[Article] What Bitcoin L2s are real?

Table of Contents

Key Takeaways
1. What Happened?
2. Backgrounds
2.1 Five Confirmation Rules for Safety & Liveness
3. Zoom in: What Bitcoin L2s are real? True or False
3.1 Stacks
3.2 Citrea
3.3 Bitcoin Sovereign Rollups
3.4 Merlin Chain
3.5 B^2 Network
4. Zoom out: Before Apeing, Be Aware of The Risks

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Bitcoin

Key Takeaways

The recent bull market and approval of BTC spot ETFs have become a catalyst for heightened interest in the Bitcoin ecosystem, leading to a surge in projects aiming to improve Bitcoin's scalability.
To determine whether scalability solutions inherit the security of Bitcoin L1, it's essential to analyze whether they meet the Safety and Liveness conditions.
This article examines whether some of the recently popular Bitcoin scalability solutions (Stacks, Citrea, Sovereign Rollups, Merlin Chain, B^2 Network) can be truly considered Bitcoin L2.

1. What Happened?

Source: House of Chimera

The recent bull market and approval of BTC spot ETFs have become a catalyst for heightened interest in the Bitcoin ecosystem, leading to a surge in projects aiming to improve Bitcoin's scalability. However, due to the limitations of Bitcoin network smart contracts, very few of the projects claiming to be scalability solutions actually inherit the security of Bitcoin L1. Therefore, this article will classify several projects that have recently gained much attention to see if they can be considered true L2s.

2. Backgrounds

2.1 Five Confirmation Rules for Safety & Liveness

It's crucial to understand where the Safety and Liveness of the numerous Bitcoin L2 projects on the market are guaranteed to determine if they are truly L2. According to the five confirmation rules for Safety and Liveness proposed by EigenLayer founder Sreeram Kannan, they are as follows:

Ledger Growth: The distributed ledger continuously grows by adding blocks.
Censorship Resistance: Any honest transaction is added to the network without being censored.
Reorg Resistance: Once confirmed, a transaction remains confirmed and unchanged.
Data Availability: Transaction data is always accessible.
Validity: The state of the blockchain is valid.

Among these, 1) Ledger Growth and 2) Censorship Resistance are directly related to Liveness, while 3) Reorg Resistance, 4) Data Availability, and 5) Validity are directly related to Safety.

For example, rollup networks ensure Ledger Growth through a sequencer replacement protocol, achieve Censorship Resistance through a mechanism that forces L2 transactions on L1 (Forced Inclusion), attain Reorg Resistance by stacking blocks on previous commitments, ensure Data Availability by storing transaction data in L1 blocks, and achieve Validity through a Fraud/Validity Proof system, thus fully relying on L1 security.

On the other hand, Sovereign Rollups, which process settlements independently within their network without relying on L1 for settlement, would fully depend on L1 security if they enforce a full node confirmation rule, similar to smart contract rollups. Sidechains, which periodically record the state root summarizing the network's state on L1, rely only on L1 for Reorg Resistance, depending on their validators for the rest, and thus cannot be considered L2.

3. Zoom in: What Bitcoin L2s are real? True or False

3.1 Stacks

Stacks is gearing up for the Nakamoto Release upgrade this year, promising improvements in scalability, MEV, and finality compared to its current design. After the upgrade, Stacks' finality will be entirely determined by Bitcoin's hash rate, meaning a reorg in Stacks would require a reorg in the Bitcoin network. Despite this, Stacks cannot strictly be considered a Bitcoin L2, as stated in the official Stacks GitHub.

Firstly, Stacks records only the hashes of transaction data on the Bitcoin network, not the full data. This proves the legitimacy of Stacks' network history but doesn't guarantee data availability. Secondly, the Bitcoin network inherently cannot incorporate a proof system for fraud proof or validity proof. Thus, in terms of validity, Stacks does not benefit from the security of the Bitcoin network.

3.2 Citrea

3.2.1 Overview & Data Availability

Citrea, a Bitcoin zk rollup based on BitVM being developed by Chainway Labs, utilizes Type-2 zkEVM technology from RISC Zero and uses cBTC as its native gas token. Regarding data availability, Citrea records state diffs and zk-STARKs related to operations on the Bitcoin network in an inscription format. This means Bitcoin nodes can access historical state diffs and validity proofs to compute Citrea's full state. Although BitVM proves these proofs, Bitcoin nodes could locally verify the proofs stored in the inscription if desired.

3.2.2 BitVM

How does Citrea verify L2 proofs given the smart contract limitations of the Bitcoin network? It uses BitVM for verification. BitVM is a VM capable of verifying arbitrary operations. Provers and Verifiers participate in this system, opening a multisig wallet on the Bitcoin network and depositing BTC. If a Prover's operation is malicious, Verifiers can identify this through a fraud proof process and confiscate the Prover's deposited BTC.

