Article Summary:
The article discusses various Bitcoin Layer 2 solutions that aim to address the scalability, security, and privacy limitations of the Bitcoin network. These solutions include opZKP and zkBTC by LightecXYZ, Liquid Network, LumiBit L2, Mercury Layer, Mirror L2, Rollux, SovrynBTC, U Protocol, and ZKBase. Each solution offers unique features such as zero-knowledge proofs, fast transaction processing, cross-chain compatibility, decentralized trading and lending platforms, and enhanced privacy and security. These projects are contributing to the development of a diverse and efficient Bitcoin ecosystem.
Article:
Title: Bitcoin Layer 2 Solutions Explained
LightecXYZ: Bitcoin Layer 2 Solution Based on ZKP
LightecXYZ aims to build Bitcoin Layer 2 using Zero-Knowledge Proofs (ZKP) technology. Its main projects include opZKP and zkBTC. opZKP completes complex calculations off-chain and generates a concise proof. It then introduces new opcodes in the Bitcoin script language to verify the off-chain computation on-chain. This solution overcomes the Turing incompleteness limitation of Bitcoin, making it possible to deploy various applications on the Bitcoin network. opZKP is technically complex and has a long development cycle. zkBTC, on the other hand, is an application built on top of opZKP, enabling cross-chain bridging between Bitcoin and Ethereum using ZKP. This solution allows users to deposit Bitcoin to a specified address and mint ERC-20 token zkBTC pegged to Bitcoin. The entire process involves generating ZKP proofs off-chain and verifying them on the Ethereum smart contract to mint zkBTC tokens upon transaction confirmation. When users redeem their Bitcoin, they need to destroy the corresponding zkBTC tokens and generate proofs off-chain for verification before redeeming the Bitcoin. The Lightec team does not have access to the private keys of the specified address, ensuring security and decentralization.
Lightec is actively developing the zkBTC project, and the launch of the testnet is expected in a few months. Additionally, they are building a token economic model to support further development of the opZKP proposal and promote the ecosystem development of Bitcoin Layer 2.
Liquid_BTC: Fast, Secure, and Private Bitcoin Layer 2 Solution
Liquid Network is a Bitcoin Layer 2 solution that provides fast, secure, and private settlement and issuance of digital assets, including stablecoins, security tokens, and other financial instruments. It uses a special Federated Byzantine Agreement (FBA) to compress block generation time to within 2 minutes. It protects transaction amounts and address information using Confidential Transactions technology and zero-knowledge proofs. Liquid Network allows users to trade LBTC (Liquid Bitcoin) as a tradable digital asset for fast and private transactions. Currently, over 3700 LBTC is in circulation. Liquid Network is governed by a distributed alliance of more than 65 Bitcoin-centric companies, including Bitbank, BTCBOX, Aquannow, Bitcoin Reserve, Cobo, and OpenNode. Bitfinex Securities has launched the first tokenized debt for the New Hilton Hotel, providing funding through tokens issued on the Liquid Network.
LumiBit L2: Enhanced Scalability, Privacy, and Decentralization Bitcoin Layer 2 Solution
LumiBit is a Bitcoin Layer 2 solution that utilizes ZK-EVM to provide enhanced scalability, privacy, and decentralization. It features a seamless Ethereum smart contract migration, a universal circuit design, and efficient transaction verification. LumiBit adopts Type 2 ZK-EVM, which is highly compatible with EVM and optimized data structures to improve verification efficiency. It integrates the Halo 2 zero-knowledge proof mechanism, eliminating the need for trusted setups and enhancing security. The introduction of Omin wallet’s abstract accounts allows users to transact on the LumiBit chain using their local Bitcoin keys. The LumiBit testnet has already been launched.
Mercury Layer: Privacy and Efficiency-Focused Bitcoin L2
Mercury Layer is a Bitcoin Layer 2 solution that focuses on enhancing privacy and efficiency through state chains for off-chain transfer and settlement of Bitcoin UTXOs. It utilizes state chains and blind threshold signatures to facilitate instant and feeless transactions without compromising fund custody and security.
