30.8.2024
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The building on Bitcoin movement has gained a lot of steam in the past two years, which has resulted in the rise of different protocols, all vying to offer new capabilities and position themselves as the entryway into the expanding world of Bitcoin DeFi.
Now, another metaprotocol has emerged— OP_NET—promising “a more seamless user and developer experience.”
Read on to learn about OP_NET, how it works, and what it could potentially bring to the Bitcoin ecosystem.
OP_NET is a new metaprotocol on Bitcoin created to introduce more smart contract-enabled opportunities to this blockchain and to address the shortcomings of other Bitcoin metaprotocols.
The metaprotocol is still running on Bitcoin’s testnet, so its capabilities are currently limited.
However, the litepaper describes a wide range of different implementations and use cases, from loans to DAOs (decentralized autonomous organizations) and other DeFi services.
OP_NET brings advanced smart-contract functionalities to the Bitcoin blockchain using Tapscript, a scripting language used for working with Bitcoin’s Taproot upgrade.
According to the project’s litepaper, this enhances Bitcoin's basic programmability to the level found in smart-contract-focused blockchains.
Compiling smart contracts is also simplified through the use of WebAssembly (Wasm), a standard that supports any language on any operating system, including Rust, Python, C/C++, and Go.
In combination with a developer suite, this lets developers permissionlessly build and deploy decentralized apps (dapps) and integrate the metaprotocol with many existing DeFi solutions.
The metaprotocol, which uses BTC to pay for transaction fees, also enhances the user experience by providing a single-address system. Additionally, by utilizing Bitcoin for data availability, consensus, and settlement, OP_NET minimizes trust assumptions.
In the OP_NET ecosystem, the nodes manage interactions and execute smart contracts through the OP_VM, or OP_NET virtual machine (VM).
Similar to the Ethereum VM, it uses computationally-based gas, but in this case, the gas fee is paid in bitcoin and later burned. The transaction fee minimum is 330 sats, as anything below that is considered dust by the network and is not included in a block.
In addition to this, OP_NET has a fee threshold of 250,000 sats, which comes up to 0.0025 BTC. Fees that exceed this amount (when ensuring transaction prioritization, for example) will have the 330 sats minimum subtracted from them and the remainder paid out to the node network. If users pay between 330 and 250,000, the entirety of the fee is burned. This is designed to simplify UTXO (unspent transaction output) management while retaining a way to reward nodes.
All transactions originating from OP_NET and submitted to Bitcoin are labeled with the string “BSI” in an arbitrary data field and are then directed towards unspendable addresses abstracted into contract addresses. The protocol detects these transactions, executes them, and generates a transaction receipt with a detailed report on the changes that were made. Anyone running their own OP_NET node can check the token state through an OP_NET token explorer.
To use the protocol’s capabilities, OP_NET requires users to bridge bitcoin from the core chain into a wrapped bitcoin (WBTC—not the same as the WBTC token on Ethereum), compatible with this metaprotocol.
OP_NET nodes use a proof of authority (PoA) consensus mechanism to validate the bridging using a multisig system on an opt-in basis, meaning not all nodes have to participate in it.
Although the wrapping system was designed strictly for bitcoin upon release, the OP_NET developers say that it can also be used for other assets in the future, potentially opening up the possibilities for ecosystem expansion.
The PoA voting system is also used for upgrading indexers. If network participants recognize the benefits of Bitcoin changes and upgrades, such as OP_CAT, they can be also implemented.
OP_NET introduces several changes compared to other, existing metaprotocols.
One of them is using bitcoin as the “gas token,” instead of a separately created and managed token only serving this purpose. According to their litepaper, the reason for this is to keep the protocol “uncompromisingly Bitcoin-aligned.”
Another key difference is that OP_NET uses an account-based model as its bookkeeping method. In other words, it tracks users’ balances, which is also what Ethereum does. Other metaprotocols on Bitcoin, like Runes, use UTXO models, which keep track of the remaining amounts of bitcoin after each transaction has been completed.
Transaction sorting is yet another difference between OP_NET and other protocols. While Bitcoin miners are usually not obliged to sort transactions by fees paid, OP_NET takes into account the fee amount that was paid, so a higher fee ensures a higher ranking in the sorting.
According to the developers, this on-chain priority fee structure helps mitigate the maximal extractable value (MEV) vulnerability, where special programs manipulate the ordering for their profit (more on mining here).
This scheme is especially prevalent in blockchains such as Ethereum, including its Layer 2 solutions, so the new Bitcoin metaprotocol can help mitigate this problem.
OP_NET offers two token standards: OP_20, its fungible token standard, and OP_721, the non-fungible token (NFT) standard.
Both names are a play on Ethereum’s standards ERC-20 and ERC-721, which correspond to the same token types.
As with Ethereum’s ERC-721 tokens, the OP_721 standard will be used to create unique tokens that can act as collectibles, numbered tokens, or any other type that needs to be non-fungible.
The same goes for OP_20, the fungible token standard equivalent to ERC-20 (and, by extension, to BRC-20). The team promises more details on these aspects once they release the whitepaper. Developers can find detailed instructions on how to deploy OP_20 tokens on the metaprotocol here.
OP_NET offers four main ways to onboard into its token ecosystem:
OP_NET uses WBTC to enable different BTC-powered DeFi applications. The PoA consensus mechanism is used both for the wrapping (when BTC is turned into WBTC) and burning (when WBTC needs to be turned back into BTC) processes.
Trusted indexers who opt in oversee this process and earn fees from it. The fees are set at a global level, so there is no risk that indexers can locally set a prohibitively high fee.
As the ecosystem grows, it is expected that tokens created with this metaprotocol will be available on different exchanges.
OP_NET may be a newcomer to the Bitcoin DeFi space, but it may be a project worth looking out for. Its different approach to Bitcoin nativity, from using BTC as its “gas token” to switching to an account-based model instead of the usual UTXO-based one, may open up new possibilities for users and developers alike, while mitigating vulnerabilities such as MEV.
But before there can be a final verdict, the metaprotocol needs to be thoroughly tested with different applications and use cases.
