The Internet Computer Protocol (ICP) is set to revolutionize decentralized finance and smart contracts on the Bitcoin base layer by implementing advanced threshold cryptography. In an interview with Cointelegraph at Paris Blockchain Week, Aisling Connolly, a senior research scientist at Dfinity, explained how the integration of threshold-Schnorr signatures will enable ICP’s smart contracts to interact directly with the Bitcoin blockchain.
Schnorr signatures, named after mathematician Claus Schnorr, function as a secret handshake between two parties, providing proof that one person has authorized something without revealing their secret code. The implementation of threshold-Schnorr will allow ICP smart contracts to perform a range of functions, including signing Schnorr signatures, inscribing Ordinals in a decentralized manner, sending and receiving BRC-20 tokens on the Bitcoin base layer, signing taproot transactions, and re-inscribing Ordinals.
ICP plans to launch the full implementation of threshold-Schnorr by mid-2024. The integration of threshold-Schnorr-BIP340, the core implementation of threshold-Schnorr, will enable smart contracts to derive addresses and authorize native Bitcoin transactions. Connolly highlighted the benefits of Schnorr signatures, such as the ability to batch transactions and support new use cases on Bitcoin.
By combining Schnorr signatures with ICP’s protocol-level integration with the Bitcoin network, the aim is to enable decentralized applications (DApps) and services to leverage the liquidity and security of Bitcoin without relying on centralized bridges. Connolly mentioned several use cases currently being explored, including ICP serving as an orchestration layer for existing DApps on Ethereum to interact with Bitcoin, and the development of new applications like Taler DAO, an algorithmic Bitcoin-backed stablecoin.
While the wider Bitcoin community has historically been skeptical of integrations and solutions that bridge Bitcoin with other chains, Connolly believes there is a growing openness to infrastructure that expands the utility of Bitcoin. The researcher pointed out that tools like decentralized exchanges on ICP that support noncustodial wallets could enable DeFi capabilities like staking Bitcoin without compromising control of private keys.
ICP currently has over 300 developers building Bitcoin-enabled DApps in various sectors, including DeFi, NFTs, gaming, and social media. The integration of Bitcoin into the ICP ecosystem in 2022 eliminated the need for bridges for cross-chain functionality, allowing ICP smart contracts to securely hold, send, and receive Bitcoin.