This article introduces three Bitcoin smart contract solutions: #RGB, RGB++, and Arch Network @ArchNtwrk.

Background

Bitcoin is currently the most liquid and secure blockchain. After the emergence of inscriptions, the BTC ecosystem attracted many developers, who quickly turned their attention to BTC’s programmability and scalability issues. By introducing various approaches such as ZK, DA, sidechains, rollups, and restaking, the prosperity of the BTC ecosystem is reaching new heights, becoming a major narrative in the current bull market.

However, many of these designs follow the scaling experiences of smart contracts from ETH and other blockchains and rely on centralized cross-chain bridges, which are weak points in the system. Few solutions are designed based on the characteristics of BTC itself, partly due to the less developer-friendly experience of BTC. Bitcoin cannot run smart contracts like Ethereum for several reasons:

• Bitcoin’s scripting language is limited in Turing completeness for security reasons, making it impossible to execute smart contracts like Ethereum.

• The storage on the Bitcoin blockchain is designed for simple transactions and is not optimized for complex smart contracts.

• Most importantly, Bitcoin lacks a virtual machine to run smart contracts.

The introduction of SegWit in 2017 increased Bitcoin’s block size limit; the Taproot upgrade in 2021 enabled batch signature verification, allowing for easier and faster transaction processing (unlocking atomic swaps, multi-signature wallets, and conditional payments). These changes have made programmability on Bitcoin possible.

In 2022, developer Casey Rodarmor introduced his “Ordinal Theory,” which outlined a numbering scheme for Satoshis, enabling arbitrary data like images to be embedded in Bitcoin transactions. This opened up new possibilities for embedding state information and metadata directly on the Bitcoin blockchain, offering a new approach for applications like smart contracts that require accessible and verifiable state data.

Currently, most projects aiming to extend Bitcoin’s programmability rely on Bitcoin’s Layer 2 (L2) networks, which forces users to trust cross-chain bridges, posing a significant challenge for L2 to gain users and liquidity. Additionally, Bitcoin currently lacks a native virtual machine or programmability, making it difficult to achieve communication between L2 and L1 without additional trust assumptions.

Arch Network, RGB, and RGB++ all attempt to enhance Bitcoin’s programmability by leveraging BTC’s native attributes, offering smart contract and complex transaction capabilities through different methods.

• RGB is a smart contract solution that relies on off-chain client verification, with smart contract state changes recorded in Bitcoin’s UTXO. While it offers some privacy advantages, it is cumbersome to use and lacks contract composability, resulting in very slow development.

• RGB++ is an extension of the RGB approach by Nervos, still based on UTXO binding but using the chain itself as a consensus-based client validator. It provides a solution for cross-chain metadata assets and supports transfers of any UTXO-structured chains.

• Arch Network offers a native smart contract solution for BTC by creating a ZK virtual machine and corresponding validator node network. It aggregates transactions to record state changes and asset stages in BTC transactions.

Arch Network

Arch Network primarily consists of Arch zkVM and the Arch Validator Node Network. It utilizes zero-knowledge proofs (zk-proofs) and a decentralized validation network to ensure the security and privacy of smart contracts. It is more user-friendly than RGB and does not require another UTXO chain binding like RGB++.

Arch zkVM executes smart contracts and generates zero-knowledge proofs using RISC Zero ZKVM, which are verified by a decentralized network of validator nodes. This system operates based on the UTXO model, encapsulating smart contract states in State UTXOs to enhance security and efficiency.

Asset UTXOs represent Bitcoin or other tokens and can be managed via delegation. The Arch Validator Network validates ZKVM content through randomly selected leader nodes and aggregates node signatures using the FROST signature scheme, ultimately broadcasting the transaction to the Bitcoin network.

Arch zkVM provides Bitcoin with a Turing-complete virtual machine capable of executing complex smart contracts. After each smart contract execution, Arch zkVM generates zero-knowledge proofs to validate the correctness and state changes of the contract.

