Translation: Blockchain in Vernacular

image.png

When considering second-layer solutions for Bitcoin, I started with a simplified model, focusing on three key design decisions:

  • How to bridge BTC?

  • How and to what extent is the security of Bitcoin inherited?

  • How to deal with the data availability (DA) problem?

  •  

1) Bridging BTC

  • BitVM Bridge: A trust-minimized bridge scheme, with a 1/N trust assumption, should be the optimal solution. However, there is no concrete bridge specification yet, and there are some unresolved (hopefully resolvable) issues, such as the need for multi-signature operators to pre-provision liquidity. The current optimistic prediction is that we may see the emergence of the BitVM bridge in at least 12 months, and in 24 months in the base case.

  • Decentralized bridges: Economically secure bridges such as XCLAIM are generally more secure, but do not scale well. In contrast, statistically secure bridges, such as large rotating multi-signature networks, currently appear to offer a better tradeoff.

  • Centralized Bridges: While not ideal, they are a simple and straightforward solution, and many Bitcoin sidechains today rely on simple hosted bridges.

     

2) Inheriting the security of Bitcoin

This is where it really gets interesting.

  • BitVM Programs: In theory, BitVM programs can write rules even for tokens that only exist on sidechains and not native to Bitcoin. This would not only enable trust-minimized bridges through BitVM, but also enable actual rollups on top of Bitcoin. However, the technical risks cannot be ignored, and a practical solution seems a long way off.

  • PoS sidechains combined with Babylon: Another option is to combine with Babylon to build a PoS sidechain. Specifically, Babylon is the first solution to allow trustless Bitcoin staking, adding utility to BTC by using BTC as an economic security layer for new PoS chains, similar to how Eigen allows the use of ETH as an economic security layer for new middleware and infrastructure.

  • Merged mining: Merged mining is another option, however, there are some inherent limitations to traditional merged mining, such as the inability to force miners to perform certain behaviors. There are some areas of research into hybrid mechanisms that could be interesting, such as requiring miners to stake on a sidechain to increase their participation while giving the sidechain the ability to slash them.

 

3) Data Availability (DA)

Why is DA important? If we are talking about an optimistic design like BitVM, users need to be able to obtain data to challenge and prove malicious transactions.

Bitcoin itself has the constraint of only being able to store 4MB every 10 minutes, which makes it unsuitable for a DA layer, not to mention the uncertainty of costs and the unpredictability of whether data can be inserted in the next block.

Can Bitcoin have rollups without a Bitcoin-guaranteed DA?

DA is a widely discussed topic in the Ethereum community, with some community leaders insisting that anything using an external DA is not a true Ethereum rollup.

By the same principle, anything using a non-Bitcoin DA is not a Bitcoin rollup. However, Bitcoin sidechains may have to compromise and be more pragmatic here, choosing to use alternatives such as Ethereum DA, Celestia, Eigen DA, DAs secured by staked BTC (via Babylon), etc.

Last point: What is the best way to choose a settlement layer for Bitcoin L1?

In the long run, as Bitcoin's mining rewards gradually decrease, Bitcoin miners will have to rely more on organic fees or secondary sources of income. In other words, in order to maintain a high hash rate, Bitcoin needs to develop a sustainable fee market. In summary, the solution that is most beneficial to Bitcoin's L1 security is, surprisingly, merged mining.

That is, BitVM (combined with external DA) and Babylon will not bring more transaction fees to Bitcoin miners. The former is an optimistic design that only needs to be executed on Bitcoin in very rare cases, while the latter, while increasing the demand for BTC as an asset, does not enhance the security of Bitcoin PoW.

Merged mining is highly consistent with increasing Bitcoin security because it requires miners to compete for the execution of L1 blocks in order to build sidechain blocks and earn sidechain rewards. In other words, winning the next Bitcoin block is a prerequisite for building the next block on the sidechain.

All in all, with these simple modules, you can already create 18 unique sidechain combinations. Assuming there are no restrictions when combining different modules, my personal favorites that may be implemented in the next two years are as follows:

  • Bridge via BitVM

  • Use Babylon to gain BTC PoS security or some innovative merged mining methods to extend Bitcoin PoW security

  • Rely on external DAs, such as Ethereum or the DA provided by Babylon

image.png

image.png