Original author: Day
Last year, due to the popularity of Inscription, everyone began to shift their attention from Ethereum to Bitcoin, especially institutions, which began to spend money to lay out Bitcoin ecological infrastructure. Recently, BEVM, BOB and other Bitcoin Layer 2 projects have completed hundreds of projects. Thousands, up to tens of millions of financing, coupled with the recent launch of Nervoss RGB++ and the casting of Seal, have enabled CKB (CKB, translated as public knowledge base) to be the first layer of the Nervos Network and responsible for storage. All transaction data and smart contracts) are soaring in popularity.
Today, let’s learn about Bitcoin Layer 2 related content. There are currently many Bitcoin Layer 2 on the market. We simply divide them into four categories, namely Bitcoin side chain, UTXO+ client verification, Roullp and Taproot Consensus. This article is divided into upper and lower parts. Today we will start with Introduce the first two categories.
01 The goal of Bitcoin Layer 2
As the leader of crypto, Bitcoin can outperform 95% of assets after a round of market trends. However, everyone is still not satisfied with the status quo and hopes to give Bitcoin more things. Compared with other public chains, Bitcoin has problems such as slow transaction speed, long confirmation time, high transaction fees during congestion, and limited smart contract functions, making it impossible to directly build complex applications.
Bitcoin Layer 2 is an additional layer built on top of Bitcoin to increase transaction speed, reduce transaction costs and increase scalability. It achieves these goals by processing transactions off-chain and saving intermediate state. This speeds up transaction confirmations, reduces transaction fees, and increases overall system capacity and throughput. Layer 2 is designed to improve the performance of Bitcoin and make it more suitable for a wide range of applications.
02 Bitcoin sidechain
The Bitcoin side chain is an independent blockchain system connected to the Bitcoin main chain. It is generally an independent blockchain connected to the main chain through a two-way cross-chain bridge. It allows users to lock Bitcoin on the main chain and then conduct transactions and operations on the side chain.
Through sidechains, users can achieve more flexible and diverse functions, such as supporting other crypto-asset payments, stateful smart contracts, faster settlement, and higher privacy. However, because the side chain requires a set of independent verification nodes and needs to verify transactions by itself, it will face problems such as too few nodes, centralization, and the inability to inherit the security of Bitcoin. The following are some representative projects of side chain development:
Stacks
Stacks is positioned as the smart contract layer of Bitcoin, aiming to introduce smart contracts and Dapps into the Bitcoin system, and connect itself to the Bitcoin main chain through the unique Proof of Transfer (PoX) consensus mechanism. Stacks allows developers to build smart contracts and Dapps. In the technical architecture of Stacks, there are core layers and subnets to choose from. The core layer is highly decentralized but has lower throughput, while the subnets are less decentralized but can achieve higher throughput.
Stacks uses the Clarity smart contract language to create Dapps and performs Nakamoto upgrades to improve network performance. The Nakamoto upgrade allows Stacks to not only settle Bitcoin transactions, but also achieve 100% resistance to Bitcoin reorganization and speed up block production. Issue stablecoins based on SBTC to increase DeFi composability. Stacks aims to achieve a high degree of decentralization and scalability, and bring smart contract functionality and Dapp capabilities to the Bitcoin system.
The current ecosystem of Stacks has been developed for 5 years, but most projects have received mediocre response or are in a stagnant state. Stacks’ Nakamoto upgrade has been in development for a long time and is expected to launch on mainnet at the end of the month. Its Token STX is currently considered the leader in Bitcoin Layer 2, with a market value of nearly US$5 billion.
RSK
RSK (Rootstock) is positioned as Bitcoin Layer 2 that supports smart contracts and focuses on DeFi. RSK has no native token and introduces RBTC as payment transaction fee, aiming to become the cornerstone of financial inclusion.
RSK leverages the security of Bitcoin to protect smart contracts and transactions by merging production blocks, where Bitcoin block producers mine both Bitcoin and RSK blocks simultaneously. It is compatible with the Ethereum Virtual Machine (EVM). Developers can use Solidity to write smart contracts and port Ethereum Dapps to RSK. In addition, RSK has established the RIF network to provide various infrastructure services such as DeFi, storage, domain name services and payment solutions to meet user needs.
At present, except for RIF, no other ecological projects have emerged, and their performance is weak. RSK launched the third batch of funding plans last month, with a total amount of US$2.5 million.
Liquid Network
Liquid is a Bitcoin sidechain and transaction settlement network launched by Blockstream. Its goal is to provide functions such as fast settlement, strong privacy and digital asset issuance. It serves institutions and asset issuers, provides asset issuance and circulation services based on Bitcoin side chains, and promotes faster Bitcoin transactions and Tokenization of digital assets. Liquid focuses on simple protocols, security, and privacy. Liquid is similar to the RSK mentioned above in that they both rely on alliance multi-signatures to issue anchored tokens, but the degree of decentralization is different. In addition, Liquid focuses more on security, while RSK focuses more on usability.
Liquid is considered a consortium chain because it is a side chain for institutional services. In addition, it is mainly used for asset issuance and transactions, and is not friendly to smart contract functions.
Lightning Network
The Lightning Network is a scaling solution built on the Bitcoin network and is designed to increase the speed of Bitcoin transactions, but its network does not support smart contracts. It enables fast and cheap micropayments by introducing a second layer of payment channels. In the Lightning Network, participants can open a special payment channel and conduct multiple transactions within the channel without recording each transaction on the Bitcoin blockchain. Only when the channel is closed will the final transaction results be submitted to the Bitcoin main chain for settlement.
