CashTokens: native tokens arrive on Bitcoin Cash

Source: ElBitcoin Original Title: CashTokens: native tokens arrive on Bitcoin Cash Original Link:

Introduction and Background

In late 2008, the idea of Bitcoin was introduced as “a peer-to-peer electronic cash system.” In fact, Satoshi Nakamoto titled the technical paper that laid the foundations of this protocol with that phrase. According to Satoshi himself, electronic cash involves direct payments between people “without having to go through a financial institution,” a premise that served as the foundation for Bitcoin-BTC until 2017, the year when supporters of “Bitcoin as cash” had to migrate to a separate network called Bitcoin Cash (BCH) --“Cash Bitcoin” in English–. Thus, the concept of digital money is the starting point of all Bitcoin technology, especially in the case of BCH, which claims this quality as non-negotiable.

This quality is not incompatible with the incorporation of other use cases, as long as integrating them does not risk the ability to use BCH as money or to scale its system so that more and more people can adopt it as such.

In this regard, Bitcoin Cash (BCH) has a process for presenting, debating, and standardizing ideas called “CHIP” (acronym for: cash improvement proposals), which, similar to “BIP” or “Bitcoin Improvement Proposals” of Bitcoin-BTC, allows the community to discuss and evaluate the suitability of ideas to develop for adding new functions to applications, and even to the protocol on which the currency runs.

One of the functions pursued for years is the possibility of transferring other assets through the Bitcoin Cash blockchain. Assets that in the cryptocurrency world are often called “tokens” or “chips,” very popular in many crypto ecosystems, which provide additional economic activity to the networks they run on, and which, combined with functions like the ability to implement smart contracts, can be exchanged on decentralized exchanges or used in DeFi platforms.

When BCH was just gaining independence from BTC, there were several proposals to incorporate tokens based on the concept of “colored coins,” which refers to transactions (such as) sending a very small amount of Bitcoin Cash that contain metadata to transfer a token. In other words, it involves using BCH transactions as a vehicle for other assets, requiring a protocol that can interpret those attached metadata as a chip, the transferred amount, etc.

This idea was implemented over the Bitcoin Cash (BCH) network through various protocols, the most well-known and longstanding being the “Simple Ledger Protocol” or “SLP tokens.”

However, the “colored coins” model has certain limitations, such as the need to run additional software to validate the information they contain, as well as waiting for at least 1 confirmation to consider such transactions valid. Due to these weaknesses, “colored coins” are a viable alternative for sending and receiving tokens but do not match the qualities of payments with the base currency.

New Standard: A Better Model

On May 15, 2023, Bitcoin Cash (BCH) will incorporate, through an update, among other new features, the ability to transfer tokens without the limitations posed by “colored coins” protocols. This new feature, with its technical specification assigned the identifier “CHIP-2022-02,” is called “CashTokens: token primitives for Bitcoin Cash.” In plain terms, CashTokens represents a superior solution compared to the “Simple Ledger Protocol” of SLP tokens, distinguished by the following features:

• The infrastructure supporting “SLP tokens” required running “SLP nodes,” i.e., additional software to validate transactions of that type based on the included metadata. In the case of CashTokens, support only requires a Bitcoin Cash node, so miners and full node operators can attest to its validity.
• SLP token transactions are not compatible with 0-conf, so accepting transactions without waiting for the first confirmation can be risky. CashTokens transactions are compatible with 0-conf, making it reasonable to accept transactions with fewer than 200$ confirmations.
• Although the Bitcoin Cash network is based on the “UTXO” model, SLP token transactions are verified using the “DAG” model. CashTokens transactions are based on the UTXO model, which offers greater efficiency in validating transactions of this standard.

These advantages, among many others, allow CashTokens to provide a better user experience and reduce friction in expanding the compatibility of self-custody wallets and trading platforms with sending and storing tokens. On the other hand, CashTokens transactions pay fees to miners denominated in Bitcoin Cash, so their eventual popularization will contribute to maintaining the system.

CashTokens: Token Primitives

The technical specification of CashTokens lists the expression “Token Primitives for Bitcoin Cash” as its formal name. This expression can be somewhat confusing for a Spanish-speaking audience, as it might be mistakenly thought to refer to something “primitive,” unsophisticated, or limited in DeFi compatibility.

However, CashTokens is not only compatible with smart contracts written with Bitcoin Cash’s scripting language, but the term does not aim to evoke simplicity. The term “primitives” in this context refers to a fundamental function of a protocol; a native function of the protocol, so a much clearer translation of the concept could be “Native tokens for Bitcoin Cash.”