Bitcoin Developers Explore Zero-Knowledge Proofs for Enhanced DeFi Capabilities

According to CoinDesk, Bitcoin developers are exploring the integration of zero-knowledge (ZK) proofs to enhance the blockchain's decentralized finance (DeFi) capabilities. This functionality is currently unavailable and would necessitate a soft fork, or a new version of the software, to be introduced. Edan Yago, a seasoned Bitcoin expert and core contributor to the smart contract operating system BitcoinOS (BOS), expressed concerns about the complexity of implementing such changes. Yago likened the process of forking a blockchain, especially one with a $2 trillion valuation, to performing open-heart surgery. He emphasized that while hard forks are more challenging, any fork introduces significant risks. A fork involves altering a blockchain's code, leading to a divergence onto a separate path. Soft forks allow older versions to interact with the new one, whereas hard forks render older versions incompatible, requiring all users to upgrade their software. ZK proofs are a cryptographic technique that validates statements while preserving privacy by not disclosing any information. Although Bitcoin's software currently lacks this functionality, proposed implementations like OP_CAT and OP_CTV could introduce it. Yago believes developers should find ways to enable ZK proofs on Bitcoin without resorting to any fork. He stated that the onus is on developers to prove that alternative methods cannot achieve this through innovative engineering. BitcoinOS aims to achieve this through BitSNARK, a Bitcoin rollup protocol designed to scale the original blockchain. This development follows the introduction of BitVM by Robin Linus in October 2023, which outlined a framework for enabling Ethereum-like smart contracts on Bitcoin. BitcoinOS has open-sourced what Yago describes as a "fully production-ready" BitSNARK protocol, granting developers access to ZK verification on Bitcoin and facilitating connections to other blockchains like Ethereum, Solana, and Cardano. BitSNARK enables developers to execute large, complex programs and verify the results of computations in just 300 bytes within standard Bitcoin transactions. This advancement could pave the way for BTCFi, a term for DeFi on Bitcoin, by enabling cross-chain bridges, decentralized exchanges, and bitcoin (BTC)-backed stablecoins. Despite numerous projects aiming to introduce DeFi on Bitcoin using OP_CAT or OP_CTV codes, which require a blockchain fork, Yago seeks to achieve the same goal through alternative methods.