Detailed Explanation of the Native Bitcoin Layer 2 Network LumiBit

Author: Rhythm BlockBeats

Fifteen years ago, Satoshi Nakamoto published the Bitcoin white paper and set the block size limit at 1MB. To this day, block size remains a hot topic among developers. The block size limits the maximum amount of transaction data that can fit into each block. As the application scope of Bitcoin expands, issues such as frequent network congestion, increased transaction confirmation times, and rising transaction fees have become common.

To address these problems, the community has proposed various scaling solutions. Some believe that the block size should be increased, others advocate for optimizing the block structure, and some suggest using sidechain technologies. Of course, each of these proposals has its own advantages and disadvantages, making it difficult for the community to reach a consensus, and even leading to splits.

The popularity of inscriptions has reignited discussions about scaling within the community. While exploring the inscription market, the short-term surge in $LBIT inscriptions and trading volume drew attention, with all inscriptions completed within 2 hours and gas fees exceeding $600,000. Research revealed that behind this was LumiBit, which is committed to Bitcoin scaling and represents a solution entirely different from protocols like the Lightning Network, Stacks, and Liquid Network.

The BTC Nativism of LumiBit

As the largest cryptocurrency consensus body, achieving BTC nativism is crucial for the trust and decentralization of Layer 2 solutions built on BTC. The stronger the BTC nativism, the more closely Layer 2 solutions can align with the Bitcoin community, core consensus, and philosophy, thus possessing higher credibility, security, and decentralization. Therefore, Layer 2 solutions must maintain these native characteristics while providing faster transaction speeds and lower fees to expand Bitcoin's functionality and application scope without compromising its fundamental principles. If BTC nativism is abandoned, Layer 2 loses its fertile ground for growth and distances itself from the BTC community, jeopardizing its security and decentralization, and if a BTC Layer 2 solution loses BTC community users, it cannot sustain long-term development.

Taking the current Ethereum Layer 2 solutions as an example, one of the purposes of charging gas fees is to cover the costs of storing and processing data on the Ethereum network. For Layer 2, user trust is not solely based on the technology of Layer 2 itself but on its connection and interaction with the main chain. The core of this trust lies in the ability to store and verify information on the main chain. Users establish trust in Layer 2 through the reliability of the main chain and the connection between Layer 2 and the main chain. Within this framework, LumiBit's strategy is not merely to make users trust its own data processing capabilities but to emphasize that users only need to trust LumiBit's honesty and transparency during the data transmission process. This honesty is verifiable, and the reliability of its data relies on the trust foundation of the Bitcoin network.

LumiBit is dedicated to bringing more verifiable information back to the BTC mainnet, thereby reinforcing its position as a true BTC Layer 2 solution. In this way, LumiBit not only emphasizes respect for and utilization of Bitcoin's native characteristics but also ensures the credibility and transparency of data on the LumiBit chain, establishing its trusted status as a BTC Layer 2 solution within the cryptocurrency space.

LumiBit's top-level design for BTC nativism encompasses the entire lifecycle structure of user wallet operations, wallet calls, cross-chain assets, and DA:

• Support for native Omni wallet account control: Unlike other EVM-compatible BTC Layer 2 solutions, LumiBit's most significant advancement in user experience is allowing users to interact on-chain solely through a BTC wallet. There is no need to prepare multiple wallets (like Metamask); users only need a Bitcoin wallet, whether it's Unisat or Xverse, to perform cross-chain operations, transactions, and use Dapps. This feature respects Bitcoin users' habits, providing a familiar and secure environment.

• UTXO-based channel cross-chain bridge: LumiBit employs a unique UTXO channel cross-chain bridge. The cross-chain interaction between users and LumiBit is abstracted as a channel, and the validation of the channel represents the legitimacy of the user's cross-chain actions. Additionally, since the channel validation process is stored in UTXO, it also represents the validation of the user's state on LumiBit, thus achieving user state validation on the BTC mainnet. When the channel closes, based on the final state update, the initial UTXO is consumed, and LumiBit creates new UTXO based on the user's state. These new UTXO reflect the Bitcoin balance proposed by the user at the time of channel closure and the final state on the LumiBit chain. Meanwhile, smart contracts running on the LumiBit chain interact with users to generate new states, allowing state updates to be verified on the BTC mainnet through the user's UTXO state, thus completing the BTC mainnet verification of all on-chain states.

