The path to general computation on Bitcoin (with OP_CAT)

The discussion revolves around the technical intricacies of implementing smart contract-like functionalities within the Bitcoin blockchain, specifically addressing the challenges and limitations posed by the absence of certain operational capabilities intrinsic to more conventional smart contracts found in other blockchain systems. The conversation highlights a critical examination of the term "smart contract" in the context of Bitcoin, suggesting that the traditional definition does not fully apply due to the lack of automatic transaction triggers, which are fundamental to the operation of smart contracts on platforms that support complex decentralized applications. This limitation is attributed to the absence of OP_CALL in Bitcoin, which restricts the ability to initiate new transactions from within the protocol itself, an essential feature for the full realization of smart contract capabilities.

Further, the dialogue touches upon the utilization of "covenants" as an alternative mechanism to achieve restricted forms of smart contract functionality on the Bitcoin network. Covenants, as discussed, offer a method to impose certain constraints on transactions, thereby enabling a degree of programmable logic akin to that of smart contracts but within the confines of Bitcoin's existing operational framework. This approach, however, necessitates a departure from standard smart contract terminology and practices, given the unique limitations and design choices inherent to Bitcoin.

Moreover, the conversation delves into technical aspects related to state tracking and the execution of complex operations on the blockchain. Questions arise regarding the storage of state information and the implementation specifics of covenant-based systems, particularly in relation to the use of particular opcodes like OP_CAT and the potential application of Schnorr signatures to address some of the identified challenges. The discussion acknowledges the complexity of these issues, including the management of state information at the node level and the verification of states across transactions.

Additionally, there is mention of StarkWare and its contributions to the field through the development of proof systems capable of settling transactions exceeding $1 trillion in value. This reference underscores the broader context of ongoing innovation and debate surrounding the optimization of blockchain technology for various applications, including those that push the boundaries of what is traditionally achievable within the Bitcoin ecosystem.

In conclusion, the exchange encapsulates a nuanced debate on the feasibility, terminology, and technical approaches to extending the functionality of the Bitcoin blockchain beyond its original design. It reflects an ongoing exploration of how best to leverage existing mechanisms like covenants and emerging technologies to enhance the blockchain's utility without compromising its core principles.