Through the Lightning Network, users can make almost instant payments without having to wait for confirmation from the Bitcoin main chain. This can greatly increase the speed of transactions and reduce transaction fees. Lightning Network uses smart contract technology and multi-signature mechanism to ensure the security of transactions between participants.
Application scenarios of Lightning Network include micropayments and games. It provides users with a convenient, fast and low-cost payment method, and also provides developers with a platform to build applications based on the Lightning Network.
On April 3, Coinbase partnered with Lightning Network payment solutions provider Lightspark to integrate the Bitcoin Lightning Network for all of its customers. Currently, the USD capacity in Lightning Network payment channels is nearly $320 million.
Overall, the second layer of the Bitcoin sidechain track is composed of relatively old projects, and although they have been in the works for a long time, the actual progress is actually not satisfactory, and they are relatively behind in terms of technology and implementation. .
03 UTXO+ client verification
UTXO+ client verification is an expansion solution for the Bitcoin UTXO account model (UTXO: Unspent Transaction Output, translated as unspent transaction output, which can be simply understood as receipts that have not been used). It attempts to be based on Bitcoin Off-chain ledger calculations are performed on UTXO, and the authenticity of the ledger is ensured through client verification. The goal of this solution is to retain the original characteristics of Bitcoin while achieving second-layer ledger sharing and security.
But in fact, the implementation of this plan is very difficult. Because Bitcoin is not designed to support complex calculations, integrating additional tasks into the UTXO model becomes very complicated. This solution emphasizes the native nature of Bitcoin, but may ignore the feasibility and difficulty of actual operation.
Currently, most projects on this track are still in the white paper stage and have not made much progress. The following are representative projects:
RGB
RGB is a Bitcoin Layer 2 solution designed to build based on the Bitcoin UTXO model and the Lightning Network. Its goal is to encapsulate data compression into each UTXO of Bitcoin and ensure asset security through client-side verification.
The design idea of RGB is to bind off-chain RGB transactions with the UTXO of Bitcoin transactions. It combines RGBs asset ownership and status with Bitcoins UTXO operations and control by sealing the proof of RGB transactions and asset ownership in Bitcoins UTXO. However, the development of RGB has been slow because many of the technical points involved are difficult to implement. Although RGB is considered an orthodox solution, its implementation difficulties and functional limitations have slowed its development.
RGB++
The RGB++ protocol is a protocol proposed by Nervos Lianchuang at the beginning of the year inspired by the RGB protocol. Its main idea is similar to RGB, by calculating, executing and verifying transactions off-chain, and then settling on the Bitcoin chain. The difference is that RGB++ adopts a different approach in verifying transactions and assets.
Nervos takes advantage of the same POW+UTXO structure advantages as Bitcoin, and combines it with innovative isomorphic mapping technology to successfully replace the client verification of the RGB protocol with CKB. In this way, Nervos maintains security and Bitcoin While maintaining the same currency, it also realizes the expansion of the functions and flexibility of the RGB protocol. This migration does not sacrifice too much privacy while providing users with more ways to use and manage digital assets. RGB++ can obtain Turing-complete smart contract execution capabilities while reusing the security of Bitcoin.
In this way, CKB becomes the execution layer and DA data layer of RGB++ assets, but it can not only support the RGB++ protocol, but also other Bitcoin-level assets, such as Runes and Atomical, as long as they are based on UTXO accounting mode. .
CKB has become very popular recently. Here is a brief introduction to UTXO Stack, developed by a company incubated by the Nervos Ecological Fund. UTXO Stack is a Bitcoin Layer 2 issuance platform based on the UTXO model. It is designed to help developers quickly build Bitcoin based on the UTXO architecture. Coin Layer 2 chain. It provides a modular toolkit that allows developers to easily build their own second-layer chains and integrate them into the Nervos ecosystem.
UTXO Stack also natively supports the RGB++ protocol and uses CKB as the data availability layer, bringing more application scenarios and development opportunities to the Bitcoin ecosystem. This architecture enables the RGB++ protocol and UTXO Stack to cooperate with each other, providing strong technical support for the development of the Bitcoin ecosystem.
BitVM
BitVM is a Bitcoin virtual machine concept solution proposed by Robin Linus, the leader of the ZeroSync project. It aims to enhance the programmability of Bitcoin and enable developers to run complex contracts on the Bitcoin network without changing the basic rules and consensus mechanism of Bitcoin. It is still in the theoretical stage.
BitVM provides a way to implement complex contracts on the Bitcoin network while maintaining the security and decentralized nature of Bitcoin. It provides developers with more programming capabilities and room for innovation by introducing new virtual machine concepts and roles. In order to improve flexibility, BitVM needs to transfer most of the calculation process to off-chain and only upload relevant proofs to the chain. Its core idea is to abstract complex smart contracts into fraud proofs and execute these proofs on Bitcoin scripts. Users can initiate reports when there are problems with asset transactions and verify the authenticity of the transactions through fraud certificates.
At present, the actual feasibility and technical details of BitVM are still controversial and require further observation and research.
04 Summary
The above is today’s content. Although everyone is optimistic about the future development of Bitcoin Layer 2, the old Bitcoin Layer 2 project is currently in a tepid state. As for new projects, due to complex technologies, most are in the white paper stage and are still some way off from being implemented.
