Discrete Log Contracts (DLC) developers celebrated the use of the first multi-oracle DLC contract on the Bitcoin network, a first in history.
In a publication At SuredBits, the developers of the Discrete Log Contracts, known as DLC for its acronym in English, they held the first discrete registration contract within the blockchain of Bitcoin, using a multi-oracle DLC. In the test implementation that the developers carried out, oracles were used to take the price of Bitcoin from Bitfinex, Pierre Rochard and Suredbits.
Oracles serve as mediums or bridges to connect and provide reliable real-world data to the blockchain; in this example, on the price of Bitcoin from different markets. Once there, that data or information is processed by the smart contracts configured within the network.
In the multi-oracle DLC test, the developers explained that in order to settle the contract, they set up a maximum price difference of $2 for 3 of the 2 oracles to vouch for the Bitcoin price, although the prices shown by 128 of the oracles did not necessarily have to match exactly. In reality, the developers set up a maximum price difference of $2, so the BTC price shown by the XNUMX oracles had to be close enough, although they did not necessarily have to be the same. This setup allowed the contract to execute successfully, even though two of the oracles did not match exactly on the Bitcoin price.
The DLCs were devised by Tadge Dryja, a well-known Bitcoin developer who has been behind ideas such as Lightning Network (LN) and UTreeXO. Through DLCs, the goal is to make Bitcoin a blockchain with its own native means to create blockchain oracles; as well as to enhance and perfect its qualities to support ecosystems DeFi.
In late 2020, Dryja stated that DLCs were one of the most significant and important developments for the evolution of Bitcoin, which will enhance its functionalities to develop new use cases or applications for decentralized finance within this blockchain.
It may interest you: A new version comes to Bitcoin to improve its performance and privacy
A major improvement to DLC security
In their post, the DLC developers noted that integrating 3 oracles into Bitcoin DLC contracts is “a huge security improvement,” as this makes DLC contracts less vulnerable to bugs, tampering, or inoperability. While they explain that trusted oracles must be used to set up a contract and validate a transaction, the DLC developers note that integrating more oracles into these contracts exponentially increases their resilience to bugs.
“If we used even more oracles (e.g. 3 out of 5, 4 out of 7, 5 out of 9, etc.), we would be protected against multiple failures.”
The use of multiple oracles also favors the generation of evidence of fraud for those dishonest oracles, without incurring losses due to the misbehavior of said oracles. The DLC developers also explained that using multi-oracle contracts offers better security guarantees, allowing users and participants to have reliable data and information within the blockchain network.
Boosting DeFi on Bitcoin
Oracles are one of the most appreciated and valued features by DeFi application developers; and in fact, they are what allow these protocols to work correctly. However, in Bitcoin, its programming language, called Bitcoin script, is limited for this type of functions, which makes the implementation of oracles within this blockchain require second layer protocols such as RSK.
However, the proposal that Dryja presents with the DLC seeks to allow the network to support and implement oracles natively, without requiring the implementation of additional protocols. Thus, with the activation of these functionalities on its own blockchain, Bitcoin will be able to have a set of its own decentralized DeFi applications, which will further boost its use and adoption.
DeFi, although being overshadowed by the frenzy caused by non-fungible tokens or NFT Currently, they are a very important and growing sector in the crypto industry. At the time of this edition, the ecosystems of decentralized finances reach a liquidity of 48.500 million of dollars.
Continue reading: Tesla accepts Bitcoin as payment and will HODL all BTC it receives
