New Exploration of Bitcoin Smart Contracts: RGB, RGB++ and Arch Network

Bitcoin, as the most liquid and secure network in the blockchain field, has attracted a large number of developers after the inscription craze. These developers quickly realized the programmability and scalability issues of Bitcoin and began exploring various solutions, such as zero-knowledge proofs, data availability, sidechains, rollups, and re-staking. These innovations have made the Bitcoin ecosystem increasingly prosperous, becoming the main focus of the current bull market.

However, many solutions have followed the scalability experience of smart contract platforms such as Ethereum, often relying on centralized cross-chain bridges, which has become a potential weakness of the system. A few solutions are designed based on the characteristics of Bitcoin itself, which is related to the complexity of the Bitcoin development environment. Bitcoin is difficult to run smart contracts like Ethereum, and the main reasons include:

1. The Bitcoin scripting language limits Turing completeness to ensure security.
2. Bitcoin blockchain storage is designed for simple transactions and has not been optimized for complex smart contracts.
3. Bitcoin lacks a virtual machine for running smart contracts.

In recent years, the Bitcoin network has undergone significant upgrades. The Segregated Witness (SegWit) in 2017 expanded the block size limit; the Taproot upgrade in 2021 enabled batch signature verification, simplifying operations such as atomic swaps, multi-signature wallets, and conditional payments. These advancements have opened new avenues for the programmability of Bitcoin.

In 2022, developer Casey Rodarmor proposed "Ordinal Theory", describing a scheme for numbering satoshis, allowing arbitrary data such as images to be embedded in Bitcoin transactions. This opens new possibilities for directly embedding state information and metadata on the Bitcoin chain, creating new ideas for smart contracts applications that require access to and verification of state data.

Currently, most projects that extend Bitcoin's programming capabilities rely on layer 2 networks (L2), which require users to trust cross-chain bridges, becoming a major barrier for L2 to acquire users and liquidity. In addition, Bitcoin lacks a native virtual machine or programmability, making it impossible to achieve communication between L2 and L1 without adding extra trust assumptions.

RGB, RGB++, and Arch Network attempt to enhance the programmability of Bitcoin by starting from its native properties, providing smart contracts and complex transaction capabilities through different methods:

1. RGB is a smart contracts solution that verifies through off-chain clients, recording contract state changes in Bitcoin's UTXO. Although it has certain privacy advantages, it is complex to use, lacks contract composability, and is developing relatively slowly.

2. RGB++ is another extension based on the RGB concept, still based on UTXO binding, but treats the chain itself as a consensus validator for clients, providing a cross-chain solution for metadata assets and supporting asset transfers across any UTXO structured chain.

3. Arch Network provides a native smart contracts solution for Bitcoin, creating a ZK virtual machine and validator node network, and records state changes and asset records in Bitcoin transactions through aggregated transactions.

RGB

RGB is an early smart contracts extension concept in the Bitcoin community, encapsulating state data through UTXO, laying an important foundation for subsequent Bitcoin native scaling.

RGB adopts an off-chain verification method, transferring the token transfer verification from the Bitcoin consensus layer to off-chain, verified by specific transaction-related clients. This reduces the need for global broadcasting, enhancing privacy and efficiency. However, this privacy enhancement method is also a double-edged sword. Allowing only specific transaction-related nodes to participate in verification enhances privacy but makes it invisible to third parties, complicating actual operations and making development difficult, resulting in a poor user experience.

RGB introduces the concept of single-use seals. Each UTXO can only be spent once, equivalent to being locked at creation and unlocked at spending. The smart contracts state is encapsulated by the UTXO and managed by the seals, providing an effective state management mechanism.

RGB++

RGB++ is another extension route based on the RGB concept, still based on UTXO binding.

RGB++ leverages 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 homomorphic binding of BTC.

RGB++ uses 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 UTXO, increasing system programmability and flexibility. The isomorphic binding of Bitcoin UTXO and shadow chain UTXO ensures consistency of states and assets between the two chains, guaranteeing transaction security.

RGB++ extends to all Turing-complete UTXO chains, no longer limited to CKB, enhancing cross-chain interoperability and asset liquidity. This multi-chain support allows RGB++ to integrate with any Turing-complete UTXO chain, increasing system flexibility. At the same time, RGB++ achieves bridge-less cross-chain through UTXO isomorphic binding, avoiding the "fake coin" problem and ensuring asset authenticity and consistency.

On-chain verification through shadow chains has simplified the client verification process in RGB++. Users only need to check the relevant transactions on the shadow chain to verify the correctness of the RGB++ state calculation. This on-chain verification method not only simplifies the verification process but also optimizes the 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.

Arch Network

Arch Network is mainly composed of Arch zkVM and the Arch validation node network, utilizing zero-knowledge proofs and a decentralized validation network to ensure the security and privacy of smart contracts. It is easier to use than RGB and does not require binding to another UTXO chain like RGB++.

Arch zkVM uses RISC Zero ZKVM to execute smart contracts and generate zero-knowledge proofs, which are validated by a decentralized network of verification nodes. The system operates based on the UTXO model, encapsulating the state of smart contracts within State UTXOs to enhance security and efficiency.

Asset UTXOs are used to represent Bitcoin or other tokens and can be managed through delegation. The Arch verification network verifies ZKVM content through randomly selected leader nodes and uses the FROST signature scheme to aggregate node signatures, ultimately broadcasting the transaction to the Bitcoin network.

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

Arch also uses the Bitcoin UTXO model, where state and assets are encapsulated in UTXOs, with state transitions occurring through the concept of single-use. The state data of smart contracts is recorded as state UTXOs, while the original data assets are recorded as Asset UTXOs. Arch ensures that each UTXO can only be spent once, providing secure state management.

Although Arch has not innovated the blockchain structure, it requires a network of validating nodes. During each Arch Epoch, the system randomly selects a Leader node based on stake, which is responsible for disseminating received information to all other validator nodes in the network. All zero-knowledge proofs are verified by a decentralized network of validating nodes, ensuring the system's security and censorship resistance, and generate signatures for the Leader node. Once a transaction is signed by the required number of nodes, it can be broadcast on the Bitcoin network.

Conclusion

RGB, RGB++, and Arch Network each have their own characteristics in the design of Bitcoin programmability, all of which continue the binding UTXO concept. The one-time use authentication property of UTXO is more suitable for smart contracts to record state.

However, these solutions also have obvious disadvantages, such as poor user experience, confirmation delays consistent with Bitcoin, and low performance. They mainly expand functionality but do not improve performance, which is particularly evident in Arch and RGB. Although RGB++ design provides a better user experience by introducing a high-performance UTXO chain, it also brings additional security assumptions.

As more developers join the Bitcoin community, we will see more scaling solutions, such as the op-cat upgrade proposal, which is actively being discussed. Solutions that align with Bitcoin's native attributes deserve special attention. The UTXO binding method is the most effective way to expand its programming capabilities without upgrading the Bitcoin network. As long as it can address user experience issues, it will be a significant advancement for Bitcoin smart contracts.