Extend Bitcoin, Ethereum and other blockchains

The Internet Computer blockchain is powered by novel cryptography, which forms the basis of new capabilities, such as web serving, unlimited scaling, incredible speed, and orders of magnitude efficiency gains — although it is a blockchain, it has been designed as a replacement for traditional IT. This same cryptography also makes these properties available within other blockchain ecosystems...

Essentially, the Internet Computer network can sign arbitrary transactions for execution on other blockchains. It does this using the unique chain key cryptography framework that powers its decentralized protocols. For example, it can sign transactions to transfer cryptocurrency, or invoke smart contract code, on other blockchains.

This means you can extend other ecosystems with Internet Computer capabilities, or use its smart contracts as glue to construct fully decentralized Web3 and DeFi services that span multiple blockchains.

Let's look at some examples...

Extending Bitcoin or working with bitcoin

Bitcoin was the first blockchain, which started it all. Currently the network hosts vast liquidity (monetary value) in the form of bitcoin. However, the Bitcoin network is simple by design and it cannot host true smart contracts.

As a consequence, Bitcoin does not have a native DeFi ecosystem of its own. Instead, Bitcoin's liquidity is "ported" to other blockchains that do have smart contract capabilities using insecure centralized blockchain bridges, which take custody of bitcoin for users, and create equivalent amounts of wrapped bitcoin on a destination blockchain, such as Ethereum.

Using native Bitcoin DeFi that operates directly on real bitcoin can provide major advantages over using wrapped bitcoin in Ethereum DeFi, say. In practice, blockchain bridges are cumbersome to use, can act as censors, or can get shutdown or hacked causing the loss of bitcoin backing the wrapped bitcoin, completely breaking services using the wrapped bitcoin, and potentially causing rippling systemic black swan events.

On the Internet Computer, smart contracts can process bitcoins directly on the Bitcoin ledger, without need for any kind of intermediary. They can create new bitcoin addresses, and send and receive bitcoin — as though they are in fact running on the Bitcoin network itself.

This means the Bitcoin community can now finally create what amounts to native Bitcoin DeFi using smart contracts hosted on the Internet Computer. These can even process HTTP requests, allowing user experiences to be created for DeFi users that are also fully decentralized, and can provide alternative means to sign Bitcoin transactions, such as Internet Identity.

Moreover, Internet Computer smart contracts can enable services from other blockchain ecosystems, such as Ethereum, to leverage native bitcoin too. For example, applications might include on-chain DEXs (decentralized exchanges), decentralized fundraising schemes, Web3 services, and more.

Explore further, and see how to get started writing code that processes bitcoin using Internet Computer smart contracts.

Extending Ethereum or working with Ethereum smart contracts

Ethereum was the second major blockchain to launch after Bitcoin. It introduced smart contract functionality, which made it possible to upload "blockchain code" that would thereafter process and store data on the blockchain itself.

On Bitcoin, it's only possible to attach basic access control scripts to bitcoin tokens, which disappear when they move. Meanwhile on Ethereum, fully Turing complete smart contracts reside at permanent addresses, and ETH tokens shuttle between them — such that the blockchain is code-centric.

The use of a blockchain to host software was a revelation, and when considering the implications, in 2014 a member of the early Ethereum community mooted the concept of a World Computer, but in practice Ethereum's technological underpinnings root the network in the world of traditional blockchain, which situation will continue after the "merge".

Meanwhile, from 2015 onwards, the Dfinity project pursued delivery of the World Computer concept. Its aim was to leverage novel cryptography to create a blockchain that could one day replace traditional IT, such as cloud computing services, databases and web servers. This resulted in the launch of the Internet Computer blockchain May 2021 after many years R&D.

Ethereum went into production in 2015, soon after the Dfinity project began technical research, and in the years since built an incredible community and ecosystem. Established network effects ensure its DeFi services are likely to continue providing the worlds preeminent public finance rails. However, increasingly, its ecosystem is being held back and harmed by a lack of decentralization.

For example, today, although Ethereum smart contracts can be used to create a DeFi service, they are not capable of serving interactive web experiences that enable end users to interact with them. Typically, cloud computing infrastructure is used to provide the user experience, and often also to perform the vast majority of data processing and storage — especially where Web3 services and dapps are involved. This exposes them to all manner of vulnerabilities, including being censored by the cloud operator, getting hacked, and the assignment of legal liability for the service to the developers operating the cloud accounts involved.

For all the reasons, it has become very clear that DeFi and Web3 services built using Ethereum need to fully decentralize and replace centralized IT such as cloud services, and go fully on-chain.

Thankfully, the Internet Computer provides an easy solution. For example, a front-end user experience built using Internet Computer smart contracts, can respond to end user inputs by initiating arbitrary transactions on Ethereum, and can display Ethereum data and Ethereum transaction results to them.

Here's how a DEX (decentralized exchange) running on Ethereum could be improved:

• The interactive web experience, through which users place orders and manage their accounts, can be created using smart contracts on the Internet Computer, which can process HTTP requests.

• Expensive data processing and storage can be offloaded to Internet Computer smart contracts. For example, the Internet Computer can be used to manage user profile information, and log all their trades — it would even be possible to use them to create a continuous double auction order book.

• Internet Identity can be leveraged. This is an anonymizing blockchain authentication framework the Internet Computer provides to allow end users to securely create sessions with Web3 services using special hardware, such as the fingerprint sensor on their laptop, or Face ID on their phone. For example, a front-end built on the Internet Computer can map Internet Identity anchors to Ethereum public keys, and then allow end users to securely and conveniently authenticate themselves to the DeFi service using their fingerprint sensor (read a friendly Internet Identity introduction).

Ethereum integration, and Internet Computer integrations with other blockchains, works slightly differently than with Bitcoin, which involves UTXOs. Internet Computer smart contracts can create arbitrary Ethereum transactions, then query the results using HTTPS outcalls.

NOTE: At the time of writing, the full end-to-end framework for direct interaction with Ethereum and other blockchains is still in development, although individual Internet Computer technology features can be combined. You can proceed now using its Threshold ECDSA capabilities — watch how other community members are proceeding.