I heard many people say that no one can define L2 in Bitcoin Asia. The problem is that we have a definition and most people just want to ignore it. It’s marketing.
“Bitcoin L2” is the one that is attracting the most attention. People use a lot of jargon to distract users from assumptions about trust and spend money on Bitcoin Season 2.
Why do I suddenly feel energized? You see, about a year ago, some team came up with a way to use Bitcoin as a data availability layer for rollups. Some people are working on improving the trust assumptions associated with bridges (aka two-way pegs). Research has made great progress, and many projects believe blockchains like Rollup will be in production by 2025.
2025? Do some projects claim to be on mainnet now?
The team is harnessing this energy to prematurely advance the modular theory of scaling Bitcoin. The project was launched with a bridge contract on a non-Bitcoin blockchain and is being marketed as Bitcoin L2. Infrastructure providers amplify the message and boast that Bitcoin is back.
However, these solutions do not scale Bitcoin. These are completely independent and centralized sidechains.
Do you mean layers? Similar to a layer of trust assumptions.
definition
Many of these projects seek to adopt a modular theory of scaling Bitcoin. This basically means that each aspect of the transaction lifecycle can be its own specialized system. Execution, transaction ordering, and data availability can all be manipulated by independent actors. Bitcoin will be the underlying payment layer for all of this.
If you dig deeper, it’s not a terrible paper. However, the current implementation in Bitcoin is a bit worse for wear.
Many new projects claim to be “rollups.” Rollup uses Bitcoin for data availability and posts the latest state root and enough transactions to Bitcoin to recalculate the state of the blockchain from the time of creation. If you want to scale your Bitcoin transaction throughput, minimized trusta bridge contract that allows users to deposit funds to mint in rollups.
If you look at some documentation sites, you will see that none of these new projects (in production) use Bitcoin for data availability. They want to use an alternative DA solution for performance. That is, they want to be “validium” or “optimium”.
These structures are similar to rollups. These are blockchains that similarly have a bridge agreement with their parent chain, but use different systems for DA. This improves performance and reduces costs, but comes with a security trade-off.
In the validation design, the L1 contract is responsible for validating the validity proof associated with a particular state transition for payment. After completing certain state transitions, validium bridge contracts can process withdrawals for users who wish to exit the chain, including unilateral exits that users can submit themselves if state data is available. Optimium is similar, but relies on a fraud proof mechanism rather than a validity proof.
However, production implementations do not use mechanisms on top of Bitcoin to support SNARK or proof-of-cheat verification…
Everything is verified on a completely different Layer 1 or proprietary permissioned sidechain network.
Most of these chains have forked the Ethereum L2 SDK. They’re settling on either Ethereum, or a fully centralized fork of Guess that they’ve scraped together.
Therefore, it has nothing to do with Bitcoin. Perhaps it will settle on Ethereum, use the hottest DA layer, and have a strong execution layer.
But it’s not Bitcoin.
So sidechain?
The new Bitcoin L2 is all just a modular sidechain. And when I say “modular sidechain” I mean running an alternative blockchain from the parent blockchain for performance purposes. It also makes security trade-offs by using alternative DA layers to improve performance.
What is the bridge between Bitcoin and Bitcoin? Performed by multisig.
Therefore, the common trust assumptions that users accept are:
- I hope Multisig, which operates Bitcoin Bridge, doesn’t give them a hard time.
- I would expect a centralized sequencer to be able to include and execute transactions
- Trust an alternative DA layer to make your data immediately available
- Expect the central prover to post state transitions to the L1 contract, or expect the central prover to contest malicious state transitions
- Trust the sidechain’s parent chain to verify state transitions (finality)
- Trust the admin key to upgrade the chain and not steal user funds
If you know that your users trust a fully centralized chain and bridge program to use their BTC, it is fine to use a modular Bitcoin sidechain. Some projects have been completely honest about this approach, and I’ve publicly stated that I’m not completely opposed to this approach from a go-to-market perspective.
The problem is that most teams try to abstract away security details and make their designs look similar to the modular structure of Ethereum and other ecosystems.
Not all hope is gone
You might read this post and think the whole situation is hellish and not worth investigating. While it may feel that way some days, there’s a lot of great R&D work being done around improved sidechain designs.
Teams like Citrea and Alpen Labs are looking to develop rollups based on Bitcoin. The BitVM community and his ZeroSync team have done a lot of great work in improving the bidirectional peg design and developing a now working SNARK verifier. This work has also inspired a number of bridging proposals from various rollup and sidechain projects.
In such a situation, you can’t throw out the good with the bad. It’s not completely hopeless. But what about all the nonsense we see in other ecosystems, such as complex scaling proposals, token incentives, and “progressive decentralization” roadmaps?
That’s 100 times more than Bitcoin.
So, yeah. These new chains are not L2.
Don’t lie to your users.
