Interview with Dominic Williams, Chief Scientist & Founder of the DFINITY Foundation

New innovations continue to emerge within the world of digital assets. Today, Brave New Coin speaks with Dominic Williams, Chief Scientist & Founder of the DFINITY Foundation about its new paradigm that seeks to disrupt the Bitcoin network scaling ecosystem, Chain-Key Bitcoin, also known as ckBTC. Over the past 20 years, Williams has had a career as a crypto theoretician and serial entrepreneur focused on the Internet and distributed systems. His research has covered Threshold Relay and PSC chains, Validation Towers and Trees, USCIDs, and The 3 E’s of Sybil Resistance.

Developed by Dfinity, ckBTC combines the robust and trusted infrastructure of Bitcoin with the technological capabilities of the Internet Computer blockchain (ICP). ICP’s basic concept is a decentralized cloud computing network that is an alternative to existing cloud service solutions offered by technology giants such as Amazon and Microsoft.

As we navigate the intricacies of this novel technology, we will examine its promise for improving scalability, speed, privacy, and security in comparison to the current Bitcoin network. We will also explore how ckBTC opens up new avenues for Bitcoin applications and ease of use, how it functions, and also get William’s take on the Ordinals and current Bitcoin network congestion.

Could you explain the technological framework behind ckBTC in more detail? How does it improve scalability, speed, privacy, and security compared to the current Bitcoin network?

“-The technological framework behind Chain-Key bitcoin (ckBTC) began with the integration of the Internet Computer (ICP) blockchain and the Bitcoin blockchain. The direct integration meant that the Internet Computer can now act similarly to a Layer 2 for Bitcoin where smart contracts on the Internet Computer can hold, send and receive bitcoin natively, without having to trust wrapped bitcoin from centralized bridging services.
-Thanks to chain-key ECDSA and threshold cryptography, Internet Computer smart contracts can create their own Bitcoin addresses and sign bitcoin transactions on the Bitcoin network. This is a key difference: there are no bridges or centralized custodians involved. ICP is among the first blockchains to perform direct integrations with other blockchains.”
— Williams

In 2022, the DFINITY R&D team developed a framework for ICP to directly communicate with other blockchains like Bitcoin and Ethereum by designing a new protocol for threshold ECDSA (Elliptic Curve Digital Signature Algorithm). The protocol is detailed in this research paper. The protocol’s design works with a trustless way of computing ECDSA signatures using a cryptographic multi-party protocol, with canister smart contracts controlling ECDSA signing keys on a public blockchain.

“-ckBTC on the Internet Computer is a multi-chain bitcoin ‘twin’ that is cryptographically secured 1:1 with real bitcoin. It is created by a pair of open-source, verifiable smart contracts, which allows for cross-chain transactions to stay completely decentralized. This is different from wrapped tokens, where a centralized custodian is required to hold your bitcoin. It benefits from the Internet Computer’s capabilities such as speed, security and scalability.
-ckBTC can be transferred with near-instant finality (1-2s) and for 10 satoshis, a fraction of the cost of a Bitcoin transfer on the Bitcoin network. Unlike on Bitcoin, ckBTC TX fees are fixed and do not fluctuate with network congestion. Users only have to pay Bitcoin transaction fees when transferring Bitcoin value across networks.
-Anyone can send and receive ckBTC value to and from addresses on either the Bitcoin or IC network. Developers can also leverage smart contracts that can hold and send ckBTC, opening up new use cases and new markets for BTC that leverage smart contract functionality.
”> — Williams

You mentioned that ckBTC enables new use cases and applications. Could you provide a few examples of these?

“-As ckBTC is designed to accommodate many use cases including simple payments, trading, loans, tipping, fundraising, and even using it as voting power in DAOs. Projects on ICP have already started experimenting with creative implementations in various categories including DEXs, SocialFi, and GameFi.
-One of the most interesting and popular use cases currently is how OpenChat is using ckBTC. OpenChat is a 100% on-chain messaging dApp, similar to Signal or Whatsapp except that it is completely decentralized and governed by the OpenChat community via a DAO.
-Every OpenChat account doubles as a crypto wallet. This means that OpenChat users can send ckBTC as instant chat messages. If you forget your friend’s birthday or need to pay back someone for dinner you can just send them a message with ckBTC attached and they will receive it instantly. ckBTC can always be redeemed for BTC, there will never be a liquidity issue or a bridge exploit.”> — – Williams

A safe, straightforward way to send cheap, fast bitcoin transactions is needed now more than ever, following the network congestion issues faced by the network following the boom of the ordinals protocol. Recently, Average transaction fees per block have, for only the 5th time in Bitcoin’s history, surpassed the BTC block reward which currently sits at 6.25 BTC. ckBTC joins the Lightning Network as a layer-2 solution offering users a haven from an expensive, slow Bitcoin network.

