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Bitcoin Layer2: Rebuilding Ethereum on Bitcoin

Bitcoin Layer2: Rebuilding Ethereum on Bitcoin

BlockBeats2024/05/25 12:13
By:BlockBeats
Original title: " Bitcoin Layer2: Rebuilding Ethereum on Bitcoin"
Original source: Xiaozhu Web3


What is Layer2


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When mentioning Layer2, people usually think of Ethereum's Layer2 Rollup, such as Arbitrum, Optimism, zkSync, and StarkWare. In fact, the expansion plan of Layer2 originated from the white paper of Bitcoin's Lightning Network in 2015.


Public chains such as Bitcoin, Ethereum, and Solana are collectively referred to as Layer1. The main function of Layer1 is to ensure security, decentralization, and final state determination, to achieve state consensus, and as a "crypto-court", it conducts arbitration through the rules designed by smart contracts, and transfers trust to Layer2 in the form of economic incentives.


Layer2 pursues extreme performance and can undertake most of the computing work for Layer1, such as separating Ethereum transactions from the main chain, reducing the burden of the network layer, improving business processing efficiency, and thus achieving capacity expansion. Layer2 can only achieve local consensus, but it can meet the needs of various scenarios.


Bitcoin Layer2


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In general, Layer2 is an independent blockchain network built on Layer1, with the purpose of packaging most of Layer 1 transactions to Layer2 to reduce pressure and expand capacity.


Currently, the Bitcoin network can process an average of about 7 transactions per second. In comparison, Alipay in the web2 world can process 10w transactions per second. With the inscription design represented by the Ordinals protocol, Bitcoin provides a decentralized storage capability on the chain. The new standard represented by BRC-20 realizes Bitcoin ecosystem tokens similar to ERC-721 and ERC-20. The explosion of these Bitcoin ecosystems has made the already inefficient Bitcoin network even more "congested". The rise of Ethereum Layer2 (including Rollup) has given Bitcoin developers hope of transplanting these mature experiences to the Bitcoin ecosystem. It can be said that Bitcoin Layer2 will undoubtedly become one of the biggest narrative spring breezes in 2024.


The Bitcoin Layer2 network is designed to meet the growing demand for faster and more efficient transactions within the Bitcoin ecosystem. By releasing certain transaction processing tasks from the main network, it aims to alleviate the congestion problem of the Bitcoin main network and significantly reduce the time required for transaction confirmation.


Bitcoin Layer2 Development and Classification


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Each Bitcoin block is 1MB. Based on the average transaction size of 250 bytes, only 1024*1024 / 250=4194 transactions can be recorded. It takes an average of 10 minutes to generate a block, so the number of transactions per second is 4194/10/60=6.99 transactions. This is how we usually say that Bitcoin has 7 transactions per second.


There are three variables here, namely block capacity, transaction size, and block time. Among them, only the method of increasing transaction speed by changing block capacity is feasible. For example, if the block capacity is increased from 1M to 32M, the transaction speed per second will increase from 7 to 224. If you want to increase the transaction speed without expanding the capacity, you can only do it through the side chain.


On December 12, 2010, when Satoshi Nakamoto disappeared from the public eye, he handed over the Bitcoin development rights to Gavin Andresen. After that, Gavin gave the code management rights to 4 developers, including Gregory Maxwell, who later served as the CTO of Blockstream.


Blockstream focuses on sidechain technology and lightning network. According to Gregory Maxwell, Blockstream was established for Bitcoin development.


The Lightning Network white paper was released in February 2015, and the Segregated Witness (Segwit) scheme was proposed in December 2015. After that, Gregory Maxwell wrote the Lightning Network into the Bitcoin roadmap, forming the technical route of "Segregated Witness + Lightning Network". This expansion route does not actually change the block size, but speeds up the Bitcoin confirmation speed through clever design and off-chain processing.


