Acknowledgements: Sincere thanks to Chakra, UTXO, Nubit, and Yala for their co-authoring and professional support. Their contributions and guidance have greatly improved the quality of this article. Thank you for your hard work and valuable insights!
In the evolution of blockchain technology, Bitcoin's modularization is more inevitable than Ethereum's, which is due to the clever interweaving of many factors. As a pioneer of blockchain, Bitcoin faces inherent scalability challenges. With the explosive growth of the user base and the continuous expansion of application scenarios (such as the emergence of inscription technology), the problems of network congestion and high transaction fees have become increasingly prominent, like a gap that needs to be crossed.
The core design concept of Bitcoin — as a simple and secure value storage and transfer system, provides an excellent stage for modularization. This approach allows for elegant expansion of functionality without touching the underlying protocol, which is a good solution.
The Bitcoin community's persistent pursuit of maintaining the stability and security of the main chain, coupled with the ever-changing technological innovation pressure of other blockchain platforms, has undoubtedly fueled the necessity of modularization. What is more striking is that as the cryptocurrency with the highest market value, the huge economic value contained in Bitcoin has become a powerful catalyst for developers to explore modular solutions, inspiring them to continuously expand the functional boundaries and application areas of Bitcoin.
The cleverness of the modular solution lies in that it cleverly opens up fertile ground for innovation on the second layer or side chain while maintaining the core advantage of the Bitcoin network's high security. This strategy not only coincides with the values of the Bitcoin community, but also opens a new chapter for Bitcoin to enrich its functions and improve its performance while protecting its core value proposition.
Chakra: A new settlement layer for BTC
1. Why do we need an independent settlement layer?
Scalability: The transaction processing capacity of the Bitcoin main chain is limited. If all Layer 2 transactions are settled on the main chain, it will inevitably lead to network congestion. The independent settlement layer effectively solves this problem by batch processing a large number of transactions and submitting only the final results to the main chain, significantly improving the overall throughput.
Innovation space: The independent settlement layer breaks through the limitations of the Bitcoin scripting language and provides developers with a broad space for innovation. Developers can boldly try various novel expansion solutions without directly affecting the Bitcoin main chain. This flexibility enables the Bitcoin ecosystem to achieve functional expansion without hard forking, ensuring the stability and compatibility of the network.
2. Comparison between Ethereum’s Dymension and Bitcoin’s Settlement Layer
Dymension in the Ethereum ecosystem is a good reference example. Dymension provides an independent chain and supports RaaS (Rollup-as-a-Service) services. The rollup built on Dymension is essentially a chain developed based on the Cosmos SDK, but the final confirmation process is outsourced to Dymension. In addition, Dymension has also transformed the IBC protocol, turning the relayer into a liquidity provider.
Bitcoin’s Challenge
However, Bitcoin’s settlement layer faces unique challenges, especially in terms of zero-knowledge proof (ZK) verification. Bitcoin itself cannot directly implement settlement functions, and even innovative solutions like BitVM have difficulty fully solving this problem. While BitVM can theoretically be used to perform ZK verification (as demonstrated by the Citrea project), it still faces significant limitations in transaction processing speed (TPS) and the implementation of other key services such as cross-chain bridging and unified liquidity.
ZK Settlement Core and Additional Services
The core of ZK settlement is that when rollup submits status updates to the chain, it also needs to submit corresponding proofs. For chains that provide RaaS services, this means that they also need to provide ZK rollup framework support.
The importance of the settlement layer is also reflected in the additional services it provides. For example, in cross-chain transactions, the transfer from rollupA to rollupB needs to be transferred through the settlement layer. This method can avoid common problems in P2P networks, such as the inconsistency of the same token on different chains. In addition, the unified liquidity pool allows all liquidity to be concentrated in the settlement layer for trading, enabling the settlement layer to capture all transaction fees.
Deep cooperation and incentive mechanism at the settlement layer
It is worth noting that settlement networks like Dymension will also encourage some deeply cooperative projects to release rollups on them, and airdrop to stakers after each rollup is launched. This strategy makes the platform token a "golden shovel", incentivizing users to actively participate in staking and ecological construction.
Overall, the concept of the settlement layer and its potential to address scalability, interoperability, and liquidity integration provide important insights and directions for the future development of the Bitcoin ecosystem.
3. Chakra is a high-performance BTC settlement layer based on the PoS consensus mechanism:
Chakra consists of a three-layer architecture: basic consensus layer, settlement consensus layer and execution layer. Its design and implementation are aimed at improving throughput, reducing latency, and enhancing security, flexibility and scalability.
The basic consensus layer is the block consensus of Chakra Chain and the foundation of upper-layer services. It adopts PoS consensus. The block generation is selected by the proposer through the verifiable random function (VRF), and the block is finally determined based on the chain with the highest voting weight.
