Bitcoin Covenants Part 5: MATT and OP_CHECKCONTRACTVERIFY — How Bitcoin could carry state across transactions

This is Part 5 in the technical article series about Bitcoin covenants by Cointelegraph Research. To read the previous article click here.

MATT (Merkleize All The Things) is a smart contract framework for Bitcoin that enables stateful contracts and scalable fraud proofs. A stateful contract carries information forward across multiple transactions and can update this information as the contract evolves. Standard Bitcoin scripts do not provide this capability, because each transaction is evaluated independently with no memory of previous executions.

Every covenant proposal allows state-carrying UTXOs to an extent, as illustrated by scripting languages such as Sapio, which builds on OP_CTV. This works by using addresses to represent a finite state automaton, where transactions function as the state transitions.