Recently there has been a feverish push to create scaling narratives for Bitcoin. A short time ago, the objectives we see today were most often considered impossible due to a lack of expressiveness in the Bitcoin protocol itself. Now, with recent breakthroughs, there is excitement around the prospect of scaling every aspect of Bitcoin in ways that minimize or eliminate the introduction of new security assumptions.
Scaling Bitcoin is a multifaceted challenge that has been approached by various innovative projects over the years. Blockstream introduced Elements, a sidechain project to extend Bitcoin’s capabilities, including assets and smart contracts, without overloading the main blockchain. Federated bridges like Liquid Network followed, enabling quicker and more confidential transactions. Thorchain’s MPC bridges were a move towards decentralized solutions for cross-chain value transfers. The Lightning Network proposed state channels for micropayments to enhance transaction throughput. Colored coins and later projects like RGB protocol aimed to embed assets within Bitcoin transactions, expanding use cases. Each solution offers different trade-offs between decentralization, security, and scalability.
However, none of these solutions introduce the kind of modularity that researchers have found to be the best path forward. Rollups are an excellent way to alleviate the burdens of execution and blockspace consumption on settlement layers, but the caveat is that they must be secured in a way that minimizes the introduction of new security assumptions. An appropriate rollup implementation uses specialized data availability (DA) layers that give everyone the means to reconstruct the rollup’s state in any scenario.
In this article we will get into some of these solutions, and explore the crafted solution of Rollux which reflects state-of-the-art.
Our research leads us to assert that, if done right, an EigenLayer of sorts can be created for BTC, introducing self-sufficient crypto-economics in a circular economy.
Bitcoin L2s
First, let’s break down the disparate narratives and resulting confusion around “Bitcoin L2” as investors in the space race to find the best solution(s) to unlock modular scaling for Bitcoin. The concise explanations I provide here are targeted to well-informed investors and blockchain enthusiasts involved in research. I will omit some nuances to avoid bloat.
The first question is, ‘What qualifies as a Bitcoin L2?’ The industry seems to have an issue defining this. A rollup typically includes a bridge enabling funds to be moved from one layer to another, where funds can be parked with assurance that you can move them back to the original layer on demand, trustlessly. The other component is sequencing and providing state to a settlement layer. If the settlement layer is not providing security for the layer to which you are sending the funds, technically that layer cannot be considered a rollup. For example, bridging BTC to Ethereum and then launching a L2 on top of that, would not be a Bitcoin rollup by definition. However, this can be thought of as a Bitcoin L2 under the current narrative, adding confusion. Overall the narrative of scaling Bitcoin has obscured the concept of Layer 2 and rollups. Where they were the same before, now the concepts may differ. A Bitcoin L2 may not be the same as a Rollup by classical definition. As it turns out, this might be desirable, as you will discover if you keep reading.
Landscape
Solutions are emerging quickly. With this in mind, I will abstract the concepts so that the information in this article will remain relevant. I will highlight the Bitcoin Rollup solution types and general L2 solution types — of which Rollux is one.
Bitcoin Rollups and Bitcoin L2s
Generally, Bitcoin rollups aim to settle their state (the root hash of the rollup) back to Bitcoin, along with the data. The two-way bridge for BTC is contained within the solution. While great if accompanied by ZK challenge/response models for fraud proofs, it comes with limitations and risks:
- The main bottleneck to scale is data availability (DA). If we use Bitcoin to serve DA for a standard rollup, we will be limited; theoretically to about 109 TPS (4194304 bytes per block/600 seconds per block/64 bytes per optimistic TX). In the real world the usable SegWit block is around 2 MB, so the throughput is around half of that assuming no other use of block space on Bitcoin. Some improvement can be found by using “state diffs” with ZK proofs, increasing throughput to a few thousand accounts updating per second instead of more granular transactions. Either way, in our view, these throughput figures are insufficient for serving global demand, especially in a digital world where AI agents will have blockchain accounts soon enough. Even with ZK, these limits are showstoppers when it comes to using Bitcoin itself directly for DA.
