Discreet Log Contracts

A Discreet Log Contract or DLC is a type of Bitcoin transaction that requires an oracle to execute a smart contract. A DLCs allows two parties to place bets using the Bitcoin blockchain as the final settlement. To construct a DLC, two parties lock funds in a multiSig wallet. These funds are only released when the oracle releases the specified information at a specified time. An oracle for a DLC can be any form of data feed, such as a website’s publication of the result of a sports match or an exchange’s listing of an asset price.

The oracle or oracles are specified in the discreet log contract, and once the conditions in both outcome and time are met. The funds will release to one of the parties that took the side of the bet that met the conditions presented by the oracle.

A DLC works by using an oracle’s signature of a certain message as a private key, which allows the winner of the bet to sign a transaction spending the funds the two counterparties committed to the contract at the beginning.