How To Save Fees in Bitcoin Smart Contracts: a Simple Optimistic Off-chain Protocol

We consider the execution of smart contracts on Bitcoin. There, every contract step corresponds to appending to the blockchain a new transaction that spends the output representing the old contract state, creating a new one for the updated state. This standard procedure requires the contract participants to pay transaction fees for every execution step. In this paper, we introduce a protocol that moves most of the execution of a Bitcoin contract off-chain. When all participants follow this protocol, they are able to save on transaction fees. By contrast, in the presence of adversaries, any honest participant is still able to enforce the correct execution of the contract, according to its original semantics.