- The challenge/response for the bisection game to secure the BTC from double-spend attacks on withdrawals has its own implications. You must either use the Bitcoin network as a court to repudiate the hearing of the bisection game (taking upwards of 50 transactions), or you can try to create a succinct validity proof which some projects are trying to do. However, by skipping the Bitcoin network as the judge, you must have consensus or some other security blanket around the game to ensure the defender and challenger are working together appropriately. Typically funds are slashed. This imposes obvious crypto-economic risk. With enough value on the line, or if DOS or some other type of attack on the network is done, could the consensus have a fault in such a way that the BTC becomes unrecoverable or stolen by participants?
This is where the discussions around Bitcoin L2s start. By separating the concepts of DA, bridges, and sidechains, you can create modules that interoperate within a new consensus to create a holistic coordinated solution. However in most solutions there are still the obvious challenges of a new consensus securing everything. The best sort of consensus possible is optimistic fraud proof which both solutions try to use, yet fall short, because they usually require a new honest majority solution. In the case of Bitcoin rollups, you end up having an insecure challenge/response game, especially as the number of ZK constraints increase. Also, if you don’t use ZK it’s infeasible to do anything beyond just a bridge. In the case of Bitcoin L2s, you create new trust assumptions around the modules such as DA or the sidechain itself.
In both solutions, the bridge is the lowest common denominator when it comes to security. That is to say, how do we move BTC from Bitcoin to some sidechain, then under a 1 of N optimistic assumption, move it back safely. There are some projects working on just that.
Optimistic Bitcoin Bridges (trust-minimized cross-chain BTC)
There have been some breakthroughs in optimistic bridging using Taproot from and to Bitcoin, which is now pushing the state-of-the-art compared to what existed before with sidechains using federated bridging. The main issues surrounding these are:
- The optimistic assumption is usually a trusted set of authorities, more like a committee. More work and research is needed in order for anyone to permissionlessly join the authority to challenge the bridge state.
- Bridging with ZK fraud proofs is ideal but runs into similar issues with challenge/response mentioned earlier. There is some research on improving this through slashable security which we cover in the Rollux solution.
Even though we have isolated the bridge to be the common security lego block, we still have edge cases where the bridge is not fully permissionless in its optimistic claims of security, or other situations that need to be solved through further crypto-economics. I will close these gaps as you read on.
Bridge first-principle design
Other parts of the design stack are as secure (or insecure) as the bridge. It is wise to think of the bridge as the first lego building block in our modular approach to solving the Bitcoin scaling problem. That said, it is important to remember that if other parts degrade the trust assumption from optimistic to something else, then solving the optimistic bridge problem becomes irrelevant.
If you apply any other mechanism design you end up sacrificing some security given the holistic design requirements of Bridge+DA+Execution layer (EVM).
An independent bridge has issues to solve. However, assuming we have an independent secure bridge, where could we bridge to for maximum alignment with Bitcoin’s security without introducing a bunch of new trust/security assumptions?
Enter Rollux, an Optimistic Rollup running on top of Syscoin’s NEVM. Syscoin itself is merge-mined with Bitcoin, sharing the security and difficulty from Bitcoin miners on the Bitcoin network. The optimistic model allows anyone to challenge the state on Rollux and in the future will be converted into a ZK rollup to remove any optimistic trust assumptions. It gives us close ties to execution of BTC in an EVM while sharing the security through BTC miners. Now what about DA, how can we solve that?
Syscoin has enshrined DA (our BitcoinDA protocol, formerly called PoDA) on the Syscoin UTXO chain which serves rollups in a Bitcoin-centric way. For the sake of brevity, suffice to say this is scalable DA made possible by a decentralized finality mechanism that stays true to PoW. You can learn more about Syscoin’s finality and BitcoinDA at these links provided. BitcoinDA allows for a hash based, non-trusted DA setup that provides abundant bandwidth of up to 450kb/second, or good enough for 7000 TPS. That’s better! But let’s keep going.
Rollux as a layer 0
Tying it all together with BTC requires some crypto-economic juggling to ensure best-in-class security, solving for modularity (DA + Execution + Bridge) and keeping it all decentralized.
