Author: Ash Li

1. Overview of BTC Layer 2

The explosive emergence of Bitcoin sidechains and Layer 2 projects fundamentally aims to address challenges related to the scalability and transaction speed of the Bitcoin network. At its core, Bitcoin is merely a decentralized ledger, lacking Turing completeness or programmability, with assets having no other application direction beyond transaction transfers. The Ordinals protocol has opened up new ideas, and while it has improved Bitcoin's programmability, it has not fundamentally changed it; it merely provides a new way to issue assets. Therefore, to further develop and strengthen the Bitcoin ecosystem, the development of Bitcoin Layer 2 can enhance the throughput of the Bitcoin network, reduce transaction fees and confirmation times, making suitable solutions particularly important.

Everyone is quite familiar with Layer 2 on Ethereum, but for Bitcoin, there has not been a detailed and specific classification standard for Layer 2. Generally, it can be roughly divided into Bitcoin sidechains, multi-signature + EVM, Rollup, State Channel, and client verification.

1. Bitcoin Sidechains: Scalability blockchains that can exist independently of Bitcoin, such as Stack, RSK, etc.
2. Multi-signature + EVM: This is the solution adopted by many BTC L2s. Whether using MPC multi-signature schemes, threshold signature schemes, or Hash Lock, DLC, etc., they are essentially multi-signature + EVM solutions. Users transfer BTC to a multi-signature address, and then generate new BTC on the EVM chain, allowing BTC activities to be compatible with EVM smart contracts. Represented by Melin Chain, etc.
3. Rollup: Typically involves introducing client verification or building a DA layer to verify Rollup, with the verification phase still conducted by clients or their own DA layer. Typical representatives of this type of project include BitVM, B2, and Bison, etc.
4. State Channel: The representative project is the Lightning Network, which excels in scalability, security, and privacy compared to other solutions, but its development progress is relatively slow.
5. Client Verification: Scalability solutions based on the Bitcoin UTXO account model, with typical representatives being RGB, BitVM, etc. Data is stored off-chain, and clients perform verification, but the downside is also slow progress, and smart contracts cannot interact.

@DWFVentures has also provided different classification standards, but they are generally similar. You can refer to the table below to understand these Layer 2 solutions.

2. What is CKB

Nervos Network, also known as CKB, was initially launched in 2019 as a PoW+UTXO public chain, and is now transitioning to position itself as BTC Layer 2, isomorphic to Bitcoin. CKB has a long history of development and accumulation in security, expanding Bitcoin's programming capabilities, technological innovation, and ecological development.

Team and Financing Situation

The CKB development team is composed of global developers dedicated to building layered blockchain solutions. Team members are professionals from the blockchain field with rich experience in technology and research. The founding team has deep roots in the industry. Its chief architect, Jan Xie, has long contributed to Ethereum clients Ruby-ethereum and pyethereum, and has collaborated with Vitalik Buterin on the Casper concept and sharding technology. Co-founder Kevin Wang previously worked on enterprise data solutions at IBM's labs and is a co-founder of the intent-driven centralized animator infrastructure Khalani Network. Another co-founder and COO, Daniel Lv, is a co-founder of the wallet imToken and was the former CTO of the cryptocurrency exchange Huobi. In August 2018, Nervos Network completed a $28 million financing round, with investments from Polychain Capital, Sequoia China, Wanxiang Blockchain, Blockchain Capital, and others. On October 16, 2019, Nervos Network completed an ICO on Coinlist, raising a total of $72 million.

Technical Features

Security

Since its launch, CKB has adopted the same PoW consensus mechanism as Bitcoin, maximizing security and decentralization. In November 2023, CKB successfully experienced its first mining reward halving, reducing its inflation rate by half. Its mining algorithm, Eaglesong, is self-developed, and the mining machines are produced by AISC mining machine manufacturer Bitmain. Additionally, CKB's virtual machine's independence from cryptographic operations ensures the security of CKB users' assets.

Programming Capability

Cell Model: CKB has generalized the UTXO model. Like UTXO, a Cell is also a transaction output, but the Cell processes the amount in UTXO, corresponding to capacity and data, transforming the original space for storing integers into a space that can hold arbitrary data. Additionally, the data structure of a Cell includes LockScript and TypeScript, where the former primarily reflects ownership, and the latter can be customized with many rich functions, such as implementing features like Covenant (restrictive clauses) that do not exist on Bitcoin. In the Cell's script, developers can specify cryptographic primitives according to their needs, making it very flexible.

