NOTE The first practical native Bitcoin smart contract protocol

The NOTE protocol marks a major development in the history of Bitcoin.

NOTE protocol is a digital asset issuance protocol based on the Bitcoin UTXO model. It is different from other protocols that have appeared recently. It is truly built on the UTXO model of Bitcoin. Using a smart contract language compatible with TypeScript, the compiled result is a Bitcoin native operation code, Turing complete, and can include a powerful set of functions including Oracle and zero-knowledge proof.  

Different from protocols such as Ordinals and Atomics, although NOTE also counts user assets through indexers, it is all based on cryptography, and Bitcoin miners ensure asset ownership, avoiding the risk of being marked by indexers. Misoperation issues occurred. Additionally, NOTE’s transaction costs are extremely low, eliminating the need to send two transactions like Ordinals and Atomics. More importantly, the NOTE protocol supports smart contracts, such as Bitwork mining and mining volume decreasing over time. It uses the actual Token value, rather than the prime number protocol based on Satoshi numbers or the dyed currency scheme that relies on UTXO balances.

Compared with many "inter-chain bridging protocols", NOTE issues native Bitcoin assets and does not involve the use of BTC as collateral to issue and trade assets on other chains.

NOTE protocol supports cross- chain, which can send native assets on Bitcoin to other UTXO chains, as well as receive assets from other UTXO chains. It's all based on cryptography and the Bitcoin blockchain consensus.  

NOTE protocol is completely developed by developers in the Bitcoin development community.

The following is a detailed technical explanation:

The advantages of the UTXO model are returning to the public eye. Bitcoin, as the anchor of digital currency, needs available and easy-to-use technical solutions, and the NOTE protocol came into being.  

The Bitcoin UTXO model has huge efficiency and concurrency advantages compared to the EVM model. However, issuance of native assets on UTXO model Bitcoin involves multiple problems that are difficult to solve. The main issue is how to identify the assets. The other is how assets are preserved in a tight transaction structure.

A transaction in the form of UTXO is as shown below:

The NOTE protocol takes an innovative approach to handling Bitcoin transactions and asset management that is significantly different from other protocol solutions. In a traditional Bitcoin transaction, the input portion of the transaction unlocks the output of the previous transaction (i.e., the old UTXO) and generates a new transaction output (i.e., the new UTXO). In other protocol schemes, assets are bound to newly generated UTXOs, causing users' assets to be scattered among different UTXOs. This approach requires indexers and wallets to maintain an exhaustive list of UTXOs to ensure the accuracy of asset binding relationships. At the same time, UTXOs with asset tags must be managed very carefully to avoid mistaken spending, and the entire UTXO must be spent at once.

In contrast, the NOTE protocol adopts an approach that treats transaction outputs as user accounts, where the user's account number is represented by its transaction output script hash, as shown in the TX1 transaction output in the example . This kind of account is completely private, and the type and amount of assets bound to it are derived from the unlocking input of TX1. When these assets are spent in TX2, new transaction outputs are generated after being confirmed and unlocked by Bitcoin miners. In this process, the NOTE protocol's indexer only needs to record the transaction details disclosed at the time of unlocking, and can provide Merkle proofs to verify the validity of the transaction after the block is confirmed.

This design not only simplifies the tracking and management of assets, reduces the problem of user asset segmentation, but also increases the privacy of transactions. By using transaction outputs as account numbers and relying on the Bitcoin network's miner verification and blockchain consensus mechanisms, the NOTE protocol provides a more secure, efficient and privacy-protecting method for the management of digital assets.

A typical Taproot P2TR format transaction is as follows:

The technical strategy adopted by the NOTE protocol is significantly different from the Ordinals and Atomics protocols. Ordinals and Atomics utilize P2TR (Taproot) redemption scripts to embed additional data by constructing an inaccessible data area by adding the OP_FALSE OP_IF opcode. The NOTE protocol allows direct operation of unlocked data through opcodes, improving data availability. In the NOTE protocol, sample scripts can pop data directly from the stack, and more complex scripts can implement on-chain checking functions such as hashlock.

In addition, the NOTE protocol is not limited to the use of P2TR, it can also be implemented through P2SH (Pay to Script Hash), P2WSH (Pay to Witness Script Hash) and non-standard scripts, which increases the flexibility of the protocol and the ability to trade cross-chain assets. NOTE protocol uses msgpack data encoding instead of json encoding, which is more compact and helps reduce the amount of data in each transaction, thereby reducing user transaction costs.

In the NOTE protocol, addresses constructed by specific redemption scripts act as user accounts. These account addresses can only be confirmed by miners when they are correctly unlocked. The asset transaction data contained in the unlocking script is recognized by the indexer when unlocked and processed by off-chain smart contracts. Only asset transactions that pass verification in the off-chain contract will be recorded by the indexer. This mechanism effectively prevents Bitcoin wallets from mistakenly spending NOTE UTXOs, and allows trace amounts of Bitcoin (such as 546 Satoshi) in UTXOs to be recycled.

