The Bitcoin ecosystem is experiencing rapid expansion, evidenced by the remarkable growth of Bitcoin L2s and sidechains, which have increased to over 25 in less than a year. For context, compare this growth rate to Ethereum’s ecosystem, where it took three years to develop 48 L2 solutions, as listed by L2BEAT.
We at Inception are diligently monitoring these developments. However, there are challenges in evaluating the incoming projects as documentation and information tends to be sparse or highly technical.
Here, we focus on Stacks and its imminent Nakamoto hard fork. Then, we compare and contrast a variety of newer projects entering the scene that have been on our radar including RGB++, Merlin, Build on Bitcoin (BOB), BEVM, Bsquared, and Nostr Assets.
Through these case studies, we intended to bring clarity to ourselves around the nuances of different Bitcoin scaling solutions and infrastructure. In doing so, we developed a comparison system for each of these projects, which we hope will also bring clarity for you.
First, let’s look at the emerging Bitcoin ecosystem as a whole and break down how it can be categorized:
One of its kind: Staking STX earns BTC yield via a novel consensus mechanism, creating a unique direct link between Stacks and Bitcoin. AFAIK, no other project does this.
How does it achieve this? Proof-of-Transfer (PoX) Consensus
PoX vs. PoW and PoS
In summary, PoX is an elegant mechanism to directly link a smart contract blockchain (Stacks) with Bitcoin’s UTXO blockchain (Bitcoin).
Stacks’ Nakamoto upgrade is a hard fork that will make Stacks a “true” Bitcoin L2 in the sense that STX will inherit 100% of BTC’s hash power for achieving transaction finality on the Stacks network (chain reorganization as hard as reorganizing Bitcoin). In addition, it’s expected to bring several key upgrades to the Stacks network, including faster transactions and the introduction of sBTC.
Stacks’ scaling through subnets and different VMs. Source: Stacks Whitepaper
A Bitcoin L2 protocol that leverages the security and immutability of the Bitcoin blockchain to enable smart contracts and asset management.
Category: L2/sidechain — UTXO
Description: RGB++ is an extension protocol (not blockchain) extends the RGB protocol by moving “smart” components such as p2p networks, virtual machines, and smart contracts onchain, specifically to the Common Knowledge Base (CKB) — the UTXO-based L1 blockchain of the Nervos Network. It enables verification and execution of RGB++ contract assets and logic on CKB, addressing interaction, smart contract execution, and proof provision issues.
Core tech / VM: RGB++ is based on the RGB protocol, which uses single-use seals and client-side validation to manage state changes and transaction verification. It leverages the RISC-V virtual machine used by CKB. Compiling RGB++ to RISC-V allows off-chain execution on RISC-V. RGB++ and RGB differ in design routes, with RGB striving for a post-blockchain purely client-side validated world and RGB++ aiming to add more blockchains to the Common Knowledge Base (CKB) and creating L2 scaling solutions on CKB.
By being UTXO based, RGB++ can bind the state and smart contracts on the CKB to Bitcoin UTXOs using single-use seals and client-side validation. Single-use seals ensure that a transaction can only occur once, making transactions unique and tamper-evident. Client-side validation means that transactions are confirmed locally by the user instead of on a centralized server or on the blockchain, which helps decentralize validation, reduce blockchain load, and enhance privacy. This approach makes the difficulty of double spending via RGB++ able to reach that of Bitcoin as shown in the chart below.
Note: Schematic diagram of PoW security after N confirmations (non-theoretical calculation)
Compatibility: RGB++ is backwards compatible with RGB operations and aims to address the slow progress of off-chain clients by adopting a PoW-based UTXO chain strategy. It introduces a mechanism for seamlessly migrating transactions from Bitcoin to CKB, to leverage CKB’s high-performance execution environment before migrating results back to Bitcoin. As the CKB is built on the basic RISC-V instruction set, the CKB-VM is flexible to support Turing-complete smart contracts and run various virtual machines, including the EVM.
Features:
Staking? Not specified, but it doesn’t seem like it based on their architecture (e.g., CKB is a PoW chain). However, the CKB network has “staking” in the sense that users can lock their CKB tokens and earn compounded interest from CKB token inflation.