Mirror_L2: Decentralized Proof-of-Stake Bitcoin Layer 2 Solution
Mirror Staking Protocol, formerly known as Mirror L2, is a decentralized Proof-of-Stake (PoS) Bitcoin Layer 2 solution compatible with EVM and smart contracts. It uses BTC as GAS. Mirror Staking Protocol employs the Overlapping Group Multisignature (MSG) algorithm managed by hundreds of nodes, balancing BTC staking ratio, security, and decentralization. It generates mBTC anchored to BTC at a 1:1 ratio and compatible with EVM. It has been used in the restaking mechanism. Mirror has designed a node management scheme where community-elected nodes play a crucial role. Champions of each election round receive significant rewards and execute governance functions. Mirror Staking Protocol has secured seed funding in 2014, and it plans to establish Total Value Locked (TVL) and ecosystem partnerships through the “Stake Once, Earn Twice” campaign with other BTC Layer 2 projects.
Rollux L2: Ethereum-Compatible Bitcoin Layer 2 Solution
Rollux, developed by Syscoin (SYS), is an Optimistic Rollup equivalent to EVM, with plans to transition to ZK-based Rollup in the future. Rollux supports near-instant transactions and contract deployments, secured by the Bitcoin network. Syscoin is a dual-layer blockchain based on PoW consensus, with the Syscoin blockchain as its core and NEVM providing smart contract functionality. Syscoin announced a $20 million ecosystem development fund in June 2022. It is listed on Binance, with a current Fully Diluted Valuation (FDV) of $170 million.
SovrynBTC: Decentralized Trading and Lending Platform Based on Bitcoin
Sovryn, developed on Rootstock (RSK), is a decentralized trading and lending platform based on Bitcoin. It offers a full suite of DeFi services, including stablecoins, automated market makers (AMM), lending pools, and margin trading. Sovryn’s founder, Edan Yago, graduated from Tel Aviv University and is the founder of CementDAO and Sovryn. John Light, the product lead, previously served as Aragon One’s governance lead. Sovryn has undergone four rounds of fundraising, with investments from Greenfield, Collider Ventures, Monday Capital, Anthony Pompliano, Cadenza Ventures, and others.
u_protocol: Fully Decentralized Synthetic BTC
U Protocol is a native fully decentralized synthetic BTC that is compatible with EVM. Its main products include uBTC and U Bitcoin Thunder Network. uBTC is a decentralized Bitcoin for Layer 2, supported by Lido’s Wrapped Staked Ether and BTC.b. u_protocol uses BTC as the pricing mechanism and enhances the user experience by charging a one-time redemption fee to prevent frequent redemptions. The system sets a price cap of 1.10 BTC, allowing borrowers to maximize their borrowing and sell uBTC for immediate profits when the uBTC:BTC exchange rate exceeds this level.
ZKBaseOfficial: Infrastructure Protocol Based on ZK Technology
ZKBase is an infrastructure protocol based on Zero-Knowledge Proofs (ZK) technology. It provides scalability solutions for mainstream blockchains such as Ethereum and Bitcoin, offering a range of services, including decentralized exchanges, cross-chain bridges, Layer 2 payments, NFT markets, and Layer 2 domain names. ZKBase plans to release AMM ZKSwap supporting BRC-20 assets to enhance market liquidity and efficiency. Compared to other protocols, ZKBase focuses on privacy, fast transaction processing, and provides a more secure approach comparable to the Bitcoin network. Chief Strategy Officer Antonio Saaranen previously served as CSO of Qtum Foundation, and Marketing and Public Relations Director Hailan Jia was a senior PR manager at Huobi Global. ZKBase secured $1.7 million in angel funding in 2020 from Bixin Ventures, SNZ Holding, FBG Capital, and others.
Conclusion:
The Bitcoin Layer 2 ecosystem is rapidly expanding, with nearly 100 projects categorized into four main types. These include EVM sidechains, projects innovating on verification methods, projects focusing on BTC deposit staking, and projects exploring BTC’s native capabilities. These solutions contribute to the development of a diverse and efficient Bitcoin ecosystem, addressing scalability, security, and efficiency challenges. By closely following and participating in these cutting-edge projects, the community and developers can better understand the future trends of blockchain technology and collectively build a more efficient, secure, and diverse blockchain ecosystem.