The first BTC L2 to obtain ETF approval in the US with tens of millions in financing, the technical architecture of Bitlayer
Bitlayer has built a cross-chain bridge solution that balances security and scalability, based on BitVM, through the integration of technology and engineering.Author: Shijiu Jun
Introduction
Recently, the Bitcoin L2 project Bitlayer Labs completed a $11 million Series A funding round, led by Franklin Templeton, ABCDE, and Framework Ventures. At the same time, Bitlayer became the first Bitcoin infrastructure project to receive ETF licensing for institutional investment.
Bitlayer is an L2 project for BTC, aimed at enhancing BTC's scalability and unlocking its ecological potential. In terms of project features, Bitlayer is the first L2 based on BitVM, and it is also the first L2 that fully inherits BTC's security while being Turing complete.
1. Current Status of BTC L2
The essence of BTC L2 is cross-chain bridges. Currently, L2 projects have various cross-chain bridge solutions, each with its own characteristics. However, from a technical perspective, most cross-chain bridge solutions are essentially multi-signature.
Multi-signature solutions actually have serious trust issues, and incidents of funds being stolen due to multi-signature are not uncommon.
The author believes that L2, as a supplement to L1, should not be limited to ecological expansion but should also inherit the security of L1.
As the first L2 based on BitVM, Bitlayer achieves trust minimization and strikes a good balance between security and scalability. Next, let’s follow Shijiu Jun's technical perspective to explore how Bitlayer expands BTC as an L2 while also ensuring security.
2. Bitlayer - Balancing Security and Scalability in L2
2.1 Basic Architecture of Bitlayer
The basic architecture of Bitlayer is shown in the diagram below.
As we can see, the business process of Bitlayer can be divided into three stages: transaction processing stage, transaction verification stage, and final verification stage. The components interacting in each stage and their approximate processing flow are shown in the table below:
Let’s break down the core process of Bitlayer.
2.2 Transaction Processing Stage - Layered Virtual Machine (LVM)
In the transaction processing stage of L2, there are two components: the sequencer and the LVM (Layered Virtual Machine).
The sequencer is not elaborated here; the sequencer in Bitlayer is responsible for collecting and sorting cached transactions, serving as the entry point for transactions in Bitlayer.
LVM is the computing component of Bitlayer, responsible for executing smart contracts and generating the latest state and zero-knowledge proofs.
What is a Layered Virtual Machine?
To answer this question, let’s look at the diagram below.
Unlike the conventional impression of a VM, Bitlayer's LVM decouples the execution of front-end smart contracts from the back-end zero-knowledge prover. The VM and zero-knowledge prover exist as components within the LVM. This innovation allows Bitlayer to extend support for various contract types and zero-knowledge proof verifiers, significantly enhancing the system's scalability and security.
2.3 Transaction Verification Stage - ZKP-based OP Bridge
In the transaction verification stage, it is essentially the interaction phase between L1 and L2. When assets flow in the form of transactions between L1 and L2, we face the classic L2 cross-chain problem: How does L2 inherit the security of L1?
Classic L2 Cross-Chain Problem: How Does L2 Inherit the Security of L1?
In fact, there are already very mature solutions on ETH. Currently, the mainstream and secure options are mainly ZK bridges and OP bridges. The comparison between the two is shown in the table below:
ZK bridges are currently the most secure cross-chain bridge solution because they require no trust. OP bridges ensure the security of cross-chain data through on-chain challenges to invalid cross-chain data (1- N security model). It seems that ZK bridges are safer than OP bridges, but in reality, Bitlayer's core relies on the OP bridge.
Why OP Bridge?
The main reason is still due to technical limitations. Currently, only ZK bridges can implement BTC L1 → L2 deposits, while for L2 → BTC L1 withdrawals, only multi-signature bridges or OP bridges are supported. For security reasons, Bitlayer chose the more secure OP bridge, which is actually a compromise.
Bitlayer's cross-chain bridge solution is a combination of BitVM bridge + OP - DLC bridge, where the OP - DLC bridge complements the BitVM bridge.