The design of the NOTE protocol takes into account the multiple upgrades of the Bitcoin network since 2017 regarding privacy and transaction space optimization. At the same time, it also draws on the large block strategy represented by BSV (Bitcoin SV) to deeply explore the potential of Bitcoin scripts. NOTE Protocol's smart contract solution is based on the Bitcoin smart contract language developed by the sCrypt team, which supports off-chain contract verification. Since the Bitcoin script language is Turing complete and can ensure execution within a given script length, the indexer will not fall into an infinite loop due to improper smart contract design, ensuring the stability and efficiency of the system.

The demonstration N20 asset issuance smart contract project has been published on GitHub.

https://github.com/NoteProtocol/scryptdemo

It demonstrates the Pow contract under the NOTE protocol by simulating the halving mechanism of Bitcoin mining and the Bitwork difficulty mining of Atomics , demonstrating the ability to implement complex logic on the Bitcoin network. By generating a 1KB Bitcoin script, the contract allows the indexer to call and verify whether the transaction complies with the protocol. This process reflects the feasibility and flexibility of smart contracts in the Bitcoin network.

More complex Oracles based on the Rabin signature algorithm and complex contracts based on zero-knowledge proofs provide high-level application scenarios. These technologies play a vital role in the implementation of smart contracts, especially when specific conditions need to be verified or specific logic needs to be executed.

By utilizing these smart contracts, asset issuance on Bitcoin can be used to implement real-world application scenarios, such as bounty scenarios for AI to solve problems. In this type of scenario, as long as someone can submit a verifiable calculation result, they can get a reward. This not only shows the utility of Bitcoin smart contracts, but also how they facilitate the implementation of complex applications that go beyond traditional financial transactions and asset management.

The N20 Token asset issuance function is part of the many functions in the NOTE protocol. The NOTE protocol also includes DID (decentralized identity) and encrypted data and ownership identification, and with the formulation and verification process of N721 NFT and Alias ​​(Bitcoin Alias ​​System), the capabilities and application scope of the NOTE protocol are expected to be further expanded.  

In order to allow users to experience the mint and transfer of N20 Tokens, a command line wallet has been released on GitHub, and an open source indexer is also planned to be released.  

The open source code contributors behind the NOTE protocol emphasize that all content is only for technical discussion, and the issuance and hype of any assets have nothing to do with code contributors. NOTE is just an open source technology project.

With the further development and improvement of the NOTE protocol, it is foreseeable that more real applications based on this protocol will be born. These applications will take advantage of the unique functions and advantages of the NOTE protocol to play a significant role in Bitcoin and the wider community. The blockchain field creates new values ​​and possibilities. The continuous contribution and collaborative spirit of the open source community are indispensable forces in promoting this process.  

Summary

The NOTE protocol represents an important progress in the expansion of the Bitcoin network to smart contract functions. By introducing smart contracts on Bitcoin, the most original and widely used cryptocurrency platform, the NOTE protocol not only enhances Bitcoin's functionality, but also provides developers and users with unprecedented innovation possibilities. The following are several key features of the NOTE protocol:

1.  Smart contract support: The NOTE protocol expands the application scope of Bitcoin through smart contracts, allowing for Create and execute more complex logic and transaction types. This includes but is not limited to asset issuance, decentralized finance (DeFi) applications, and other scenarios that require conditional execution.

2.  Model based on UTXO: Unlike account-based smart contract platforms, the NOTE protocol is built on Based on Bitcoin's UTXO model, it leverages the security and high efficiency of Bitcoin.  

3.  Cross-chain function: NOTE protocol supports cross-chain transactions, enabling digital assets to move between different UTXO chains, further improving its flexibility and application scope.

4.  Real-world applications:NOTE protocol supports advanced cryptography technologies, such as zero-knowledge proof and Rabin signature algorithm, and can be applied to more complex real-world applications in the scene.

5.  Low cost and high efficiency: By optimizing data storage and using msgpack encoding, the NOTE protocol aims to reduce transaction costs and improve network efficiency.

6.  Open source and community-driven: The NOTE protocol emphasizes the open source spirit and community contributions, promotes the transparency and trustworthiness of technology, and also encourages a wider development and application innovation.

With the development and application of NOTE protocol, we can expect more innovative applications and services to appear in the Bitcoin ecosystem, which will provide users with services while maintaining the core values ​​of Bitcoin. Richer features and better experience.

NOTE Protocol

Website: https://noteprotocol.org

X: https://twitter.com/NoteProtocol

GitHub: https://github.com/NoteProtocol