The dream of decentralized finance (DeFi) on the Bitcoin blockchain has eluded developers for nearly as long as the dominant blockchain has existed. But a crucial component of DeFi, smart contracts, is not native to the Bitcoin blockchain.

Today, however, a group of developers is set to launch the OP_NET testnet on Wednesday, which they say will bring the programmable feature to Bitcoin.

Tapscript and Taproot

OP_NET takes advantage of the Tapscript component of the Bitcoin Taproot upgrade, which also made Ordinals and Runes possible. According to pseudonymous OP_NET co-founder Chad Master, the objective is to build a permissionless meta-protocol system that allows anyone to deploy decentralized applications and smart contracts on the Bitcoin network.

"We want to see DeFi on Bitcoin in full force," Chad Master told Decrypt, providing a preview of the launch. People want to be able to use Bitcoin without compromise and without having to move it to another blockchain—one with less security and decentralization," the co-founder continued. "In a permissionless and open-source manner, as true to BTC as possible, we're bringing that solution with the introduction of OP_NET."

WebAssembly and Multi-language Support

As Chad Master explained, OP_NET uses WebAssembly (WASM), which means smart contracts can be written in multiple languages, including AssemblyScript/Typescript, Rust, Python, C++, and more.

According to the OP_NET light paper, only Bitcoin must pay transaction fees, not sidechain tokens.

OP_NET Transactions

OP_NET transactions submitted to the Bitcoin network are labeled in an arbitrary data field with the string "BSI," indicating that an OP_NET transaction is initiated.

These transactions are sent to unspendable Bitcoin addresses, which have been converted into contract addresses. These transactions are then processed in the OP_NET virtual machine (OP_VM), and the contracts are updated as needed.

"Basically, it's the Bitcoin Virtual Machine," Chad Master said. "Even though layer-2 type solutions have used that term, this is a true implementation of that concept."

Chad Master said work on OP_NET began in February and evolved from work on a Bitcoin-based decentralized exchange called MotoSwap.

Ultimately, he—along with co-founder Danny Plainview and lead developer Anakin—shifted focus to OP_NET, with MotoSwap being one of the first applications to launch.

Building the DeFi Ecosystem

"You need a few different key pieces for a DeFi ecosystem, including a lending protocol or a stablecoin, so we have to build those things, too," he said.

Chad Master did, however, acknowledge that an unfortunate side effect of permissionless and decentralized finance is scams and Ponzi schemes. "We don't want to be responsible for launching those, but we need to be able to have the environment where those things can launch," he said.

Token Standards and Liquidity

OP_NET also supports fungible and non-fungible tokens, designated OP_20 for fungible tokens and OP_721 for non-fungible tokens.

According to Chad Master, the labeling is meant to make the two token standards comparable with the ERC-20 and ERC-721 standards on Ethereum.

Accessing the vast amount of stagnant liquidity in Bitcoin is a golden opportunity, Chad Master opined, adding that it provides Bitcoin holders a way to generate yield from their assets and leverage them all on the blockchain.

"OP_NET's main goal is to allow the expressibility and creativity in app development that exists on more programmable blockchains like Ethereum to occur on Bitcoin," Chad Master said. Bitcoiners need applications that benefit all BTC holders, not just those who want to speculate on NFTs."