CKB Virtual Machine: It uses the open instruction set RISC-V, allowing developers to create smart contracts in any language, as long as they compile it into RISC-V binary format with the appropriate compiler. This not only ensures efficiency but also allows various cryptographic algorithms, whether Bitcoin's original Secp256k1 or the later introduced Schnorr, to be directly ported to run on the CKB blockchain.

User Experience

The CKB mainnet is fully compatible with BTC addresses (starting with bc1p and bc1q). The official wallet used is JoyID, which does not require a mnemonic phrase or password, allowing users to directly use applications on CKB through their BTC wallet addresses, making operations simple and user-friendly. Users in the Bitcoin ecosystem can seamlessly enter the CKB ecosystem without having to switch wallets to EVM sidechains; the inscription protocol Omiga also supports the use of Unisat and OKX Web3 wallets.

Infrastructure

CKB has introduced a framework called Axon, enabling Bitcoin inscriptions to create their own BTC Layer 3 on CKB. Additionally, its development tools are continuously improving. Besides various toolkits and software development kits (SDKs) contributed by the core development team, the MagickBase team has also developed a tool called Kuai, which lowers the development threshold for DApps.

Rich Ecosystem

In terms of ecosystem, CKB is far ahead of other Bitcoin sidechain solutions:

• Wallet Products: JoyID is a Passkey wallet that does not require a mnemonic phrase or password, supports multiple chains, and has integrated over 30 DApps, allowing users to directly use applications on CKB through their Bitcoin wallet addresses.
• DID Products: @DIDbased supports multi-chain and Passkey DID, with more features than ENS, and has completed Series A financing.
• Inscription Protocol: Omiga is an innovative inscription protocol built on the CKB blockchain, providing users with a fairer and more efficient token minting and management experience.
• RGB++: An extended protocol based on RGB, which is also a layer 1 asset issuance protocol for Bitcoin, now launched; it utilizes the Cell model on the CKB chain to represent ownership relationships of RGB assets while establishing a mapping relationship with Bitcoin's UTXO, allowing CKB to serve as a database and off-chain pre-settlement layer for RGB assets, achieving more reliable data hosting and RGB contract interaction. Meanwhile, UTXO Stack, led by ABCDE, has natively integrated the RGB++ protocol.

The CKB ecosystem already includes wallets, cross-chain bridges, DID, DEFI, and other projects. Previously, there were no well-known projects, but with the launch of the first asset $Seal under the RGB++ protocol, there was a surge in wallet registrations, and assets on CKB began to gain visibility, generating high interest. Many users started to learn about RGB++ and the assets on CKB, even leading to tutorials on multi-account registrations. The wealth effect has drawn attention to this excellent Layer 2 solution, and the open-source protocol of CKB has attracted many developers. Meanwhile, the price of $CKB has started to rise in recent days.

3. RGB++ in Layer 2

On February 13 of this year, the CKB official website released a light paper for the RGB++ extension protocol based on CKB, which went live on the mainnet in just two months. By combining Bitcoin's UTXO with CKB's underlying architecture, UTXO can be bound and mapped to the CKB Cell model mentioned above, while the off-chain client of RGB can transform into on-chain verification on CKB, using the data and type fields in the Cell for correspondence, thus solving the data island problem in RGB. Users do not need an RGB++ client but can complete verification directly through Bitcoin and CKB light nodes.

Advantages Comparison

Unlike other sidechains and staking using EVM, CKB possesses the characteristics of PoW+UTXO that share the same roots as BTC, and is based on the community-recognized RGB protocol for its extension protocol, requiring no multiple addresses or cross-chain interactions. The native solution is the most suitable, excelling in both security and Turing completeness.

We can recall that the BRC-20 protocol of Ordinals, Atomicals, and the upcoming Runes protocol, along with past catalysts that ignited bull markets, were all changes in asset issuance methods. Currently, after the mainnet launch, the first RGB++ asset $Seal issued by @crypcipher has a single gas cost of only around 5U, while the current market price has reached over 2000U. RGB++ can serve as an asset issuance protocol, enabling layer 1 Bitcoin to issue new RGB assets, and the trading of these assets also possesses Turing completeness. In the RGB++ protocol, CKB serves as Bitcoin's execution layer and DA layer, while the mainnet acts as the settlement layer, a feat that EVM solutions can never achieve. Meanwhile, CKB co-founder Cipher has expressed hope to integrate RGB++ with the Lightning Network by the end of this year.

Although CKB is not the earliest developed in the entire Bitcoin L2, excellent technology is the key to longevity. The Bitcoin halving in April, the launch of the Runes protocol, and the issuance of RGB++ assets lead us to believe that the Bitcoin ecosystem will begin to collectively explode.

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