DLC (Discreet Log Contract) is a contract execution scheme based on oracles that can realize new decentralized financial applications while ensuring the security of Bitcoin deposits. Compared with the Lightning Network, DLC has advantages such as better privacy, complexity and flexibility of financial contracts, reduced counterparty risk, and scalability for specific use cases. However, DLC still has some risks and problems in Bitcoin ecological applications, such as key risk, centralized trust risk, and decentralized key derivation. To solve these problems, this paper proposes some solutions and optimization ideas, including key management, decentralized oracles, coupling of decentralization and key management, OP-DLC: oracle trust minimization, and OP-DLC + BitVM double bridge. These solutions help improve the security of the Bitcoin ecosystem.

The optimization directions of DLC include:

1. Key management: To improve the security of the oracle private key, BIP32 should be used to derive a child key or grandchild key for signing. In addition, to improve the security of random numbers, the hash value of the private key and the counter k:=hash(z, counter) should be used as the random number k to prevent the random number from being repeated or lost.

2. Decentralized Oracle: Schnorr threshold signature can realize decentralized oracle, improve security, reliability, flexibility, scalability and accountability, etc.

3. Coupling of decentralization and key management: The paper Distributed Key Derivation for Multi-Party Management of Blockchain Digital Assets proposes a distributed key derivation method in the threshold signature scenario, which allows the decentralization technology of oracle and key management technology to be coupled.

4. OP-DLC: Minimization of oracle trust: Introducing an optimistic challenge mechanism, so that oracle nodes supervise each other and minimize oracle trust.

5. OP-DLC + BitVM Dual Bridge: Allow users to deposit and withdraw funds through BitVM's permissionless bridge, or deposit and withdraw funds through the OP-DLC mechanism, realize arbitrary granularity change, and improve capital liquidity.

Through these optimization solutions, DLC will play a greater role in the Bitcoin ecosystem, providing users with more secure, reliable and flexible financial services. Welcome everyone to talk about your views and suggestions on DLC in the comment area and discuss the future development of the Bitcoin ecosystem together.😊