The next evolution of Bitcoin: OP_CAT in-depth analysis

Author: Four Pillars Source: @wowitsjun and @xparadigms Translation: Shan Ouba, Golden Finance

Many people believe that Bitcoin remains static due to its unchanging architecture. Without a clear roadmap beyond its halving schedule, predicting the future of Bitcoin is challenging. However, Bitcoin can be upgraded through community consensus. If a majority of full nodes agree, Bitcoin can be upgraded through a soft fork, introducing new features.

This article examines Bitcoin's major past upgrades and explores OP_CAT, the next major upgrade expected. Let's delve into the significance of these upgrades and explain why they represent important milestones in Bitcoin's history.

1. Background - Major Upgrades: Segregated Witness (SegWit), Taproot, and OP_CAT

1.1 Segregated Witness (SegWit) (2017) - Expanding Bitcoin Blockspace, Birth of Bitcoin Cash

The Segregated Witness upgrade was implemented in August 2017 and was Bitcoin’s first major attempt to solve the scalability problem. Prior to Segregated Witness, Bitcoin blocks stored a combination of signatures and transaction data. This approach was inefficient because the space allocated for signatures was disproportionately large compared to the actual size of the signature data.

Two opposing solutions emerged: one group advocated increasing Bitcoin’s block size, while the other sought to maintain the existing block size but improve efficiency. Segregated Witness, the latter solution, separates signature data from transaction data through a core logic upgrade. It creates a separate storage space called the "witness zone" that allows more transaction data to be recorded in each Bitcoin block.

Thanks to the Segregated Witness upgrade, the amount of transaction data that can be stored in each block has increased fourfold. This improvement results in faster transaction processing and lower fees.

1.2 Taproot (2021) - Improving Bitcoin's Efficiency and Privacy

Implemented in November 2021, Taproot is another important upgrade for Bitcoin after Segregated Witness. The upgrade enhances Bitcoin's efficiency and privacy by introducing Schnorr signatures and Merkle Abstract Syntax Trees (MAST).

Before Taproot, Bitcoin's signature method relied on the Elliptic Curve Digital Signature Algorithm (ECDSA), which required one signature per transaction. This approach resulted in an increase in signature data size and made it easier to track transactions when multiple wallets sent funds to a single address.

Schnorr signatures address the limitations of ECDSA by combining multiple signatures into a single unique signature. This significantly reduces the proportion of signature size in a block. In addition, even transactions with multiple functions appear as a single transaction, enhancing user privacy.

In addition, Merkle Abstract Syntax Trees (MAST) allow Taproot to handle complex Bitcoin transactions more efficiently. It does this by introducing logic to extract and verify the hash of the required script.

Unlike the Segregated Witness upgrade, Taproot has received almost unanimous support in the Bitcoin community.

1.3 OP_CAT (aka BIP-420) - Foundation for Bitcoin Ecosystem Growth

OP_CAT is widely considered to be the next upgrade for Bitcoin. It is a simple 13-line piece of code that Satoshi Nakamoto deactivated in 2010 to protect Bitcoin from DDoS attacks. OP_CAT allows multiple elements to be connected in the Bitcoin system. Today, there is a push to reintroduce OP_CAT with measures to prevent DDoS attacks, such as limiting the size of replication. This reintroduction, known as BIP-420, could be a major milestone for the Bitcoin ecosystem, enabling a variety of developments, including Layer 2 solutions.

As highlighted in “The Real Way to Scale Bitcoin Through L2,” Bitcoin’s scripts are stateless. However, combining OP_CAT with Schnorr signatures can allow Bitcoin to enforce specific actions and verify state changes. This is crucial because blockchains essentially store state. If state changes can be confirmed inside Bitcoin, it opens the door to internal smart contracts. Additionally, OP_CAT can enable STARK verification, facilitating Bitcoin deposits and withdrawals through zero-knowledge proofs. Starkware has already demonstrated zero-knowledge proofs through STARKs on Bitcoin Signet. Many anticipate a soft fork in the near future to introduce OP_CAT, which could revolutionize the Bitcoin ecosystem and even the entire cryptocurrency space.

2. Conclusion

2.1 @wowitsjun_ from Hashed

The direction of Bitcoin's next upgrade will be one that directly contributes to scaling the Bitcoin ecosystem rather than improving its efficiency. Unlocking Bitcoin's potential means much more than the emergence of another ecosystem. Scaling the Bitcoin ecosystem will pave the way for integrating the fragmented blockchain space into one, leveraging synergies with the Ethereum ecosystem. As clues to Bitcoin's scalability are unveiled one by one through future upgrades, the Bitcoin ecosystem will inevitably expand. Here, we need to think about what the future financial system will look like.

2.2 @xparadigms from Four Pillars - “The Next Phase of Digital Gold”

Bitcoin is known for its resistance to change, with past disagreements leading to forks such as Bitcoin Cash and Bitcoin SV. Although controversial, the proposed OP_CAT addition is expected to have a greater impact than any previous upgrade.

Introducing OP_CAT to Bitcoin could enable a secure scaling solution that fosters a strong Bitcoin ecosystem. It is able to connect multiple elements, allowing for proof verification, including zkRollup deployments. For example, Starkware recently tested a STARK-based zkRollup on testnet.

Gold’s value stems from its scarcity and proven utility. Similarly, Bitcoin, now established as “digital gold,” is entering a new phase of exploring its applications. With the OP_CAT upgrade, this digital gold can become a cornerstone for building digital infrastructure and finance.