ColliderScript: Advancing Bitcoin covenants without a fork

The quest to bring “covenants” to Bitcoin — a mechanism that enables more sophisticated transaction types by controlling how coins can be spent in the future — has been an ongoing challenge. Recent research sheds light on how covenants may be achieved without the contentious and complex process of a soft fork.

This new approach, outlined in a paper by Ethan Heilman, Victor Kolobov, Avihu Levy and Andrew Poelstra, introduces “ColliderScript,” an innovative methodology that could allow covenants on Bitcoin as it exists today.

The primary advantage of ColliderScript is that it enables covenants without requiring a protocol change such as OP_CAT. The concept of covenants on Bitcoin has been viewed by some as threatening due to the substantial changes needed at the consensus layer to enable it.

ColliderScript side-steps that issue by proving that covenant functionality is technically feasible on Bitcoin even now, albeit at a high computational cost — initially estimated at millions of dollars per transaction due to the significant computational power required.

While this may be impractical in its present form, the paper presents a valuable proof of concept. StarkWare’s Avihu Levy, one of the paper’s co-authors, expects that even costly covenants have a place in Bitcoin.

“If you have an alternative and people are using it, and it’s already there and maybe just more expensive,” Levy told Blockworks, “it potentially accelerates the social process towards the soft fork.”

ColliderScript’s approach relies on SHA-1 cryptography, which requires substantial computational power to achieve covenant-like outcomes. Levy and his co-authors project that advances in hardware or dedicated algorithms may eventually reduce these costs, making Collider Script more practical.

“I’m 100% certain we could improve, and improve significantly,” Levy said. “It’s very clear we can improve things on the hash function front.”

SHA-1 is also slated for deprecation, according to the National Institute of Standards and Technology (NIST).

That doesn’t worry Levy, however, so long as the cost to a malicious attacker remains about a million times greater than the cost of an honest one.

“If SHA-1 becomes problematic, you can replace it in the algorithm — for example, with SHA-256, which also exists on Bitcoin and with some changes, this would probably also work — so that’s not a problem.”

Levy acknowledges that even as efficiencies improve, soft-forking Bitcoin to formally include covenants would remain the “cleanest, safest and most efficient” path forward.

This research doesn’t just highlight a technical pathway; as Levy points out, it can serve to demonstrate covenants’ utility, potentially accelerating the often slow-moving process of consensus-building among Bitcoin stakeholders.

Drawing parallels to the development of the BitVM, which also started as a high-cost innovation before evolving into something more scalable, Levy believes that ColliderScript can follow a similar trajectory. Just as the BVM’s second version enabled more feasible usage for Bitcoin’s complex transaction environment, future iterations of ColliderScript could make covenant-based transactions increasingly viable.

The project arose out of a mix of curiosity and persistence, with Levy working on it in his spare time since April. As Bitcoin continues to face challenges around scaling and transaction flexibility, this type of grassroots experimentation could play a vital role in Bitcoin’s development, whether or not ColliderScript itself becomes a mainstream solution.

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
0xResearch: Alpha in your inbox. Think like an analyst.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
The Drop: Apps, games, memes and more.
Lightspeed: All things Solana.
Supply Shock: Bitcoin, bitcoin, bitcoin.