How to define Bitcoin L2 and L2 from an inclusive perspective

Author: jolestar Source: X, @jolestar

Recently, Bitcoin Magazine's definition of Bitcoin L2 has caused a debate about what Bitcoin L2 is. This issue has also been debated in the Ethereum community. So how do you define L2? We can analyze it from two perspectives: technical and ecological. I advocate an inclusive perspective of L2.

Definition of L2 from a technical perspective

If you want to define L2 technically, the key is to Let it be clearly different from L1 and centralized solutions. I think there are two key points:

1. L2 does not create new block space. The technical solutions for creating new block spaces are all L1 in nature.

2. L2 should use L1 to achieve data availability and security. The technical solutions for creating new block spaces are all L1 in nature.

But obviously, the market is not only defined from a technical perspective, but more from an ecological perspective.

Definition of L2 from an ecological perspective

When defining L2 from an ecological perspective, we focus on It is how L2 utilizes or inherits the capabilities provided by L1. Let’s take Bitcoin as an example to analyze the inheritance and expansion directions on Bitcoin.

BTC assets

This is a story that all L2s are telling, how to make Trillion-scale BTC assets generate additional usage scenarios, whether it is trading or staking, there is a lot of room for imagination. To allow assets from one blockchain system to be traded in another system, a bridge is required, and the key issue here is how to make users trust this bridge and ensure the security of assets.

From this perspective, all solutions that create usage scenarios for BTC assets through bridges can be understood as Bitcoin L2. Even BTC ETF can be understood as Bitcoin's L2. It is a completely centralized custody bridge that ensures security through legal supervision. So what everyone is struggling with is not the issue of decentralization, but the issue of trust. Decentralized solutions can reduce users’ trust costs and bring opportunities to new projects, but how to construct a secure decentralized bridge on Bitcoin is a key problem. Can L2 use other characteristics of Bitcoin to improve the performance of this bridge? safety.

In addition, with the development of extension protocols on Bitcoin, whether it is Ordinals, extension protocols above Ordinals (BRC20, etc.), Atomicals, or RGB, Taproot assets Wait, there will be more and more new assets on Bitcoin. How to make this bridge scalable and able to quickly support new asset types is also a huge challenge.

Bitcoin block space

Bitcoin is the most decentralized blockchain network , the value of its block space has not been fully utilized. This wave of Ordinals inscription craze can be understood as the discovery of the value of Bitcoin as a data availability layer (DA). The Ordinals protocol defines an extensible data format standard that provides a unified solution for parsing, displaying, and exchanging data engraved on Bitcoin.

Extended protocols on Bitcoin and L2, how to make full and effective use of Bitcoin’s block space is a direction to explore.

The programmability of the Bitcoin network

Bitcoin Script has limited programming capabilities, and it has limited Its programming capabilities are mainly represented by three types of locks: time lock, hash lock, and private key lock. Taproot allows the complexity of Bitcoin Script to increase by an order of magnitude, which is why solutions like bitvm are possible. But the key challenge in this regard is that Bitcoin Script is stateless. It cannot read the status of Bitcoin and the accumulated status. It can only rely on input. Whether Bitcoin scripts can be used to implement arbitration is still a direction to be explored. .

Another perspective is innovation in cryptography, including protocols that construct game mechanisms based on key exchange to ensure security, such as the Lightning Network. There is also Babylon’s “extractable one-time signature”. Although its implementation details have not yet been announced, the market is already looking forward to it.

Bitcoin’s status

Bitcoin’s status includes the following:

2. Bitcoin's block nonce

3. Bitcoin's UTXO, and the ownership of UTXO

4. Bitcoin's block, and the UTXO attached New assets and information

Then we can analyze different Bitcoin extension protocols and how the L2 project extends Bitcoin from the above perspective.

How to scale Bitcoin

Bridge + Programmable Environment

Given that Bitcoin itself has limited programming capabilities, one method is to transfer Bitcoin assets to an environment with stronger programmability, such as EVM, thereby opening up new application scenarios for Bitcoin assets. Representatives in this area include BEVM and Merlin. The key lies in the design of the bridge: 1. Whether L2 can take advantage of the security provided by L1. 2. Scalability of cross-chain solutions.

Extending a smart contract layer on Bitcoin

RGB takes advantage of Bitcoin's UTXO which can only It uses the one-time feature to achieve one-time sealing, and also uses Bitcoin's block space to announce transaction commitments, providing an Offchain programming environment. Its advantage is that it completely matches the UTXO model, does not rely on global state, and ensures privacy. However, this is also its shortcoming, limiting its programming scenarios. In this direction, CKB's RGB++ makes trade-offs on the characteristics of RGB and provides a richer programming model through the cell model.

Offchain calculation in Indexer mode

Inscription Indexer mode can be understood as an Offchain calculation model , assets are defined on the chain, legality is guaranteed by off-chain calculations, and global status can be provided at the same time. Inscription can be understood as an asset between L1 and L2. If the protocol has a built-in migration mechanism from L1 to L2, the circulation of assets between L1 and L2 can be achieved. And if the generation and verification logic of inscribed assets are engraved on Bitcoin through code, it is also an expansion plan for Bitcoin's programming capabilities, such as bitseed.

Stackable L2 (Stackable L2)

If the expansion of Bitcoin is realized through smart contracts The Indexer of the protocol parses all UTXOs on Bitcoin and additional states in the Indexer, and allows developers to deploy applications into the Indexer through smart contracts, which is equivalent to providing a new smart contract layer for Bitcoin. This is Rooch's solution .

I called this mode smart Indexer before, but the concept of Indexer feels like it is read-only, so I used a new word "Stackable L2" , refers to all extension schemes that contain the full state of L1 in L2, and it completely inherits all states of L1. In this case, the L2 application can read all the states on L1 and create new states at the same time. The assets of L1 and L2 can be stacked and combined to form new assets. The security of L2 can be ensured through a modular solution. I will write a detailed description of this concept later.

The above solutions can actually cooperate with each other through the combination mode.

L2 from an inclusive perspective

If we put aside the specific implementation method, abstraction If you fully understand L2, you will find that it should be a continuous spectrum, from CEX at the far left to L1 at the far right. Solutions in the middle can be included in this spectrum range. The two ends of this spectrum also represent two different growth modes. CEX is basically a completely product- and user-oriented growth method, while L1 has a relatively long construction cycle and prioritizes narrative and blueprints, while L2 is in the middle and will be a hybrid growth model.

Adopting an inclusive perspective, we don’t need to get too hung up on what “real L2” is. Various technologies and solutions created by the industry, Validium, Plasma, Sovereign rollup, Op/Zk rollup, Modular Execution layer, Decentralized compute, side chain, L2/L3, etc., should be regarded as part of this spectrum. The industry adopts various Various permutations and combinations explore the infrastructure required by new applications.

Different projects have different assumptions about new applications, which also determines its combination and growth model. It may be L1 a little to the left, or CEX a little to the left. A little to the right. The future is uncertain. It is difficult to predict at this stage which model will grow, but one thing is certain. After so many years of exploration, the industry has a large-scale L1 and a large-scale CEX. It also needs to have a large-scale CEX. The middle layer fills this gap.