CashTokens: the native tokens arrive at Bitcoin Cash

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

Introduction and background

In late 2008, the idea of Bitcoin was presented as “a peer-to-peer electronic cash system.” In the words of Satoshi Nakamoto himself, electronic cash allows for 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 in which supporters of “Bitcoin as cash” had to migrate to a separate network called Bitcoin Cash (BCH). Thus, the concept of digital money is the starting point for 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 jeopardize 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, discussing, and standardizing ideas called “CHIP” (acronym for: cash improvement proposals) that, similar to the “BIPs” or “Bitcoin improvement proposals” of Bitcoin-BTC, allows the community to discuss and evaluate the suitability of ideas to be developed to add new functions to applications, and even to the protocol on which the currency runs.

One of the functions that has been pursued for years is the ability to transfer other assets through the Bitcoin Cash blockchain. Assets that in the world of cryptocurrencies are often referred to as “tokens”, very popular in many crypto ecosystems, which provide extra economic activity to the networks they run on, and that, accompanied by functions like the ability to implement smart contracts, can be exchanged on decentralized exchanges or used on DeFi platforms.

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

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

However, the model of “colored coins” has certain limitations, such as the need to run additional software to validate the information they contain, as well as having to wait for at least 1 confirmation to consider those transactions valid. Due to these weaknesses, “colored coins” represent a viable alternative for sending and receiving tokens, but without matching 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 imposed by “colored coin” protocols. This new feature, which has been assigned the technical specification identifier “CHIP-2022-02”, is named “CashTokens: token primitives for Bitcoin Cash”. In simple terms, CashTokens represents a superior solution compared to the “Simple Ledger Protocol” of SLP tokens, distinguished among other things by the following characteristics:

• The infrastructure supporting “SLP tokens” required running “SLP nodes”, meaning additional software to validate transactions of that type based on the metadata included in them. In the case of CashTokens, its 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 it can be risky to accept transactions without waiting for the first confirmation. Transactions with CashTokens are compatible with 0-conf, so it is reasonable to consider transactions good without confirmations less than $200.

• 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 means greater efficiency in validating transactions of this standard.

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

CashTokens: token primitives

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

However, CashTokens is not only compatible with smart contracts written in the Bitcoin Cash scripting language, but the term does not seek to evoke simplicity. The expression “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.”