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 establishing the foundations of this protocol with that phrase. According to Satoshi himself, electronic cash involves direct payments between individuals “without having to go through a financial institution,” a premise that served as the foundation for Bitcoin-BTC until 2017, the year when proponents of “Bitcoin as cash” had to migrate to a separate network called Bitcoin Cash (BCH) — “Bitcoin in cash” in English. Thus, the concept of digital money is the starting point of all Bitcoin technology, especially in the case of BCH, which asserts this quality as non-negotiable.

This feature is not incompatible with incorporating other use cases, as long as doing so does not put at risk BCH’s ability to be used 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 to present, debate, and standardize ideas called “CHIP” (acronym for: cash improvement proposals), which, similar to “BIP” or “Bitcoin Improvement Proposals” for Bitcoin-BTC, allows the community to discuss and evaluate the suitability of ideas to develop for adding new features to applications, and even, to the protocol on which the currency runs.

One of the functions that has been pursued for years is the possibility of transferring other assets via the Bitcoin Cash blockchain. Assets that are commonly called “tokens” or “fichas” in the crypto world, very popular in many crypto ecosystems, which bring extra economic activity to the networks on which they run, and which, along with functions like the ability to implement smart contracts, can be exchanged on decentralized exchanges or used in DeFi platforms.

When BCH had just separated from BTC, several proposals emerged to incorporate tokens based on the concept of “colored coins,” which refer to transactions (for example) that contain metadata to transfer a token, such as sending a very small amount of Bitcoin Cash. In other words, it involves using BCH transactions as a vehicle for other assets, requiring a protocol that can interpret these attached metadata as a ficha, the transferred amount, etc.

This idea was implemented on 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 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 of “colored coins” protocols. This new feature, with the 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” for SLP tokens, distinguished by the following characteristics:

• 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 allows for greater efficiency in validating transactions of this standard.

These advantages, among many others, enable CashTokens to provide a better user experience and reduce friction in expanding wallet and platform compatibility for 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 the system’s maintenance.

CashTokens: token primitives

The technical specification of CashTokens states the expression “Token Primitives for Bitcoin Cash” as its formal name. This phrase may be somewhat confusing for a Spanish-speaking audience, as it might mistakenly think (that it refers to something “primitive,” unsophisticated, or limited in DeFi compatibility.

However, CashTokens are 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.”

Originally, it was indicated that CashTokens did not require the use of two address formats. A correction has been made because Bitcoin Cash’s native tokens )BCH( allow the use of “token aware” addresses )capable of handling tokens( that can receive both BCH and CashTokens, as well as normal format addresses that only receive BCH. The use of two formats aims to prevent users from sending tokens to wallets that do not reflect this type of asset.