• Data availability (DA) on the Bitcoin mainnet: The data availability issue for Bitcoin Layer 2 is how to upload, publish, and verify data in a manner that is affordable and effective for the Bitcoin network. Since transaction data in Rollup is sent to Bitcoin in aggregated form, the block capacity of Bitcoin will limit the size of the aggregated transaction data in Rollup. Without the ability to increase Bitcoin's block capacity, using more efficient data compression and proof verification methods is the only option. LumiBit utilizes the Halo2 + FRI zero-knowledge proof scheme to generate validity proofs for transactions. The ZK-EVM generates zero-knowledge proofs for each transaction's state change after executing the user's transaction, and only when the transaction is valid and can be executed normally will its zero-knowledge proof be generated. LumiBit shifts the complexity of verification and proof generation off-chain, reducing the storage overhead on Bitcoin Layer 1 and lowering the cost for users submitting transactions on Layer 2.

• Support for inscription calls: The platform supports inscription calls, allowing users to interact with and utilize Bitcoin's native features. All user call data is stored on the BTC main chain and executed through inscriptions. When publishing a transaction, users only need to inscribe the inscription and broadcast it through the BTC network. After confirmation on the BTC network, LumiBit will immediately execute and settle the transaction on the LumiBit network.

• Using BTC as gas: One of the most important aspects of LumiBit's approach may be using BTC itself as the "gas" for transactions. This not only simplifies the transaction process within the Layer 2 framework but also creates a closed loop by making Bitcoin's native characteristics central to LumiBit's operations. By using BTC as gas, LumiBit aligns the incentives of its Layer 2 protocol with the Bitcoin network, ensuring that the value and demand for BTC are directly associated with activities within the LumiBit ecosystem.

The History of Bitcoin Scaling and the Arrival of Type 2 ZK-EVM

Previously, common scaling methods for Bitcoin included state channels and sidechains.

In 2015, Joseph Poon and Thaddeus Dryja proposed the Lightning Network, a network based on payment channels. Users can conduct fast, low-cost Bitcoin transfers off-chain, requiring on-chain transactions only when opening or closing a channel. Currently, approximately 5,000 BTC are in the Lightning Network.

State channels, represented by the Lightning Network, also have several drawbacks, such as being unable to handle complex contract computations, having funds locked up, and security risks, which do not provide a thriving on-chain ecosystem for Bitcoin.

Subsequently, Bitcoin sidechains like Liquid Network and Rootstock began to emerge, running in parallel with the Bitcoin mainnet and communicating with Bitcoin through bi-directional bridges. However, sidechains have independent consensus rules and data storage structures, meaning their data availability (DA) is not guaranteed by the Bitcoin network, posing certain risks to user assets in extreme cases.

In contrast to Bitcoin's slow scaling development, Ethereum's scaling market is thriving. However, the mainstream scaling solutions for Ethereum adopt Rollup Layer 2. According to L2 BEAT data, Ethereum's Layer 2 TVL has exceeded $22.5 billion.

David Hoffman, co-founder of Bankless, once stated that the era of EVM equivalence has arrived. When David made this statement, he may not have considered that Bitcoin might also usher in an EVM equivalence era, capturing the ecological value of Ethereum.

LumiBit is a new Bitcoin L2 solution that achieves low fees, high performance, and fast transaction confirmations through ZK-Rollup. LumiBit employs the Scroll technology solution, which is Type 2 ZK-EVM and can be considered fully equivalent to EVM. Vitalik has categorized ZK-EVM into four types in his papers, with Type 2 being fully compatible with EVM, where transaction execution and account logic are consistent with EVM, differing only in block structure and state tree from Ethereum.

