Over a decade ago, the launch of Bitcoin heralded the beginning of a new decentralized monetary system. In order to increase Bitcoin’s global adoption as a form of sound digital money, there are ongoing development efforts to add further functionality that builds upon its qualities as one of the most secure blockchains.
In addition to facilitating peer-to-peer payments, the Bitcoin network supports Discreet Log Contracts (DLCs), a type of smart contract that allows for conditional payments using Bitcoin’s scripting language. By creating a DLC, parties can enter into agreements that securely and privately distribute payments based on preset conditions and future information without revealing any details of those conditions to the blockchain.
A DLC on the Bitcoin blockchain appears no different to an ordinary multisignature output, meaning external observers cannot read details of the contract from the public ledger or even determine its existence. In essence, DLCs provide a secure way for an oracle to handle any type of transaction with a payout curve, with early use cases ranging from sports prediction markets to futures contracts.
The activation of Taproot on the Bitcoin network brought with it two important foundational technologies for DLCs—Point Time Locked Contracts (PTLCs) to reduce the size of complex transactions and Schnorr signatures to improve privacy. This protocol upgrade opened up the possibility for more advanced conditional transactions that leverage the beneficial properties of Bitcoin as a decentralized computing network with extensive hashing power.
Importantly, DLCs rely on a trusted source of external data known as an oracle to provide tamper-proof inputs for settling contracts correctly with a corresponding payment output. Smart contract developers on Ethereum and other blockchains have already faced this challenge, commonly known as the blockchain oracle problem. The solution is utilizing secure oracle infrastructure that enables blockchains to interact with data from external systems. Chainlink is the leading decentralized oracle network, helping secure over $75 billion in value across the multi-chain ecosystem.
It is for this reason that we are excited to announce that DLC.Link—an infrastructure provider for the Bitcoin ecosystem—has received a Chainlink Community Grant to develop open-source infrastructure for bridging data from Chainlink oracles to DLCs on the Bitcoin network. Through this grant, DLC.Link will create a Chainlink External Adapter enabling smart contracts to connect DLCs on the Bitcoin network to an extensive library of high-quality external data sources.
Using Chainlink oracles to secure the outputs of DLCs on the Bitcoin blockchain allows for the creation of advanced conditional payments that benefit from both the extensive connectivity of Chainlink and the dependable security of Bitcoin. Through the secure delivery of external datasets, Chainlink can increase Bitcoin’s utility as a store of value, medium of exchange, and form of collateral as well as enhance the beneficial properties of the network as a decentralized global settlement layer.
Furthermore, by connecting the flourishing Bitcoin developer community, committed to increasing the adoption of trust-minimized conditional payments, with Chainlink’s thriving developer ecosystem, dedicated to advancing hybrid smart contracts, both ecosystems and the larger open-source community stand to benefit. In the future, this integration can be expanded to support additional Bitcoin layer-2 networks and Bitcoin secured chains such as Lightning, Stacks, Liquid, and beyond.
“We’re thrilled to have received a Chainlink Community Grant to build out the infrastructure required for connecting Discreet Log Contracts on the Bitcoin network to Chainlink’s highly reliable and secure network of oracles. This will enable developers in the Bitcoin ecosystem to offer users advanced decentralized applications that were previously impossible to achieve,” stated Aki Balogh, CEO of DLC.Link.
Through the Community Grants Program, Chainlink continues to empower innovative teams, academics, and social impact projects that research and develop key tools and infrastructure to accelerate the adoption of hybrid smart contracts, secure oracle networks, and cutting-edge technology capable of creating a more economically fair world.
About the Chainlink Grant Program
If you want to learn more about the Chainlink Community Grant Program, check out our recent blog post that further expands upon its goals and the criteria for submission. We encourage talented individual developers and development teams to apply to the grant program here, or if you’re a researcher and want to collaborate, contact us. Chainlink Community Grants are provided in cash and/or LINK.