BitVM && OP - DLC Dual Combination Bridge Process Analysis
Bitlayer uses the BitVM bridge to ensure security while supplementing with OP - DLC to reduce reliance on BitVM. So far, the BitVM bridge has undergone several upgrades, achieving a leap from pure theory to practical application.
The latest flowchart of the BitVM bridge is as follows:
In the entire process, there are a total of 5 roles.
How to Understand This Model?
From a model perspective, the BitVM bridge is based on a prepayment and reimbursement model. The Operator node pre-pays funds for the withdrawing user and periodically applies for reimbursement from the public deposit address, earning fees by utilizing the spread (from the withdrawal user's transaction fees). If the Operator acts maliciously and falsely reports transaction data, they can be challenged by anyone and punished.
Is Security Guaranteed?
We all know that when transferring funds across chains, it relies on a public fund pool (essentially the assets locked by users), and the security of the fund pool is the core issue that all cross-chain bridges must address.
Traditional BTC L2 solutions generally manage public fund pools through multi-signature, which obviously has trust risks. The BitVM bridge adopts a model similar to the Lightning Network, where it is predetermined who can take the funds. When users lock funds into the public fund pool, they communicate with the alliance, ensuring that the funds are locked in a Taproot address that can only be accessed by the Operator. The Operator can only unlock the relevant funds after completing the prepayment, providing proof of their prepayment on-chain, and being correctly challenged.
It can be said that the BitVM bridge achieves the splitting of the fund pool by introducing the Operator, which is indeed an innovative idea. Based on past experiences, we tend to think about how to achieve decentralized fund management methods, but overlook the fact that the concept of a fund pool itself is centralized. The BitVM bridge decentralizes the fund pool, enhancing the security of the bridge from the source.
Are There Any Drawbacks?
However, no solution is perfect, and there will always be some unsatisfactory aspects.
Careful readers may notice that the BitVM bridge's model, where the operator pre-pays funds to users and then reimburses from the public account, resembles a fund pool model. One pool is the public account (which is the assets truly locked by users, responsible for directly reimbursing the operator), and another pool is the one constituted by operators, used to directly prepay users' withdrawal needs (this pool is virtual and distributed among different operators).
When users initiate a withdrawal, they directly interact with the operator for fund transactions, which means that the operator's final funds become the funds of the pool.
The funds of the withdrawing user have gone through the operator as a third party, and the source of funds is no longer from the fund pool, while also mixed with other users' funds.
Due to the limitations of this fund pool model, for some users who place great importance on the source of funds, the BitVM bridge may not meet their independence requirements for funds.
To address this issue while reducing excessive reliance on the BitVM bridge, Bitlayer has added the OP-DLC bridging solution, which implements user P2P transactions based on a pipeline concept, with the security of the OP-DLC bridge relying on fraud proofs and third-party oracles.
What About Usability?
The security of the BitVM bridge is beyond doubt, but the issue of usability requires continuous improvement. For example, according to BitVM's expectations, a large number of alliance members need to be online and correctly pre-sign to ensure the correct flow of the process, which is indeed a challenge.
3. Conclusion
In terms of architecture, Bitlayer's LVM achieves the decoupling of smart contract execution and zero-knowledge proofs, which is a forward-looking design idea, making it possible for Bitlayer to adapt to various VMs and zero-knowledge provers in the future.
In the technical selection of cross-chain bridges, Bitlayer's BitVM + OP-DLC dual-channel bridge is essentially the safest cross-chain bridge implementation scheme for BTC L2 at present (achieving trust minimization).
Through the integration of technology and engineering, Bitlayer has built a relatively secure and scalable cross-chain bridge solution based on BitVM, but this is only a transitional phase, a compromise after weighing security and scalability.
Minimizing trust should be the goal pursued by BTC L2. As BitVM gradually becomes more practical, and as far as I know, a significant breakthrough in Bitlayer's construction on BitVM is expected in about three months. We look forward to Bitlayer gradually becoming the BTC L2 we anticipate.