Arch also utilizes Bitcoin’s UTXO model, with states and assets encapsulated in UTXOs, using a single-use concept for state transitions. Smart contract state data is recorded as State UTXOs, while raw asset data is recorded as Asset UTXOs. Arch ensures each UTXO can only be spent once, providing secure state management.

Although Arch does not innovate blockchain structure, it requires a validator node network. During each Arch Epoch, the system randomly selects a Leader node based on staking, responsible for disseminating received information to all other validator nodes in the network. All zk-proofs are verified by a decentralized validator network to ensure system security and censorship resistance, with signatures provided to the Leader node. Once the transaction is signed by the required number of nodes, it can be broadcast to the Bitcoin network.

RGB

RGB is an early smart contract extension approach from the BTC community. It records state data through UTXO encapsulation, providing a significant concept for subsequent BTC native scalability.

RGB uses an off-chain verification approach, shifting the validation of token transfers from Bitcoin’s consensus layer to off-chain clients related to specific transactions. This method reduces the need for network-wide broadcasting, enhancing privacy and efficiency. However, this privacy enhancement is a double-edged sword. By involving only nodes related to specific transactions in the validation process, privacy protection is improved, but it also makes the process opaque to third parties, complicating operations and development, and leading to a poor user experience.

Additionally, RGB introduces the concept of single-use sealed tags. Each UTXO can only be spent once, effectively locking the UTXO upon creation and unlocking it upon spending. Smart contract states are encapsulated in UTXOs and managed through sealed tags, providing an effective state management mechanism.

RGB++

RGB++ is another extension of the RGB concept by Nervos, still based on UTXO binding.

RGB++ utilizes Turing-complete UTXO chains (such as CKB or other chains) to handle off-chain data and smart contracts, further enhancing Bitcoin’s programmability, and ensures security through isomorphic binding with BTC.

RGB++ utilizes a Turing-complete UTXO chain. By using a Turing-complete UTXO chain like CKB as a shadow chain, RGB++ can handle off-chain data and smart contracts. This chain not only executes complex smart contracts but also binds with Bitcoin’s UTXO, increasing the system’s programmability and flexibility. Additionally, the isomorphic binding of Bitcoin’s UTXO with the shadow chain’s UTXO ensures consistency of state and assets between the two chains, thereby ensuring transaction security.

Moreover, RGB++ extends beyond all Turing-complete UTXO chains, not limited to CKB, which enhances cross-chain interoperability and asset liquidity. This multi-chain support allows RGB++ to integrate with any Turing-complete UTXO chain, increasing system flexibility. RGB++ also achieves bridge-less cross-chain functionality through UTXO isomorphic binding, avoiding the “fake token” issue associated with traditional cross-chain bridges, thus ensuring asset authenticity and consistency.

By performing on-chain verification through the shadow chain, RGB++ simplifies the client verification process. Users only need to check related transactions on the shadow chain to verify the correctness of RGB++’s state computations. This on-chain verification not only simplifies the verification process but also optimizes user experience. By using a Turing-complete shadow chain, RGB++ avoids the complex UTXO management of RGB, providing a more streamlined and user-friendly experience.

Conclusion

In terms of BTC programmability design, RGB, RGB++, and Arch Network each have their own features but all continue with the UTXO binding approach. The single-use authentication property of UTXO is well-suited for recording states in smart contracts.

However, their drawbacks are also significant: poor user experience, confirmation delays, and low performance consistent with BTC. This is particularly evident in Arch and RGB. While RGB++ offers a better user experience by introducing a higher-performance UTXO chain, it also introduces additional security assumptions.

As more developers join the BTC community, we will see more scaling solutions, such as the op-cat upgrade proposal, which is actively discussed. Solutions that align with BTC’s native properties are worth focusing on. The UTXO binding method remains the most effective way to extend BTC’s programmability without upgrading the BTC network. If user experience issues can be resolved, it will represent a significant advancement for BTC smart contracts.

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