Image source: Vitalik

LumiBit's Type 2 ZK-EVM is based on general circuit design, ensuring full compatibility with the Ethereum ecosystem at the EVM layer. Additionally, it adopts a state tree update scheme more suited to Bitcoin UTXO, considering the differences between Bitcoin and Ethereum states. Meanwhile, Bitcoin will serve as DA, and the user's transactions, LumiBit's historical transaction states, and global account states will be generated by the zero-knowledge proof generator to produce corresponding root proofs, which will then be packaged and sent back to the Bitcoin mainnet. The vast computational power of Bitcoin will ensure the security of LumiBit's L2.

Compared to similar ZK-Rollups, LumiBit differs in that the generation of zero-knowledge proofs for its transactions will be based on Halo2 + FRI, utilizing polynomial commitments to reduce verification costs. Halo2 is a zero-knowledge proof system belonging to zk-SNARK, used to generate concise non-interactive proofs to verify transaction validity. FRI belongs to the STARK proof system, used to construct and verify proofs related to complex polynomial data. This means LumiBit integrates the advantages of both STARK and SNARK.

Image source: LumiBit

Currently, Type 2 ZK-EVM is one of the leading solutions in the market, but there is still a gap from a native Ethereum environment. To ensure a 100% migration of the entire Ethereum ecosystem, Type 1 ZK-EVM, which is fully equivalent to Ethereum, needs to be realized. LumiBit has also proposed the concept of Type 1 ZK-EVM based on Type 2 ZK-EVM, which abstracts another layer of Type 1 ZK-EVM on L2, returning the execution results of transactions to Type 2 ZK-EVM, and then LumiBit updates the state to the Bitcoin network, indirectly achieving Type 1 ZK-EVM through a three-layer structure.

The Eve of Bitcoin Ecosystem Explosion

In addition to bringing a scaling solution to Bitcoin, LumiBit also attempts to disrupt the current inscription trading market.

Currently, the process for users to conduct Bitcoin inscription trading on L2 is cumbersome and complex, requiring back-and-forth transactions between the main chain and L2. Furthermore, the liquidity of funds is relatively dispersed, leading to low utilization.

LumiBit is addressing this issue through an asynchronous structure built on synchronous cross-chain communication and asynchronous cross-chain transactions.

Synchronous cross-chain communication ensures that communication on LumiBit remains in sync with the BTC main chain. Additionally, LumiBit's built-in indexer and listener can read the communication status of the BTC main chain for on-chain applications to retrieve. Therefore, users can see all information about the inscription market on LumiBit without needing to check each trading market or indexer separately.

The biggest pain point in current L2 transactions is the time and fund friction caused by frequent cross-chain asset movements. In the transaction process on LumiBit, the cross-chain of Bitcoin mainnet assets and confirmation on the LumiBit chain are asynchronous, meaning on-chain transactions can be asynchronously mapped. From a technical perspective, LumiBit's UTXO channel bridge uses UTXO as a user state seal and combines root proof state encryption with hash time lock for cross-chain channel verification. After the channel closes, the root proof is printed on UTXO, ensuring the data integrity of the Bitcoin network.

This means that users can conduct inscription transactions on the LumiBit network, and after settlement is completed on the LumiBit network, it will automatically execute cross-chain operations for users.

Image source: LumiBit

Of course, LumiBit is not a perfect L2 scaling solution, and there are many challenges to overcome from Type 2 ZK-EVM to Type 1 ZK-EVM. However, it is undeniable that LumiBit possesses a unique industry-wide vision, integrating leading and mainstream protocols in the current market to form a proprietary solution.

LumiBit points to one possible direction for the future development of Bitcoin L2 while also describing potential scenarios for the future Bitcoin ecosystem, featuring a full-chain ecosystem and interoperability, without increasing users' learning costs. We are now on the eve of the Bitcoin ecosystem explosion that LumiBit envisions.