BIP upgrade required? No, RGB++ doesn’t require changes to the Bitcoin protocol as it functions as a layer on top of Bitcoin’s existing infrastructure.
Degree of Bitcoin security inheritance? Claims to reach 100% potential (see above).
A Bitcoin sidechain protocol that aims to improve the scalability and capital efficiency of the Bitcoin ecosystem.
Category: L2 — EVM (ZK rollup)
Description: Merlin Chain is built on Bitcoin and aims to unlock the potential of Bitcoin through its users, protocols, and native assets. It has adopted an oracle network, on-chain BTC fraud-proof modules, and ZK rollups to improve Bitcoin’s scalability and efficiency.
Core tech / VM: Compatible with the EVM and supports Bitcoin native protocols including Bitcoin, BRC20, Bitcoin hashpower, BRC420, Atomicals, Pipe, and Bitmap. Developers can use Ethereum smart contracts to build dapps where transactions are executed on the Bitcoin blockchain.
Compatibility: Merlin Chain is simultaneously compatible with the EVM and various Bitcoin native protocols, allowing Ethereum users to interact with dapps on the Bitcoin L2 network without needing to switch to a Bitcoin wallet. Bitcoin wallet connection to the Merlin network is powered by Particle Network’s account abstraction protocol BTC Connect. BTC Connect assigns a Bitcoin wallet as a signer for a smart account on the Bitcoin L2/EVM chain. This could bring more users from the Bitcoin ecosystem to the Ethereum ecosystem, and vice versa.
Features:
Staking? Yes, yield is in assets on the Merlin Chain.
BIP upgrade required? Not specified, but probably not as this is an EVM chain operating on top of Bitcoin’s existing infrastructure.
Degree of Bitcoin security inheritance? Merlin claims to maintain the security level (or close to) of the Bitcoin network.
BOB is a Bitcoin L2 protocol designed to bridge the gap between Bitcoin adoption and innovation with full EVM compatibility, focusing on DeFi and capital efficiency.
Category: L2 — EVM (optimistic rollup transitioning to ZK rollup); more like Merlin than RGB++
Description: BOB is an EVM rollup stack tailored to and secured by Bitcoin, aiming to onboard millions of new Bitcoin users. It seeks to close the gap between BTC adoption and innovation by providing a platform enabling Ordinals for Ethereum users, stablecoins for BTC users, and Bitcoin DeFi.
Core tech / VM: BOB uses an EVM rollup stack for usable decentralization and fast go-to-market. It’s secured by Bitcoin through merged mining and plans BTC staking in the future. Their roadmap also includes multi-rollup capabilities between Bitcoin and the EVM. Merged mining will allow Bitcoin miners to mine for Bitcoin and BOB at the same time, securing both networks without adding computation costs.
Compatibility: Initially bootstrapped as an optimistic ETH rollup to tap into liquidity, assets, and users; then, BOB plans to integrate Bitcoin security and ZK validation, transforming it into a Bitcoin ZK rollup. It is designed to be integrated with Bitcoin’s stack including Lightning, Nostr, Ordinals, BRCs, P2P, and more.
Features
Staking? Planned, but specifics wrt how it will work and what assets the yield would be in are not specified. Native EVM compatible.
BIP upgrade required? Not specified, but the use of merged mining suggests that no BIP upgrade is necessary. Merged mining doesn’t require interaction between the Bitcoin node and the BOB node software.
Degree of Bitcoin security inheritance? Not specified.
BEVM is a Bitcion L2 that aims to bring EVM compatibility and dapps to the Bitcoin ecosystem.
Category: L2/sidechain — EVM
Description: BEVM is another Bitcoin L2 with EVM compatibility, allowing for seamless and easy deployment of various dapps from the EVM ecosystem onto Bitcoin. It stands out for its use of BTC as gas, enabled by a cross-chain mechanism between Bitcoin and BEVM which requires the deployment of Bitcoin light nodes on the BEVM chain nodes for synchronizing data from Bitcoin mainnet to BEVM. The result is potentially far expanded use and consumption scenarios for BTC.
Core tech / VM: BEVM is based on technologies, such as the Schnorr signature algorithm (brought by Taproot upgrade) allowing for decentralized Bitcoin cross-chain operations. Together, they enable BEVM to function as a decentralized BTC L2 using BTC as gas while being fully EVM compatible.