BitVM's main advantage over other solutions is that it can be implemented without any upgrades to the Bitcoin network, which is innovative considering that building rollups on Bitcoin was previously impossible without network upgrades to introduce a proof system. Moreover, the BitVM system, with a single Prover and N Verifiers, is robust even if only 1-of-N Verifiers is honest. However, BitVM has drawbacks: it's slower, more expensive, and more complex than EVM. Despite these, the ability to prove arbitrary operations on Bitcoin in an optimistic manner offers significant potential for diverse applications.

3.2.3 Evaluation

The zk-STARK proofs generated in Citrea's type-2 zkEVM are optimistically verified by BitVM. Since it only requires a 1-of-N honest assumption, this system is very similar to optimistic rollups. Additionally, Citrea's forced transaction system, which inserts transactions into L2 via inscriptions on Bitcoin L1, provides censorship resistance. Including the hash of the most recently finalized Bitcoin block in the rollup block header also offers resistance to re-orgs. Considering all these aspects, Citrea's Safety and Liveness can sufficiently be considered inherited from Bitcoin L1, making it reasonable to classify Citrea as an L2 solution.

3.3 Bitcoin Sovereign Rollups

As mentioned earlier, Bitcoin Sovereign Rollups can indeed be considered a Layer 2 solution. They store transaction data on the Bitcoin network, allowing Bitcoin L1 full nodes access to all related data, enabling them to independently verify the Sovereign Rollup's canonical state and exchange fraud/validity proofs via a peer-to-peer network. Under the full node confirmation rule, Sovereign Rollups inherit both the Liveness and Safety of Bitcoin L1.

However, Sovereign Rollups face significant challenges. First, trust-minimized bridging between L1 and L2 is not feasible because, unlike smart contract rollups that process transaction validity on L1, Sovereign Rollups handle settlements internally, and the Bitcoin network does not support deploying smart contracts to verify these actions. Consequently, it's difficult to securely utilize L1's BTC within a Bitcoin Sovereign Rollup.

Second, their scalability is limited. While dedicated Data Availability (DA) solutions like Celestia offer 1.4mb/s, and Ethereum (pre-EIP-4844) offers 83kb/s, the Bitcoin network's bandwidth is only 6.8kb/s (=4,096kb/10min). This inherently limits the scalability of Bitcoin Sovereign Rollups that store transaction data on the Bitcoin network.

Despite these limitations, activities within Bitcoin Sovereign Rollups are guaranteed the Safety and Liveness of Bitcoin L1. While it may be challenging to utilize BTC directly or applications requiring high scalability (e.g., gaming, perp, …), it's well-suited for transactions that are less frequent and demand higher security (e.g., RWA, NFT, …).

3.4 Merlin Chain

Merlin Chain, developed by Bitmap Tech, claims to be a ZK rollup on Bitcoin. It provides a service called BTC Connect using the Particle Network, allowing connectivity to the network with Bitcoin wallets (UniSta, Xverse, etc.) despite being an EVM-based chain. With limited information currently available, it's difficult to classify Merlin Chain as an L2 unless it utilizes BitVM or a similar method for validity proof verification, as the Bitcoin network cannot inherently verify these proofs.

3.5 B^2 Network

The B^2 Network introduces a bootstrapping strategy first used by Ethereum-based rollup networks like Blast, Manta, which offer points through bridged assets. Claiming to be a ZK rollup on Bitcoin, similar to Citrea, it employs a comparable approach. While it doesn't use BitVM for validity proof verification, it follows a challenge model similar to optimistic rollups, with a different slashing mechanism.

However, B^2 Network can't be fully classified as a Bitcoin L2 due to data availability issues. Like Citrea, it records data on the Bitcoin network as inscriptions, but only the hashes are recorded, not the full data, which is stored on a separate decentralized storage protocol.

4. Zoom out: Before Apeing, Be Aware of The Risks

We briefly explored whether the myriad of emerging Bitcoin scalability solutions truly depend on the Safety and Liveness of Bitcoin L1. Only a few of the numerous projects have been covered, and it's highly likely that most others do not qualify as true Bitcoin L2 solutions, thus necessitating caution from users. The focus was solely on Safety and Liveness, without considering aspects like BTC bridging, which requires further analysis.

With network bootstrapping strategies like points and referral systems becoming the norm, many projects may lure users with persuasive narratives. Users are encouraged to carefully evaluate a project's risks before making an investment. Stay SAFU!

Thanks to Kate for designing the graphics for this article.

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What Bitcoin L2s are real?