Smart Contracts on BTC: Exploring Fractal Bitcoin and CAT20 Protocol

Fractal Bitcoin, as an important innovation in the Bitcoin ecosystem, has officially launched its mainnet after several rounds of testing. One of the highlights of this project is the introduction of smart contracts functionality, along with the simultaneous launch of the new token protocol CAT20. This article will delve into the technical design of CAT20 and its potential impact.

Fractal Bitcoin Introduction

Fractal Bitcoin, also known as Fractal BTC, is a layer-2 network that is fully compatible with BTC. Compared to the Bitcoin mainnet, it has a faster block confirmation time, taking only 1 minute to complete. The basic principle is to replicate multiple BTC networks, with each chain capable of processing transactions, thus increasing the overall processing speed.

A significant technological breakthrough of Fractal lies in the reactivation of the OP_CAT opcode, which was abandoned in the early days of BTC for security reasons. This move greatly enhances the functionality of Fractal Bitcoin, giving it the potential for smart contracts.

CAT20 Protocol Analysis

The CAT20 protocol is a new type of token standard developed based on Fractal Bitcoin, similar to ERC20 on Ethereum. Its implementation relies on the support of the underlying OP_CAT opcode.

deployment process

The deployment of the CAT20 token is divided into two phases: "commit" and "reveal:"

1. Commit phase: Write the basic information of the token in the transaction output script, such as name, symbol, etc. The hashId of this transaction will serve as the unique identifier of the token.

2. Reveal Phase: Output an OP_RETURN containing the initial state hash of CAT20, as well as a Minter for the subsequent minting process.

minting mechanism

The main features of the minting process include:

• The input is a Minter( initially generated by the deployment transaction ).
• Each minting produces one token and any number of Minter outputs.
• The output order is fixed, Minter must be before the token.

It is worth noting that the number of Minters set will affect the minting activity of the entire network. Increasing the Minter output can improve availability, but it will also increase transaction costs.

transaction construction

The transaction construction of CAT20 employs a clever script design that allows users to control UTXOs from non-owned addresses. This is achieved by using specific public and private key pairs in the script.

state management

CAT20 adopts a dual state storage mechanism:

• The current state hash is stored in the OP_RETURN of the transaction output.
• Specific state information is stored in the smart contracts ( Minter and Token ).

After each minting, the minting amount of the newly generated Minter is half of the remaining mintable amount.

transfer and burn

When transferring, the input and output token quantities of the transaction must remain consistent. To destroy a token, simply transfer it to a regular address.

Summary

The design of the CAT20 protocol provides users with great operational flexibility, but it also imposes higher requirements on the smart contracts verification logic. This design has the following advantages:

1. Simplified Token holding status inquiry, just check the Token's UTXO.
2. It is convenient to monitor the minting situation, and transactions containing "cat" in OP_RETURN can be searched.

The emergence of CAT20 has brought new possibilities for the Bitcoin ecosystem, promising to drive the development of more innovative applications. However, its security and stability still need further verification and improvement.