Compatibility: EVM compatibility means BEVM supports the execution of any smart contract or dapp in the Ethereum ecosystem.
Features:
Staking? Not specified.
BIP upgrade required? Not specified, but likely no, as the architecture appears to work with existing Bitcoin infrastructure and upgrades like Segwit and Taproot.
Degree of Bitcoin security inheritance? Not specified.
Bsquared is a Bitcoin L2 network aiming to enhance Bitcoin’s scalability and application diversity through ZK proofs.
Category: L2 — EVM (ZK rollup)
Description: Bsquared attempts to solve Bitcoin’s scalability challenges by introducing a ZKP-based, EVM-compatible L2 aimed at increasing transaction speed and broadening application diversity without compromising security. The litepaper details a ZKP verification commitment rollup combined with Taproot integration on Bitcoin that is capable of running Turing-complete smart contracts for off-chain transactions. The result is increased transaction efficiency and cost reductions paired with enhanced privacy and security during confirmation on the Bitcoin network.
Core tech / VM: Bsquared utilizes ZKPs and adopts a zkEVM architecture for the execution of transactions within the L2 network and the output of related proofs. The capacity for Turing-complete smart contracts can enhance Bitcoin’s utility for applications across DeFi, NFTs, social, and more.
Compatibility: Fully compatible with the EVM and native Bitcoin assets via Particle Network’s BTC Connect.
Features:
Staking? Not specified, but as a ZK EVM with full EVM compatibility, it can issue its own protocol staking rewards.
BIP upgrade required? Not specified, but the design is like Ethereum ZK rollups, with off-chain compute and reliance on the base chain (Bitcoin mainnet instead of Ethereum mainnnet) for final transaction verification (settlement) and data availability. So, probably not.
Degree of Bitcoin security inheritance? Not specified.
Nostr Assets is a decentralized protocol for digital asset issuance and management on the Bitcoin network. It is built on Nostr but by a separate team.
Category: Digital asset issuance
Description: Nostr Assets integrates Taproot Assets (formerly Taro) and native Bitcoin payments (denominated in Satoshis) into the Nostr ecosystem, enabling the management of digital assets issued on Bitcoin. It aims to bridge the gap between social networking and financial transactions, with the Nostr ecosystem being a decentralized network for social networking and messaging. By leveraging the public and private keys of Nostr, users can send and receive Bitcoin-based assets via wallets linked to their Nostr accounts.
Core tech / VM: Nostr Assets operates by integrating Taproot assets (e.g., stablecoins, NFTs) and satoshis into the Nostr ecosystem. While Nostr Assets do not directly issue assets, it facilitates their introduction and transaction within the ecosystem. The protocol leverages Bitcoin’s Lightning Network for asset transactions for faster speeds and lower costs.
Compatibility: Nostr Assets adds a native asset layer to the Nostr protocol, which is compatible with Bitcoin’s Taproot assets and the Lightning Network. This compatibility expands the utility and applications of the Nostr protocol, and also could significantly increase adoption and usage of the Lightning Network.
Features:
Staking? Not specified. Unlikely as Nostr is not a blockchain but a social networking protocol.
BIP upgrade required? No.
Degree of Bitcoin security inheritance? Not specified.
We conclude with a condensed table including key information from each section above.
The Bitcoin ecosystem is experiencing rapid expansion, evidenced by the remarkable growth of Bitcoin L2s and sidechains, which have increased to over 25 in less than a year. For context, compare this growth rate to Ethereum’s ecosystem, where it took three years to develop 48 L2 solutions, as listed by L2BEAT.
We at Inception are diligently monitoring these developments. However, there are challenges in evaluating the incoming projects as documentation and information tends to be sparse or highly technical.
Here, we focus on Stacks and its imminent Nakamoto hard fork. Then, we compare and contrast a variety of newer projects entering the scene that have been on our radar including RGB++, Merlin, Build on Bitcoin (BOB), BEVM, Bsquared, and Nostr Assets.
Through these case studies, we intended to bring clarity to ourselves around the nuances of different Bitcoin scaling solutions and infrastructure. In doing so, we developed a comparison system for each of these projects, which we hope will also bring clarity for you.
