Compute Anything on Bitcoin? What You Need to Know About BitVM

Bitcoin took a leap this week.

Bitcoin developer Robin Linus released a paper on Tuesday called "BitVM: Compute Anything on Bitcoin," which proposes a way to take advantage of more complicated smart contracts on Bitcoin than have been possible in the past. Smart contracts are essential computer code that runs applications on blockchain networks.

Pseudonymous developer Super Testnet boldly proclaimed that "this is probably the most exciting discovery in the history of Bitcoin script."

Better smart contracts, in the same vein as second-largest cryptocurrency Ethereum, has long been a Bitcoin holy grail. BitVM enabling similar functionality potentially enables developers to more easily build more complex applications than before, pushing Bitcoin forward.

Though not everyone is convinced BitVM deserves the attention it’s getting, if it works, BitVM could have wide effects on what can possibly be built on top of Bitcoin.

In the paper, Linus lists sidechains and rollups—tech that's all the rage in crypto these days—as potential applications. Sidechains are networks that run parallel to blockchains while rollups bundle up transactions before ultimately being reported on the main network. Both are used to help scale blockchain networks such as Ethereum, which typically can only handle a dozen or so transactions per second due to design limitations.

But the most exciting application? Linus told Decrypt he thinks it's "scaling Bitcoin to millions of transactions for Bitcoin to become the most used currency on Earth."

BitVM can run on Bitcoin today

Perhaps the most promising aspect of the proposal is that it works on Bitcoin today, not needing any "soft fork" additions to Bitcoin, which are difficult to execute. Bitcoin's last soft fork Taproot, for instance, took years to be put into place, since developers had to test and make sure it worked correctly.

Without getting too far into the weeds, BitVM introduces a way to execute smart contracts "off chain" so all these computations don't clog up Bitcoin's limited space. On Bitcoin’s base layer, it can only handle roughly a maximum of four MB of data a minute. That’s not a lot.

"As long as both parties collaborate, they can perform arbitrarily complex, stateful off-chain computation, without leaving any trace in the chain. On-chain execution is required only in case of a dispute," the paper explains.

In an abstract sense, this works similarly to the Lightning Network, widely trumpeted as the future of Bitcoin payments, since it also uses an off-chain mechanism to scale Bitcoin transactions.

'Huge' future design space

Though there's a lot of excitement around the new idea, the paper has been met with some skepticism from Bitcoin developers, as well.

Among other technical sparring, one criticism is that, even though computations are done “off-chain,” verification on-chain could still have a hefty overhead. The BitVM proposal says it won't add a ton of volume to the network, which could cause gas fees to spike like they did when Ordinals surged in popularity. But others also point out that the proposal requires a lot of interactivity between the two parties, something that developers try to get around as much as they can.

But Linus thinks these problems can be solved with time. "[The paper] was intended to describe the idea in simple terms, spark interest in the community, and it is not a full solution yet," Linus told Decrypt.

"However, this paradigm enables a huge novel design space," he added, "and I think it is quite likely that we do find complete solutions soon."