Step 1. Syscoin itself has some unique aspects like BTC difficulty encoded inside as an artifact of merged mining. First of all, we can use this to create a difficulty-based re-staking concept with the bridge’s BTC. This creates something similar to stETH, but BTC as stBTC. No slash risk, just extra yield at the hardness of BTC.
Step 2. Remember we previously covered that all bridges end up having some edge-case attack vectors or trust-assumptions which could be improved upon? We can run an Eigen-type layer with 2 specific AVS services. The bridge service and a DA service. The security of the service would be backed by stBTC from Step 1, ensuring slashable security with BTC itself. The bridge service can then close off any edge cases in the most minimal way by ensuring slash security is applied to obscure cases which are not likely to occur. This creates a nice Nash Equilibrium of demand to take risk with slashable security due the enormous unlikelihood that the risk is ever to materialize, allowing people to publically run nodes to ensure that they can cover their risk in case all others are bad. As more demand takes that risk, the more secure it becomes in a feedback loop, generating revenue for the holders of BTC behind these services. With stBTC backing an Eigen-type service there is no slashing risk on the wrapped BTC as there is with stETH, and the distribution of BTC is much better than other coins which solves many of the risks of re-staking protocols like Eigen.
Step 3. Revenue is obtained by using such services, becoming an omni-layer BTC bridge that has the best security, serving other chains as their L2. As revenue increases, this will increase demand for the backers of BTC securing the AVS services in a positive reinforcement loop. This also holds true with DA, which will allow L2s to consume the high-premium secure BitcoinDA layer at the base, or an EigenDA for more abundant slightly less secure (assume BTC slashable security). EigenDA can safely do up to 10MB/sec or 164k TPS and that is with BTC slash security behind it! It might not make sense to do Bitcoin L2s on EigenDA with ETH defending its tokenomics for security, but it makes a ton more sense if a fork of Eigen (for example) has BTC itself securing Bitcoin-focused scaling projects.
Step 4. Omni-chain modular Bitcoin layer. ZK light client to serve BitcoinDA + EigenDA to other execution environments that can validate the chain and check the DA messages prior to their own rollup state transitions.
These 4 steps outline a vision for Rollux as a foundational enhancement to Bitcoin’s scalability and functionality. The layer 0 is secured by Bitcoin miners, and the services and cross-chain BTC bridge are secured by BTC itself. Sort of like Babylon and BitVM put together but with our BitcoinDA as well.
Syscoin
There are some interesting properties of Syscoin that make it the ideal settlement layer for rollups, and additive to Bitcoin’s network rather than parasitic:
- Enforced merged mining. A miner must mine BTC or a parent chain to get SYS.
- No supply cap, EIP 1559, 1% target long term inflation. We degrade inflation down to a minimum to give Sentry nodes (the finality voting nodes) incentive to run long term. On the NEVM side there is static inflation with fees burned. Miners and Sentry nodes always have a subsidy coming in. Read Minimal Viable Inflation. Being utility-focused, SYS does not compete with BTC’s scarcity-driven economy.
- As BTC subsidy dwindles, merged mining pools collect their guaranteed subsidy of SYS. This creates a long-term crypto-economic partnership between BTC and SYS.
- As we have BTC difficulty as an artifact of merged mining, we can, in a decentralized way, create yield at the hardness of BTC in smart contracts by reading this difficulty for stBTC.
- An enshrined DA layer philosophically aligned to Bitcoin. Keccak hash based, no trusted setup and QC safe. It follows the principles of verify then trust yourself only. Local full nodes do not need to assume trust across other nodes like sampling based techniques.
- There is no need for direct optimistic games on Bitcoin itself, use the merge-mined chain as sort of a proxy without new optimistic assumptions. Given that the bridge is the weakest link in the security chain, use direct bitcoin integration of an optimistic trust minimized bridge and build the rest of the lego blocks on a merge-mined chain instead to remove any other risk. The AuxPow chain must have specific characteristics like finality due to having enshrined DA. Syscoin solves this perfectly with its evolved characteristics almost like it was destined to fit the bill.
Services on Rollux can serve any and all Bitcoin L2s, especially starting with bridging, then offering DA for those projects looking to scale beyond a few TPS in the most sensible way possible.
You can gain more context and understanding of concepts written within this post from some of my other writings: