Rootstock – Smart Contracts on the Bitcoin Blockchain

by Albert Szmigielski

As a concept the Rootstock [1] platform is one of those ideas that once it is proposed it is obvious that it is a great idea. Essentially Rootstock aims to be what Ethereum is, a decentralized, Turing-complete smart contract platform. However, Rootstock aims to utilize the Bitcoin ecosystem rather than creating a new one from scratch. The way this will be accomplished is via the still not fully implemented sidechains technology [2]. This approach presents both advantages, and its own set of challenges. We will briefly outline what the Rootstock platform promises to offer and then will discuss the main points of the proposal.

Smart Contract Platform

Smart contracts are an active area of interest and research. They were originally proposed over two decades ago by the now famous Nick Szabo [7][8][9]. In a nutshell they are computerized contracts that can execute automatically, based on a set of rules and triggers. Smart contracts are the next step, or even the next generation, in automating a variety of commercial activities. They have the possibility of disrupting a large number of existing business models. As an example consider car insurance that is purchased on a per trip basis. As soon as the car starts moving an insurance contract is entered into and when the trip is finished, based either on user input or on the preprogrammed destination, the insurance contract is terminated. This type of an insurance model could be even implemented as a P2P model, totally eliminating the need for traditional insurance companies. This is the sort of innovation that smart contract platforms, such as Rootstock, will make possible.

The Rootstock Goods

Rootstock promises a great deal of innovation. First there will be a Turing-complete Virtual Machine, it will also be backwards compatible with the Ethereum VM by including Ethereum VM opcodes. This allows Ethereum contracts to be run on the Rootstock VM as well. The platform aims for 20 second block times, and claims about 300 transactions per second (tps) at launch, and scalability to 1000 tps. This is comparable with PayPal, but not as capable as the credit card networks. The biggest advantage of Rootstock over other platforms is that while it will be using its own blockchain, it will be merge-mined with Bitcoin, giving it a security level comparable with Bitcoin. However, this will require convincing miners to merge mine it with Bitcoin. Rootstock claims that it can help miners become more profitable, if the fees the miners earn for running Rootstock contracts will provide a significant boots to revenue. That is certainly possible if the platform becomes popular and the volume of contracts being run on it amounts to a sizable number.

Sidechain

Rootstock will exist as a Bitcoin sidechain. If you haven’t heard of the sidechains proposal you can review the whitepaper here, or read our explanation of sidechains here. But in summary a sidechain is a blockchain that is separate from the main Bitcoin Blockchain, but assets can be transferred back and forth. That is, we can send some BTC to the sidechain and then when we no longer need them on the sidechain send them back to the main chain. This allows innovation without the worry that the investment will wither to nothing as it was the case with hundreds of alt-coins. As a result of being a sidechain Rootstock will not issue a new currency or token. Instead in order to pay for Rootstock transactions there will be a two way peg between the native Rootstock token called RTC, and bitcoin. To transact on the RSK platform one simply transfers BTC to the sidechain, which locks them and then unlocks an equivalent amount of RTC on the Rootstock platform. To transfer back the process is repeated in reverse. RTC are locked and BTC are unlocked.

Federation

In practice however, the transferring of BTC to RTC and vice-versa gets a little more complicated. Since Bitcoin does not know about transactions on another blockchain a workaround will be needed. To that end RSK will utilize a Federation of “leading Bitcoin companies” that will secure the transfer of funds between the chains. To incentivize the members of the Federation there will be fees that can be earned on these transfer transactions. The locking and unlocking of the funds will be done automatically, without human intervention. A multi signature setup will probably be utilized where some threshold of the Federation members signs a transfer transaction in order to release locked funds. This is of course a Semi-Trust-Free model.

Use Cases

A general purpose smart contract platform can be used essentially for anything that developers can come up with. The Rootstock whitepaper outlines a few obvious cases. Micro-payments are an obvious one as perhaps the Bitcoin network is getting too expensive due to rising fees. Fast payments are a natural use-case as a result of fast block times. Escrow services are possible due to the smart-contract capability of the platform, so are P2P exchanges, Internet-gambling, and prediction markets. Micro-lending is another possibility and Rootstock is said to be working with the World Bank to enable micro-lending on a larger scale [3][4]. Other use cases include Alt-coin creation, asset tokenization, remittances, Intellectual Property registry, Voting systems, supply-chain traceability, online reputation systems, digital identity systems, and in-game global currency. There are many more use-cases, and if the platform catches on with developers we will probably see a number of very clever uses.

Contribution to the Bitcoin ecosystem

The RSK platform aims to allow smart contracts on the Bitcoin platform, using a token that’s tied to bitcoin, and that can be exchange back to bitcoin at the same rate. There are other smart contract providers like Counterparty, or OMNI that are built on top of the Bitcoin blockchain and therefore are bound by the same drawbacks. What RSK is offering is Bitcoin-like security with Ethereum-like flexibility. If such a platform were to catch on, it is very likely that it would boost the not only the utility, but also the value of the Bitcoin network and bitcoin the currency. Furthermore if Rootstock can provide miners with additional revenue, and relief the Bitcoin blockchain of some transactional volume, the entire ecosystem would benefit.

In Practice

The Rootstock white paper was released at the laBitconf conference in December of 2015 as a proposal. It is not clear how far along the company is with the development. Currently there is no code available for inspection, nor are there any pieces of the software suite released to the public. Rootstock has received an investment from Coinsilium [6] valuing the young company at five million dollars. We are assuming that the investors did do their due diligence. Once the platform is released into the wild we can further investigate and gauge its viability and usability.

Conclusion

Rootstock is a very promising smart contracts platform. It promises Ethereum-like features with Bitcoin-like security. It will be tied to Bitcoin via a sidechain. The platform will be backwards compatible with Ethereum. There will be no new currency issued, instead bitcoin will be used indirectly via a native Rootstock token. The peg of the token to bitcoin will be secured by a federation of mature, safe, and respectable Bitcoin companies. There are a large number of use-cases that the platform can be used for. Even Rootstock itself is working on micro-lending. The RSK platform brings smart contracts to the Bitcoin ecosystem, and hopes to increase miners’ revenues by enabling them to collect transaction fees on RSK contracts. The code for Rootstock has not been released yet. WE have high hopes for this platform, and if it delivers everything that it is promising, it will have a bright future.

References

Sidechains Explained http://blog.cryptoiq.ca/?p=19
[1] Rootstock Whitepaper https://uploads.strikinglycdn.com/files/90847694-70f0-4668-ba7f-dd0c6b0b00a1/RootstockWhitePaperv9-Overview.pdf
[2] Sidechains Whitepaper https://blockstream.com/wp-content/uploads/2014/10/sidechains.pdf
[3] https://www.cryptocoinsnews.com/rootstock-merges-bitcoin-ethereum-help-world-bank-micro-lending/
[4]http://www.ibtimes.co.uk/rootstock-merges-bitcoin-ethereum-help-world-bank-drive-financial-inclusion-1528902
[5] http://www.labitconf.com/
[6] https://www.cryptocoinsnews.com/coinsilium-investment-rootstock/
[7] http://szabo.best.vwh.net/smart_contracts_idea.html
[8] http://szabo.best.vwh.net/smart.contracts.html
[9] http://szabo.best.vwh.net/index.html
http://bravenewcoin.com/news/rootstock-is-coming-are-ethereums-days-numbered-or-will-the-18-million-dollar-idea-survive/

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