The settlement consensus layer specializes in handling settlement events between different chains. The settlement consensus reuses the Chakra PoS consensus validator set and the underlying communication. It is a lightweight consensus that can achieve extremely low latency. The validator listens to the settlement request event, broadcasts the signature confirmation, and generates a Quorum Certificate (QC) after collecting enough signatures. The settlement message and QC are sent to the Babylon network for finality. The BTC staked on Babylon will provide additional shared security for Chakra's settlement consensus and ensure the security of settlement services.
The execution layer uses Substrate BlockSTM designed by Chakra to improve performance through multiple optimization methods and handle settlement requests for frequent state transitions. Through optimization methods such as optimistic parallelization, coverage of change sets, batch submission, global keys and MVMemory, Chakra can significantly improve transaction processing speed in a multi-threaded environment, reaching a transaction processing capacity of more than 5,000 transactions per second (TPS). In high-configuration computing environments, it can even reach 100,000 TPS, meeting the current settlement needs of major BTC L2.
Nubit：BTC的Data Availability Layer
We will not elaborate on the question of why BTC needs DA here. We will mainly talk about why BTC needs a new DA (in other words, DAs like Celestia cannot currently meet BTC’s needs).
Nubit has built a highly scalable and secure data availability layer based on the economic security of Bitcoin. Nubit's team members are professors and doctoral students from the University of California, Santa Barbara, with outstanding academic reputation and global influence. They are not only proficient in academic research, but also have rich experience in blockchain engineering implementation.
1. Bitcoin native integration:
Nubit is designed with compatibility and integration with the Bitcoin network in mind. This native integration allows Nubit to interact directly with Bitcoin's UTXO model, script system, and consensus mechanism, providing a seamless user experience and greater security. In contrast, Celestia, as a general data availability layer, can provide services for multiple blockchains, but cannot provide this deep Bitcoin-specific integration.
2. Bitcoin native staking:
Nubit has introduced an innovative mechanism that allows Bitcoin holders to directly participate in the PoS consensus without converting their BTC to other tokens or using complex cross-chain bridges. This means that BTC holders can directly stake their Bitcoin, participate in network security maintenance and receive corresponding rewards. This not only enhances the economic security of the network, but also maintains the liquidity and value of BTC. In contrast, Celestia's staking mechanism is based on its native token and cannot directly leverage Bitcoin's economic value and network effects.
3. Bitcoin Anchoring:
Nubit achieves a tight anchor to the Bitcoin mainnet by regularly recording its own block hashes and pledge set voting information on the Bitcoin blockchain. This approach not only provides additional security guarantees, but also greatly shortens the time to unbind assets (from traditional weeks to less than 4 hours). This direct Bitcoin anchoring mechanism enhances the credibility of the Nubit network and provides users with greater flexibility. Celestia, as an independent blockchain, cannot provide this direct anchor to the Bitcoin mainnet.
4. Focus on the Bitcoin ecosystem:
Nubit is designed and optimized specifically for the unique needs and applications in the Bitcoin ecosystem. For example, it provides optimization support for Ordinals (NFT protocol on Bitcoin), BRC-20 (token standard on Bitcoin), etc. The team wrote a paper on modular indexers with Domo (creator of BRC20), added the design of the DA layer to the indexer structure of Bitcoin Meta Protocol, and participated in the establishment and formulation of industry standards.
5. Bitcoin-level PoS consensus mechanism and DA guarantee:
Nubit explores an efficient BFT-based consensus powered by SNARK for signature aggregation. The PBFT scheme is combined with zkSNARK technology to significantly reduce the communication complexity of verifying signatures between verifiers, verifying the correctness of transactions without accessing the entire data set, thus allowing for extremely large-scale consensus verifier sets, reaching bit The degree of decentralization at the currency level. Nubit’s Data Availability Sampling (DAS) works by randomly sampling small portions of block data over multiple rounds. Each successful round of sampling increases the likelihood that the data will be fully usable. Once a predetermined confidence level is reached, the block data is considered accessible. In contrast, Celestia uses the traditional Tendermint consensus algorithm and can only support a scale of 100 staking validators.
Nubit Ecosystem Integration Progress:
Currently, data availability integration with Layer2 such as Merlin, Manta, and Rooch Network has been achieved. The modular indexer built on Nubit has been integrated into OKX Wallet, Tomo, Gate Wallet, and Unisat wallets as a technical standard, providing secure and trustless indexing services to millions of Bitcoin ecosystem users through Nubit. Nubit is also working with Succinct to enable any ecosystem to deploy zk light clients on the chain, allowing ecosystem applications/L2/L3 to access the data availability layer secured by Bitcoin from Nubit.
Through innovative consensus algorithms and protocol mechanism designs, Nubit has built the first data availability layer with security guaranteed by Bitcoin, providing scalable data services for applications and infrastructure in the Bitcoin ecosystem and even multi-chain ecosystems, unlocking the bottleneck of Bitcoin's own data throughput and opening up unlimited possibilities for developers.
UTXO Stack: Creating a UTXO-based Bitcoin Layer 2
OP Stack and Arbitrum Orbit provide Ethereum developers with tools to build their own Layer 2 rollups, greatly reducing the development threshold. On Bitcoin, UTXO Stack is extending the UTXO model, a core feature of Bitcoin, to Layer 2 solutions. UTXO Stack provides a one-click chain launch tool to help developers create a native isomorphic Bitcoin Layer 2 based on the UTXO model at low cost.
