A smart contract was recently deployed on the Bitcoin network to place a $10,000 bet on the outcome of the upcoming US presidential election, marking the first such instance of its kind.
On September 8th, Nicolas Dorier, the founder of open-source Bitcoin payment processor BTCPay Server, said he used the Bitcoin network instead of other popular choices like Ethereum, while placing a bet with Chris Stewart, the founder of data feeds API provider Suredbits.
The duo used the Bitcoin mainnet to host a Discreet Log Contract (DLC) — a type of smart contract that is invisible to external observers and addresses the issues of scalability and privacy compared to other blockchains.
Outcome Observer, an anonymous Twitter account, acted as the contract’s signer and will handle the bet’s settlement when the results of the election are out. At that time, Outcome Observer will sign the DLC using a private key, which will then automatically send funds to either Dorier or Stewart based on their pick.
“When the election is finalized, the Outcome Observer will broadcast a sign that either I or Nicolas can use to settle the bet. If Trump wins, Nicolas will receive 1 BTC. If Biden wins, I will receive 1 BTC,” said Stewart.
Meanwhile, even if Outcome Observer were to disappear and not broadcast the message to the DLC during the bet’s settlement, a “refund” agreement – signed previously by Dorier and Stewart – will activate and return the funds.
Podcast host Marty Bent stated the development was a “very important moment in Bitcoin history” as it proved the Bitcoin network can be used to sign a trustless contract. He noted that the bet helped dispel an often-cited criticism of Bitcoin – namely its lack of smart contract hosting capabilities, which are prevalent on networks like Ethereum.
Bent added that DLCs could also be the “best way to implement smart contracts at the moment” due to their scalability and privacy, compared to “other competing smart contract implementations on the market.”
Stewart shared the sentiment. “The purpose of DLCs is to allow people to speculate on the outcome of an event in a trust minimized way. It also allows you to keep your speculation in Bitcoin, rather than using ETH.”
Meanwhile, Stewart added that while signing the DLC was a manual process, newer implementations and tools on the market would soon allow Bitcoiners to engage with smart contracts without shifting to Ethereum for purpose.
“DLCs are a way to enable #DeFi on bitcoin. I don’t think we — as Bitcoiners — need to concede that territory to Ethereum. There is plenty of powerful primitives in bitcoin that allow you to do advanced applications with Bitcoin. Coming soon, Lightning DLCs!,” concluded Stewart.