Discrete Registration Contracts (DLC) integrate oracles to Bitcoin and the Lightning Network. A DLC can be indistinguishable from a Lightning network command, giving it privacy.
Discrete Registration Contracts (DLCs) allow clients to build DeFi applications on Bitcoin and the Lightning network claimed its developer Tadge Dryja. Dryja, a Bitcoin researcher for the MIT Digital Currency Initiative, brought a short live presentation from LaBitConf, where he showed important thoughts about Discreet Log Contracts (DLC), their use cases, and a list of other technical and relevant details
Dryja considered the implementation of DLC contracts to be one of the most relevant improvements for Bitcoin today. Dryja noted among her reasons that DLCs allow DeFi-style transactions in Bitcoin.
Dryja exposes an example of a contract for the exchange of the USD / BTC pair, where he would make the purchase or sale of the assets by seeing the oracle’s signature validating certain information, such as the price of BTC and other indicators. This example is a decentralized finance use case or application in Bitcoin.
Dryja commented that DeFi, though he can find it funny to handle with, is not so safe. The researcher points out that a considerable number of attacks have targeted the Ethereum oracles, resulting in thefts for DeFi users.
Discreet Bitcoin Smart Contracts are threatened by Oracles+
The researcher valued the discrete registration contracts as a way to deploy smart contracts in Bitcoin, computable in the Lightning Network, and with oracles independent of the network, in an efficient, private way and without requiring major changes or forks to the protocol.
Dryja pointed out that the Lightning Network, as a Bitcoin smart contract style, is not able to receive external information to execute contracts under more concrete conditions.
In response to this need, oracles would allow DLCs to use real-world information on Bitcoin, and the Lightning network. Oracles are an information bridge between a blockchain and the outside world. They are responsible for transmitting the necessary information so that smart contracts can work according to external parameters.
The example that Dryja starts from to explain his theory is a bet on the state of the climate. If it rains tomorrow, Alice receives 1 BTC; if tomorrow is sunny (not raining), Bob receives 1 BTC.
The implementation of an oracle would be necessary for the event that Bob and Alice do not respect the results and conflict. The oracle will embody the third part of the agreement, putting its signature on the validity of certain information, without judging or deliberating about it, since it does not know the conditions of Alice and Bob’s contract.
“If an oracle knows about the contract, it is not an oracle, it is a judge”, Dryja also indicates that in the case of Ethereum, the oracles are within the chain and compute the results; while with DLC, the oracle stays out of Bitcoin and only certifies the veracity of a piece of information.
The Case of The Human Oracle: Centralized, Honest and Neutral
Dryja then raises no problem with using centralized human oracles, as something that, despite the decentralized qualities of Bitcoin, could be much more practical to implement.
In the same way, he proposes that oracles work, using traditional finance as an example. Dryja also clarifies that some conventional contracts base their fulfillment on the information that a trusted centralized entity provides, such as betting on the price of an asset (gold, oil, etc.)
By: Jenson Nuñez.
