The Internet Computer Protocol (ICP) is set to revolutionize decentralized finance and smart contract functionality on Bitcoin’s base layer by utilizing advanced threshold cryptography. In an interview with Cointelegraph at Paris Blockchain Week, Aisling Connolly, a senior research scientist at Dfinity, explained how ICP plans to integrate threshold-Schnorr signatures into its protocol. This integration will enable ICP’s smart contracts to generate addresses and authorize transactions directly on the Bitcoin blockchain.
Schnorr signatures, named after mathematician Claus Schnorr, function as a secret handshake between two parties, providing proof that a person has approved something without revealing their secret code. The implementation of threshold-Schnorr signatures by ICP will enable smart contracts to perform various functions, such as etching Bitcoin Runes, inscribing Ordinals in a decentralized manner, sending and receiving BRC-20 tokens directly on the Bitcoin base layer, signing taproot transactions, and re-inscribing Ordinals.
ICP expects the full implementation of threshold-Schnorr to be launched by mid-2024. The core implementation of threshold-Schnorr-BIP340 is integrated into ICP, allowing smart contracts to derive addresses and authorize native Bitcoin transactions. Connolly explained that Schnorr signatures offer additional functionalities like batching transactions and enable new use cases on Bitcoin. They simplify the process, make it faster, and enhance security.
The combination of Schnorr signatures with ICP’s protocol-level integration with the Bitcoin network is expected to unlock opportunities for decentralized applications (DApps) and services that can leverage the liquidity and security of Bitcoin without relying on centralized bridges. Connolly highlighted a few use cases that are already being explored and developed by ecosystem developers. One such use case is ICP serving as an orchestration layer, where an existing DApp on Ethereum can work alongside an ICP smart contract to interact with and write to Bitcoin.
ICP is also being used to build applications from scratch, with Taler DAO, an algorithmic Bitcoin-backed stablecoin, being one example of these new experiments. However, the integration of ICP with Bitcoin does raise questions about its acceptance within the wider Bitcoin community. Connolly mentioned that conversations with Bitcoin proponents indicate an open attitude towards infrastructure that expands the utility of Bitcoin.
Connolly believes that the Bitcoin community is generally receptive to exploring and considering tools like decentralized exchanges on ICP that support noncustodial wallets. This would enable DeFi capabilities like staking Bitcoin without compromising control of a user’s private keys. Currently, ICP has over 300 developers building Bitcoin-enabled DApps in various fields such as DeFi, NFTs, gaming, and social media. Bitcoin integration was introduced by ICP in 2022, eliminating the need for bridges for cross-chain functionality and allowing ICP smart contracts to hold, send, and receive Bitcoin.