Segregated Witness means not writing the witness information of the transaction into the block, so that the block size remains unchanged and the amount of information in a single transaction is reduced to accommodate more transactions.


The Lightning Network is to build a prepaid pool in the form of margin between counterparties with frequent transactions. As long as it does not exceed this amount, all transactions are not recorded in the main chain block. Only a transaction occurs at the time of settlement, thereby reducing the pressure of small transactions on the main network.


After the Segregated Witness upgrade, although the Bitcoin block size limit has been changed to 1M for transaction data blocks and 3M for witness data blocks, the total size is 4M. However, this limit has not changed so far. As Bitcoin's influence continues to grow, the problem of expansion has become prominent. Expansion is still one of the core issues facing the Bitcoin ecosystem. Various technical routes are actively exploring solutions. The main expansion directions of Bitcoin are currently as follows.


State Channel


A state channel is a virtual channel established on the blockchain for two-way communication and state services between different users. It allows users to conduct multiple transactions within the channel without having to record the transaction on the blockchain each time, greatly improving the efficiency and speed of transactions. These channels can be created by two or more users and will only settle with smart contracts on the blockchain when necessary, reducing the load and transaction fees of the blockchain network.


The most famous example of state channels is the Lightning Network mentioned above. The two parties to the transaction establish an off-chain payment channel at the time of the first transaction. In essence, it is a ledger held by both parties to keep transaction records. The two parties to the transaction lock a certain amount of funds in the channel and then sign the transaction through the private key.


The transfer of funds between the two parties is not carried out on the chain, but is only saved in each other's ledger. When one or both parties decide that the channel is no longer needed, the settled balance is broadcast on the main network.


However, the Lightning Network is not just a direct connection between the two parties. It can connect a large number of single channels in series to form an interconnected and vast payment network. In other words, assuming that C and A have a channel, C and B do not have a channel, but A and B have a channel, then C can trade with B indirectly through A, and A, as an intermediary, can charge routing fees. In the Lightning Network, the network will find the path with the least nodes and the least transaction fees to complete the transaction.


Sidechain


Sidechain is the most common solution, and the most popular sidechain technologies include Stacks, Liquid, and Rootstock.


As the leading Bitcoin sidechain project, Stacks is anchored on the Bitcoin blockchain on the one hand, and on the other hand, as an independent protocol, it introduces smart contract functions similar to Ethereum, and settles transactions permanently on the BTC blockchain, unlocking the programmability of Bitcoin as Bitcoin L2, opening up new possibilities for applications such as DeFi and NFT.


If you look at the overall system, Stacks actually has its own chain, compiler, and programming language, and runs in sync with Bitcoin to ensure its transactions and integrity. However, since it uses a "peg" method to achieve BTC cross-chain - achieved by issuing sBTC on the Stacks network, it is essentially a centralized mapping method, which has certain centralized single-point risks. At the same time, its network Gas uses its main network token STX instead of BTC. Miners participating in Stacks' network mining will consume the pledged BTC to mine its network tokens. Through this system, miners earn STX coins and transaction fees, while STX pledgers earn Bitcoin, which will also cause miners to hesitate to participate in the trade-off.


Emerging sidechain technologies such as BEVM use a completely decentralized Bitcoin Layer2 solution.


BEVM is a BTC Layer2 that uses BTC as Gas and is compatible with EVM. Its core goal is to expand Bitcoin's smart contract scenarios, help BTC break through the constraints of Bitcoin's non-Turing completeness and lack of support for smart contracts, and allow BTC to build decentralized applications with BTC as native Gas on the BEVM Layer2.


When a user transfers BTC from the Bitcoin mainnet to BEVM, the user's BTC will enter the contract address hosted by 1,000 nodes, and then generate new BTC at a 1:1 ratio on the BEVM, the BTC Layer2 network.


When the user issues an instruction to transfer BTC from BEVM back to the main network, the BEVM network node will trigger the Mast contract, and the 1,000 nodes that hold assets will automatically sign according to the established rules and return BTC to the user's address. The entire process is completely decentralized and trustless.


