Integrating The Internet Computer With Bitcoin: Bringing Digital Gold To Web3


The Internet Computer in July 2021 released a detailed roadmap and plan to integrate its network with the Bitcoin network, the world’s largest blockchain. This development is very significant and its positive knock-on effects have yet to be fully evaluated. Of course, when traditional blockchain networks started integrating with Bitcoin, mainly in the form of inter-chain bridges and bringing Bitcoin to various DeFi protocols, it signified a huge trend — bringing the world’s most liquid crypto to the world of DeFi.

So what the Internet Computer is doing is not only bringing a similar functionality to its own network, but it’s doing so with better and safer technology (chain key cryptography), and it’s doing this integration to bring and extend Bitcoin to the world’s most powerful smart contract framework.

This proposal by the Internet Computer has two goals: the first is to make the IC’s powerful smart contract functionality available for Bitcoin transactions and the second is to enable Bitcoin transactions to have faster finality with low costs.

Main Takeaway — the Internet Computer’s goals of merging the network with the Bitcoin network are multifaceted and include enabling smart contract support for Bitcoin, and doing so without trust assumptions, and allowing for easy-to-use API for IC canisters to receive, store, and transfer Bitcoin quickly and inexpensively.


General Technology & Features Behind This New Integration

One of the main technologies and Internet Computer features making this integration possible are IC canisters. For this project to happen, canisters are essential. What will happen as a result of this direct integration is that canisters will be able to have Bitcoin addresses, they’ll be able to access the UTXO set of Bitcoin addresses, they’ll be able to securely sign Bitcoin transactions, and they’ll be able to submit Bitcoin transactions to the Bitcoin network.

As you can see in the image above, this is how the network will look with this integration. The Bitcoin network will be deployed at the Internet Computer Protocol layer and in the top box is where the canisters with Bitcoin addresses can be seen.

The technologies making this integration happen is chain key cryptography and being able to compute ECDSA signatures, which the Bitcoin and Ethereum networks rely on. Interestingly, the Internet Computer does not naturally implement ECDSA signatures, but rather a BLS signature scheme. However, in summer/fall 2021 proposals arose in the NNS to start implementing threshold ECDSA signatures into the Internet Computer so that smart contract canisters can hold BTC and ETH.

In summary, chain key technology is being extended to support ECDSA, which is how Bitcoin and Ethereum sign transactions.

Progress Update & Timeline

The plan for the release of the Bitcoin integration feature is that the Chromium (Beta) will be released in a few weeks with a target of late June. This will include the API for Bitcoin testnet integration being made available on the IC mainnet for public consumption. It will also include threshold ECDSA deployment, as well as documentation, videos, and a sample DApp on how to use the feature. The general availability is targeted at approximately 1–2 months after Chromium. This will include the API for Bitcoin mainnet integration being available on the IC mainnet for public consumption. It will include threshold ECDSA deployment on two of the largest subnets on the IC mainnet for public consumption. Lastly, it will include the ckBTC canister.

Implications & Innovations

There are a few important implications and innovations to think of when it comes to the Internet Computer integrating with the Bitcoin network, including things such as bridges and wrapping assets on other blockchains.

First, when it comes to cross-chain bridges, we’re all aware of the complexity, difficulty, and security issues that have come from bridging. It’s incredibly hard to get blockchains to talk to one another, and even harder to get transactions sent across chains.

As a result of this, there have been multiple instances of hackers siphoning funds from these bridge exploits. For example, the Ronin bridge hack, Qubit bridge, Wormhole bridge, and the Poly Network bridge to name a few. In all of these cases, hackers stole millions of dollars of funds.

However, the Internet Computer’s initiative to integrate with Bitcoin will be a much safer process. One reason for this is because the Bitcoin blockchain is relatively easier to technically integrate with, which is one of the reasons the IC has chosen to do this process before integrating with Ethereum, which will be a much longer and more complex undertaking.

What’s great about the IC’s Bitcoin integration is also that the transactions will all take place on the Bitcoin blockchain, so that means when people send and use Bitcoin, that Bitcoin being sent actually happens on the Bitcoin network, which is a very secure chain.

The second aspect related to the IC’s more secure bridge is that the network uses the power of advanced cryptography to create a bridge without trust — chain key cryptography. Chain key cryptography is an innovation on top of other blockchain consensus and digital signature schemes.

Traditional blockchain bridges require trust in third-parties, which as said above often have security weaknesses and code that’s able to be exploited. This brings us to trusting a central intermediary to wrap specific coins.

In this case, the problem with wrapped Bitcoin (wBTC) is that you have to trust and rely on an organization to do the wrapping. But on the Internet Computer, this Bitcoin will not be wrapped, but the real Bitcoin itself.

The graphic below illustrates how Bitcoin goes from the Bitcoin network to a centralized wrapping institution which then mints and burns BTC to match demand to be given to DeFi players.

The Internet Computer Bitcoin integration will solve this problem by allowing Bitcoin not to be placed on a centralized intermediary, but only be called on by IC canisters and retrieved from the Bitcoin network itself.

IC canisters will have Bitcoin addresses, access the UTXO set of addresses, and they’ll be able to sign Bitcoin transactions directly. So it makes it much more of a direct interaction and integration versus wrapped tokens.

These are the two main innovations: chain key cryptography for better cross-chain bridging, and direct network to network connections by having the Internet Computer simply facilitate Bitcoin transactions and have them completed on the Bitcoin blockchain.


How the Internet Computer will utilize this integration remains to be seen, but some of the initial applications are likely to be in the IC’s DeFi protocols such as InfinitySwap, and maybe will be even used as a payment in other internet applications and services being built on the IC. This will check the box of having a digital currency for the true Web3 internet, something Jack Dorsey himself would probably marvel at.


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All About The Internet Computer
All About The Internet Computer

This blog is dedicated to exploring the Internet Computer's tech stack, how it compares to the industry, projects building on the Internet Computer, and what ways the Internet Computer is creating true Web3.

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