Before Bitcoin, the only way to know for sure a contract would be enforced would be to put trust in a third party, like the government and its court systems, or a financial institution, to enforce it. In his latest Medium post, Digital Rights Management: Serialised Media, Dr. Craig Wright explains how this can be done with the Bitcoin protocol, now reborn in Bitcoin SV (BSV), and without a trusted third party.
Wright spells out a situation where two parties are attempting to trade things of value, and that could be anything, ranging from two different cryptos, fiat currency, goods, services, or the digital rights to a property. Demonstrating how this can be achieved using Bitcoin, Wright describes a way it “enables two parties to conduct a fair exchange using separate transactions and no third party, and is both atomic and secure.”
nChain’s chief data scientist gets into some specifics of how the code is implemented in code to work with the BSV blockchain, and provides full details of the hypothetical scenario in the Appendix of his post.
For those who are a little less coding inclined though, the trade described in Table 1 shows how the protocol works beautifully. It all begins when Alice and Bob agree on a transaction, a deadline for it, and trade their public keys.
From there, both Alice and Bob generate a secret, a transaction agreement (the contract), and a stipulation for a refund if the contract doesn’t go to plan. Once they’re both done, they submit those pieces to the blockchain.
From there, it’s simply a matter of completing the contract, or receiving the refund. If the contract times out, Alice and Bob get their refunds. Otherwise, they share their secrets and collect on whatever the contract ensures. One can’t collect on the contract without unlocking the goods for the other, ensuring it’s perfectly fair, without a third party’s intervention,
This type of scheme was originally devised in the Bitcoin Wiki in 2014. Now that Bitcoin has returned to its roots in the form of BSV, it’s ready to take on this type of smart contract, and do it better and with more functionality than rival altcoins.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.