Client Verification


Currently, most public chains use a global consensus model, where all nodes verify all transactions, all transaction information is transmitted between nodes, and the entire network shares a unified global state.


Problems caused by the global consensus model:


1. Scalability limitations make it expensive to verify all contract interactions;

2. High costs prevent more users from participating in running nodes, and nodes are centralized;

3. Lack of privacy, and transaction information is public.


Client-Side Validation (CSV) only requires the consensus layer to maintain an encrypted commitment to the ledger events, and the actual event information (ledger) is stored outside the blockchain.


The representative project of CSV is RGB, in which there is no global network broadcasting all transactions to create the equivalent of the Bitcoin UTXO set. This means that when receiving an asset transfer, the RGB client must not only verify whether the most recent state transition is valid, but also perform the same verification on all previous state transitions dating back to the genesis state of the issuance contract. Therefore, RGB needs to verify the transaction history step by step from the bottom up to prevent double-spending attacks.


RGB improves scalability by verifying only relevant transactions, but may also encounter problems similar to data availability, and payment verification needs to be optimized through data sharing.


RGB's client needs to store more data. If the off-chain data used to verify transactions is lost, users will no longer be able to spend. It is not just the key that needs to be saved.


Rollup


ZK Rollup and Optimistic Rollup are basically similar to Ethereum. Bitcoin is used as the consensus layer, data layer, and settlement layer, but the technical challenges are very large. In particular, if ZK-Rollup is to be supported, a huge upgrade of the Bitcoin mainnet is required, which is difficult to reach a community consensus and will weaken the currency and value storage narrative of the Bitcoin network.


The representative project of ZK Rollup is Alpen, and the representative project of Optimistic Rollup is BitVM. Both are relatively ideal and are in the theoretical stage.


Sovereign Rollup is another "incomplete" Rollup solution. Bitcoin only serves as the consensus layer and data availability layer. Layer2 has its own status and asset data, which is not stored on the Bitcoin network. It is verified by Layer2 nodes, that is, the settlement is placed on Layer2. It is technically easy to implement, so it is also highly discussed in the Bitcoin community.


Rollkit, an open source technical framework developed by Celestia, allows developers to customize the data availability layer and execution layer, supports the direct storage of Rollup data on the Bitcoin network, and supports developers to deploy Sovereign Rollup. Therefore, developers can use Rollkit to deploy the Rollup protocol on the Bitcoin network to improve scalability and minimize network operation costs.


Omnichain


Omnichain connects all blockchains together by building a base layer (Layer 0), and all other networks and DApps can be based on it regardless of their smart contract technology.


The full chain is a super multi-chain ecosystem that is compatible with everything, so as long as it is compatible with Bitcoin, it can also be regarded as Bitcoin's Layer 2, representing the project MAP Protocol.


MAP Protocol is a Bitcoin Layer2 network for peer-to-peer cross-chain interoperability. It uses Bitcoin's security mechanism to enable assets and users of other public chains to interact seamlessly with the Bitcoin network, thereby enhancing the security of the network and realizing BRC-20 cross-chain capabilities.


Summary


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Bitcoin Layer2 is still in its early stages, as Bitcoin itself is extremely restrictive and difficult to program. In addition, on-chain expansion has long been a difficult problem for the Bitcoin community. The support behind the community comes from teams or institutions with different development backgrounds, lacks coordination, and coordination is difficult. The debate between Bitcoin fundamentalism and Bitcoin's emerging ecology still exists.


In the long run, the ability to introduce Rollup and smart contracts is crucial to the development of the Bitcoin ecosystem, and may become a key driver of innovation and diversification in the Bitcoin ecosystem, producing landing products such as Inscription Defi.


But is Bitcoin, which is becoming more and more like Ethereum, still the Bitcoin we knew before?


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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