“-Other use cases include tipping posts on DSCVR, a decentralized social media platform for NFT gated communities, or using it as rewards in games like Plethora, where talented players can earn ckBTC just by playing. Funded has also implemented ckBTC as a way for teams to jumpstart their projects with crowdfunding.
-These casual, everyday transactions wouldn’t be possible if users would be subjected to Bitcoin’s high transaction fees or long finality.”> — Williams

What is the process for Bitcoin holders to convert their BTC to ckBTC? Is there a fee involved?

“There are 3 ways of converting your BTC to ckBTC, all 3 use the same underlying protocol level APIs.

1. ICDex – First orderbook-based DEX running fully on-chain.

2. ICP.Swap) – Offers the largest number of tokens to trade on the Internet Computer.

3. NNS dapp – Choose your ckBTC account on the NNS frontend dapp to send and receive from the Bitcoin network. Detailed steps how to convert your BTC to ckBTC using the NNS frontend dapp: – Sign in with your Internet Identity. If you don’t have one, you will be prompted to create one. Any device that supports WebAuthn can be used as a passkey for II. Alternatively, you can use a YubiKey.

• You should land on the "My Tokens" page, otherwise navigate there using the sidebar on the left – Select ckBTC – Click "Receive" on the bottom
• Here you can send ckBTC if you already have some in another wallet
• To convert BTC to ckBTC, click "Bitcoin" on the top. This will show you a Bitcoin address, where you can send bitoin.
  Once there are enough confirmations, you will see your ckBTC in your tokens selection. You can see the estimated inter-network fee, which is 0.00002 BTC. Note that because this is a real bitcoin transaction, it is likely to take an hour or more, and bitcoin fees apply. Once yo ckBTC, each transaction costs 10 satoshis regardless of network congestion or transaction amount. It is generally advised to first send a small amount of BTC to make sure it works before you convert significant amounts.
  ”> — Williams

Williams explains that there are a number of advantages of using ckBTC over other wrapped alternatives.

“There are plenty of benefits to using ckBTC instead of other forms of wrapped BTC. Some of the benefits of using ckBTC include:
-Fixed transaction fee: 10 satoshis
-Finality: 1-2 sec
-Full balance is always available. No channel liquidity issues
-No centralized custodians or bridges
-ckBTC makes using bitcoin practical for everyday transactions.
”> — – Williams

How does ckBTC handle the issue of transaction fees? Are they significantly lower than on the Bitcoin network?

“ckBTC has a local ledger facilitating fast transactions with low fees fixed at 10 satoshis, and only settles transactions on the Bitcoin network only for cross-chain transactions. ckBTC can help lower BTC transaction fees by decreasing the load on the Bitcoin network, which has been congested due to the popularity of BTC Ordinals and BRC-20 tokens.”> — – Williams

What do you make of the boom in popularity of the Ordinals NFT protocol? Has it been a boon or a curse for the Bitcoin network?

“It’s been interesting to see the reaction to Ordinal NFTs from the Bitcoin community, it seems to have split the community in two. Any perceived deviation from Satoshi’s original vision always sparks debate amongst the Bitcoin community, from the small block vs big block wars to Ordinal NFTs. Multi-chain solutions like ckBTC can allow the Bitcoin network to function while Ordinal NFTs grow in popularity, I think it is a positive. We want more people to use blockchain technology and we now have the solutions to cater for more than just one use case.
-The Ordinals craze has inspired the ICP ecosystem. A developer team building on the Internet Computer is within weeks of releasing their BTC Ordinals marketplace that will utilize ckBTC as their payment method.
”> — Williams

Conclusion

ckBTC presents a promising step forward in blockchain technology, blending Bitcoin’s reliability and widespread use with the Internet Computer’s speed and scalability. By providing a more user-friendly approach to Bitcoin transactions, ckBTC stands to make cryptocurrency more accessible for everyday use. It’s expansion arrives at a timely moment when the Bitcoin network faces a new scaling challenge, the popularity of the Ordinals protocol and NFTs.

However, as with any innovation, it’s important to remain aware of the potential trade-offs and challenges ahead. Layer 2 solutions are often seen as a distraction that fragments the network. Investment and development that would otherwise go into Bitcoin are going into layer 2 solutions, and some argue that this is a detriment of the main chain. This creates intrachain competition, whereas ideally, all value should be flowing into Bitcoin.

As we move forward, however, the development and adoption of supplementary technologies like ckBTC will continue to shape the landscape of cryptocurrency, blockchain technology, and digital finance. ckBTC fits within a gap in the market and has been built backed by robust research. It exists because Bitcoin continues to face challenges with scaling and bridging the asset has historically been an unstable solution.