{"id":1287,"date":"2024-05-20T17:33:22","date_gmt":"2024-05-20T17:33:22","guid":{"rendered":"http:\/\/ci02dde3fe700026ce"},"modified":"2024-05-20T17:33:22","modified_gmt":"2024-05-20T17:33:22","slug":"bitcoin-layer2-sidechains","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/technical\/bitcoin-layer2-sidechains","title":{"rendered":"The New Wave Of Bitcoin L2s Are Sidechains"},"content":{"rendered":"
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I heard a lot of people say no one could define an L2 at Bitcoin Asia. The problem is that we have a definition, and most people just want to ignore it. Marketing, eh.<\/p>\n

\u201cBitcoin L2s\u201d are the hottest thing on the street. People are using a bunch of jargon to distract users from trust assumptions and shill Bitcoin Season 2.<\/p>\n

Why all the sudden energy? See, about a year ago, some teams figured out how to use Bitcoin as a data availability layer for rollups. Others have been working on improving trust assumptions related to bridges (aka two-way peg). The research has been making great progress, and a lot of projects think we\u2019ll have rollup-like blockchains in production by 2025.<\/p>\n

2025? Some projects claim to be on mainnet now?<\/p>\n

Teams have taken this energy and are prematurely promoting the modular thesis for Bitcoin scaling. Projects are launching with bridge contracts on blockchains that aren\u2019t Bitcoin, and are marketing themselves as Bitcoin L2s. Infrastructure providers amplify their message and boast that Bitcoin is back.<\/p>\n

But these solutions don\u2019t scale Bitcoin. They\u2019re completely independent, centralized sidechains.<\/p>\n

Layers they say? More like layers of trust assumptions.<\/p>\n

Definitions<\/h2>\n

A lot of these projects are trying to adopt the modular thesis for Bitcoin scaling. This basically means that each aspect of the transaction lifecycle can be its own specialized system. Execution, transaction ordering, and data availability can all be operated by independent actors. Bitcoin will be the settlement layer at the base of it all. <\/p>\n

It\u2019s not a terrible thesis when you dive into it. But its current implementation on Bitcoin is a bit worse for wear.<\/p>\n

A lot of the new projects claim to be \u201crollups\u201d. Rollups would use Bitcoin for data availability, and post their latest state root, and enough transactions to recompute the state of the blockchain from genesis, to Bitcoin. If they want to scale Bitcoin\u2019s transaction throughput, they\u2019ll also have a trust-minimized<\/em>, bridge contract where users can deposit funds to mint on the rollup.<\/p>\n

Dive into a few documentation sites and you\u2019ll see that none of these new projects (in production) are using Bitcoin for data availability. They want to use an alternative DA solution for performance’s sake. Meaning they want to be \u201cvalidiums\u201d or \u201coptimiums\u201d.<\/p>\n

These constructions are similar to rollups. They\u2019re blockchains that similarly have a bridge contract with the parent chain, but use a different system for DA. This improves performance, decreases costs, but comes with some security tradeoffs.<\/p>\n

In the validium design, the L1 contract would be responsible for verifying the validity proof associated with a specific state transition for settlement. After finalizing a specific state transition, the validium bridge contract is able to process withdrawals for users who want to exit the chain, including unilateral exits that users can submit themselves if the state data is available. Optimiums are similar, but they rely on a fraud proof mechanism instead of validity proofs.<\/p>\n

But none of the production implementations use a mechanism, on Bitcoin, that supports verifying SNARKs or fraud proofs… <\/p>\n

Everything is being verified on a completely different Layer 1 or their own permissioned sidechain network!<\/p>\n

Most of these chains are forking an Ethereum L2 SDK. They\u2019re either settling on Ethereum or some completely centralized fork of geth they scraped together.<\/p>\n

So there\u2019s no relationship to Bitcoin. Maybe it settles on Ethereum, uses the hottest DA layer, and has a kick-ass execution layer.<\/p>\n

But it\u2019s not Bitcoin.<\/p>\n

So sidechains?<\/h2>\n

All the new Bitcoin L2s are just modular sidechains. And when I say \u201cmodular sidechain\u201d, I mean they run an alternative blockchain off of their parent blockchain for performance purposes. They also make security tradeoffs by using an alternative DA layer for improved performance.<\/p>\n

Their bridge with Bitcoin? Run by multi-sigs.<\/p>\n

So the general trust assumptions users take on are:<\/p>\n