The first thing that must be mentioned is Bitcoin's first-layer asset issuance protocol RGB++. It maps Bitcoin UTXO to eUTXO (extended UTXO, supporting smart contracts) of a Turing-complete UTXO chain through isomorphic binding, and uses the script constraints on these two chains to verify the correctness of state calculations and the validity of ownership changes. This Turing-complete UTXO chain is called the RGB++ chain, which can be a chain that meets the conditions such as Nervos CKB or Cardano. The so-called isomorphic binding refers to the mutual binding of Bitcoin UTXO and eUTXO on the RGB++ chain - the unlocking condition of eUTXO is set to the corresponding UTXO. So once the UTXO is spent, the corresponding eUTXO is also transferred. Assets issued using the RGB++ protocol are interpreted on the RGB++ chain, and ownership is bound to Bitcoin UTXO.
An unprecedented feature brought by RGB++ is the cross-chain without cross-chain bridge, which is called Leap. When the unlocking condition of eUTXO is Bitcoin UTXO, the ownership of the RGB++ asset explained by it is on the Bitcoin chain; and if we construct a transaction on the RGB++ chain and make the unlocking condition of eUTXO become Litecoin UTXO, then the ownership of the RGB++ asset will jump to the Litecoin chain. In this way, a bridge-free cross-chain from Bitcoin to Litecoin is realized. The whole process is completely decentralized, without cross-chain bridges, and no trust assumptions are required. Through Leap, RGB++ assets issued on the first layer of Bitcoin can smoothly cross to the second layer.
With the above technical preparation, UTXO Stack can build Bitcoin Layer 2 based on UTXO model and PoS mechanism in one click, which is called Branch Chain. Branch Chain has the following advantages:
- High TPS and low transaction fees, thanks to the unique parallel processing characteristics and PoS mechanism of the UTXO model.
- The asset protocol uses RGB++. RGB++ assets can be freely transferred between any UTXO chains (including but not limited to Bitcoin, CKB, Litecoin, and various Branch Chains) without the need for a cross-chain bridge.
- Reuse CKB’s smart contract stack to achieve Bitcoin Layer 2 Turing completeness.
- Reuse BTC wallets, such as JoyID, UniSat, OKX Wallet, Gate Wallet, etc.
- Security is guaranteed by BTC/CKB staking, DA layer, forced exit mechanism, etc.
UTXO Stack helps create a high-performance programmable Bitcoin Layer 2, emphasizing Bitcoin nativeness and isomorphism with the UTXO model, providing a new paradigm for Bitcoin expansion.
Yala: Reshaping the DeFi future of BTC with modularity
DeFi solutions on Bitcoin face multiple challenges, mainly due to the inherent limitations and design concepts of the Bitcoin network. Existing Layer 2 technologies such as rollups and sidechains, while providing possibilities for complex applications, are still subject to Bitcoin's technical constraints and it is difficult to fully utilize its consensus and security mechanisms. At the same time, these solutions also have shortcomings in asset security, cross-chain interoperability, and native function support. There are many Bitcoin holders, but due to security issues, many large holders are on the sidelines of emerging Bitcoin applications. Yala, through its unique design, fundamentally solves Bitcoin's security issues and provides liquidity solutions for Bitcoin holders.
Yala is a BTC-native DeFi solution that adopts a modular architecture and integrates a decentralized indexer network and Oracle. It uses assets from the bitcoin ecosystem to issue the stablecoin $YU. The issued $YU can freely participate in any DeFi activities on the chain, thereby unlocking the programmability of BTC assets and releasing the huge liquidity of Bitcoin.
Yala's architectural design embodies the essence of modular thinking. It includes the application layer, consensus and data availability layer, execution layer and settlement layer. This modular design enables BTC assets to conduct native DeFi transactions while maintaining the security and consensus of the Bitcoin network.
Specifically:
Application layer: Yala’s application layer defines the logic of state changes, which can be smart contracts in EVM or other BTC L2.
Consensus and DA layer: Yala uses Indexer to maintain the off-chain status and data availability of the system. This echoes the concept of an independent DA layer explored in BTC modularization, and both are committed to improving data processing efficiency and availability.
Execution layer: Yala's Vaults Module serves as an execution environment for state changes, similar to the independent execution layer discussed in BTC modularization, and aims to improve transaction processing efficiency.
Settlement layer: Yala eventually settles transactions to the BTC mainnet.
Yala's architectural design demonstrates how to achieve modularization of DeFi functions in the Bitcoin ecosystem. It cleverly leverages the security and decentralization of Bitcoin, while overcoming Bitcoin's limitations in smart contracts and scalability through modular design.
The Yala example also highlights the advantages of modularization in improving development efficiency and system flexibility. By providing SDK and customizable modules, Yala makes it easier for developers to build applications in the Bitcoin ecosystem, which coincides with the goal of BTC modularization.
