of the value of the NFT at the time of purchase to the total value of all NFTs. Since the percentage is calculated based on the price of the NFT at the time of purchase, it may lead to users deliberately holding and raising the price of the NFT in order to obtain a higher allocation percentage, which in turn stimulates the market to gradually increase the allocable revenue and attract traffic attention.
  • In the market of music NFTs, Pianity has the opportunity to stand out through its perpetual storage and dual-revenue model.
  • Verto: DEX for profit sharing tokens
  • There is a special token type in Arweave: Profit Sharing Token (PST). Holding a PST profits holders a certain AR fee from other users using the DApp. Verto is the DEX of these profit sharing tokens. Its token, VRT, receives a 0.5% commission on all PST transaction fees. (For more on PST, please refer to our previous article)
  • In our previous article, we mentioned that Verto is working on a refactoring of the SmartWeave contract code, so there have been no transactions recently, but it is a good indication that Verto is active in the Arweave SmartWeave ecosystem and is contributing to its development. We are looking forward to trading these profit sharing tokens when the new version of Verto goes live.

Arweave’s unique advantage

6. Conclusion

Related Links




Foresight Ventures is a blockchain technology-focused investment firm, focusing on identifying disruptive innovation opportunities that will change the industry

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Foresight Ventures

Foresight Ventures

Foresight Ventures is a blockchain technology-focused investment firm, focusing on identifying disruptive innovation opportunities that will change the industry

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