New Star of Bitcoin Layer 2 Network: How Bitlayer Balances Security and Scalability

Recently, the Bitcoin Layer 2 network project Bitlayer Labs completed a $11 million Series A financing round, led by several well-known investment institutions. Notably, Bitlayer has become the first Bitcoin infrastructure project to receive ETF licensing for institutional investment.

Bitlayer, as a Bitcoin Layer 2 network project, aims to enhance the scalability of Bitcoin and unleash its ecosystem potential. The uniqueness of this project lies in the fact that it is the first Layer 2 network based on BitVM, and it is also the first to fully inherit the security of Bitcoin while supporting a Turing-complete Layer 2 solution.

The Current State of Bitcoin Layer 2 Networks

Currently, most Bitcoin second-layer network projects are essentially cross-chain bridges, with their core technology primarily based on multi-signature schemes. However, multi-signature has serious trust issues, and there have been multiple incidents of funds being stolen.

An ideal layer two network should not only expand the ecosystem but also inherit the security of the underlying network. Bitlayer, as the first layer two network based on BitVM, has achieved a good balance between security and scalability while implementing minimal trust.

Bitlayer's Technical Architecture

The basic architecture of Bitlayer consists of three main stages: transaction processing, transaction validation, and final validation.

Transaction Processing Stage: Layered Virtual Machine LVM

During the transaction processing stage, Bitlayer uses two key components: the sorter and the Layered Virtual Machine (LVM). The sorter is responsible for collecting and sorting transactions, while the LVM is responsible for executing smart contracts and generating the latest state and zero-knowledge proofs.

The innovation of LVM lies in the decoupling of front-end smart contract execution and back-end zero-knowledge proofers, which greatly enhances the scalability and security of the system.

Transaction Verification Stage: ZKP-based OP Bridge

During the transaction verification phase, Bitlayer faces the challenge of how to inherit the underlying security of Bitcoin. Currently, mainstream secure cross-chain solutions include ZK bridges and OP bridges. Bitlayer chose the OP bridge as its core technology, mainly as a compromise between technical limitations and security considerations.

The cross-chain bridge solution of Bitlayer adopts a combination of BitVM bridge and OP-DLC bridge. The BitVM bridge ensures security, while the OP-DLC bridge serves as a supplement to reduce reliance on BitVM.

How BitVM Bridge Works

The BitVM bridge adopts a "pay first, reimburse later" model. Operator nodes advance funds for withdrawing users and then regularly apply for reimbursement from the public deposit address. If an operator falsifies transaction data, anyone can initiate a challenge and penalize them.

This model achieves the decentralization of the capital pool by introducing operators, thereby enhancing the security of the chain bridge from the source. However, this approach also has some limitations, such as being potentially unfriendly to certain users with strict requirements on the source of funds.

To address this issue and reduce the over-reliance on the BitVM bridge, Bitlayer has also introduced the OP-DLC bridging solution, enabling peer-to-peer transactions between users.

Summary

Bitlayer demonstrates forward-thinking in its architectural design, with its LVM achieving the decoupling of smart contract execution and zero-knowledge proofs, laying the foundation for future compatibility with various virtual machines and zero-knowledge provers.

In the selection of cross-chain bridge technology, Bitlayer's BitVM+OP-DLC dual-channel bridge solution represents one of the safest implementations in the current Bitcoin Layer 2 network, achieving minimal trust.

Although Bitlayer has constructed a relatively balanced cross-chain bridge solution for security and scalability through the combination of technology and engineering based on BitVM, it is still in a transitional phase. With the continuous advancement and practical application of BitVM technology, it is believed that Bitlayer is expected to achieve significant breakthroughs in the application of BitVM in the coming months, gradually becoming the ideal Bitcoin Layer 2 network solution that people are looking forward to.