First, let’s look at the emerging Bitcoin ecosystem as a whole and break down how it can be categorized:
One of its kind: Staking STX earns BTC yield via a novel consensus mechanism, creating a unique direct link between Stacks and Bitcoin. AFAIK, no other project does this.
How does it achieve this? Proof-of-Transfer (PoX) Consensus
PoX vs. PoW and PoS
In summary, PoX is an elegant mechanism to directly link a smart contract blockchain (Stacks) with Bitcoin’s UTXO blockchain (Bitcoin).
Stacks’ Nakamoto upgrade is a hard fork that will make Stacks a “true” Bitcoin L2 in the sense that STX will inherit 100% of BTC’s hash power for achieving transaction finality on the Stacks network (chain reorganization as hard as reorganizing Bitcoin). In addition, it’s expected to bring several key upgrades to the Stacks network, including faster transactions and the introduction of sBTC.
Stacks’ scaling through subnets and different VMs. Source: Stacks Whitepaper
A Bitcoin L2 protocol that leverages the security and immutability of the Bitcoin blockchain to enable smart contracts and asset management.
Category: L2/sidechain — UTXO
Description: RGB++ is an extension protocol (not blockchain) extends the RGB protocol by moving “smart” components such as p2p networks, virtual machines, and smart contracts onchain, specifically to the Common Knowledge Base (CKB) — the UTXO-based L1 blockchain of the Nervos Network. It enables verification and execution of RGB++ contract assets and logic on CKB, addressing interaction, smart contract execution, and proof provision issues.
Core tech / VM: RGB++ is based on the RGB protocol, which uses single-use seals and client-side validation to manage state changes and transaction verification. It leverages the RISC-V virtual machine used by CKB. Compiling RGB++ to RISC-V allows off-chain execution on RISC-V. RGB++ and RGB differ in design routes, with RGB striving for a post-blockchain purely client-side validated world and RGB++ aiming to add more blockchains to the Common Knowledge Base (CKB) and creating L2 scaling solutions on CKB.
By being UTXO based, RGB++ can bind the state and smart contracts on the CKB to Bitcoin UTXOs using single-use seals and client-side validation. Single-use seals ensure that a transaction can only occur once, making transactions unique and tamper-evident. Client-side validation means that transactions are confirmed locally by the user instead of on a centralized server or on the blockchain, which helps decentralize validation, reduce blockchain load, and enhance privacy. This approach makes the difficulty of double spending via RGB++ able to reach that of Bitcoin as shown in the chart below.
Note: Schematic diagram of PoW security after N confirmations (non-theoretical calculation)
Compatibility: RGB++ is backwards compatible with RGB operations and aims to address the slow progress of off-chain clients by adopting a PoW-based UTXO chain strategy. It introduces a mechanism for seamlessly migrating transactions from Bitcoin to CKB, to leverage CKB’s high-performance execution environment before migrating results back to Bitcoin. As the CKB is built on the basic RISC-V instruction set, the CKB-VM is flexible to support Turing-complete smart contracts and run various virtual machines, including the EVM.
Features:
Staking? Not specified, but it doesn’t seem like it based on their architecture (e.g., CKB is a PoW chain). However, the CKB network has “staking” in the sense that users can lock their CKB tokens and earn compounded interest from CKB token inflation.
BIP upgrade required? No, RGB++ doesn’t require changes to the Bitcoin protocol as it functions as a layer on top of Bitcoin’s existing infrastructure.
Degree of Bitcoin security inheritance? Claims to reach 100% potential (see above).
A Bitcoin sidechain protocol that aims to improve the scalability and capital efficiency of the Bitcoin ecosystem.
Category: L2 — EVM (ZK rollup)
Description: Merlin Chain is built on Bitcoin and aims to unlock the potential of Bitcoin through its users, protocols, and native assets. It has adopted an oracle network, on-chain BTC fraud-proof modules, and ZK rollups to improve Bitcoin’s scalability and efficiency.
Core tech / VM: Compatible with the EVM and supports Bitcoin native protocols including Bitcoin, BRC20, Bitcoin hashpower, BRC420, Atomicals, Pipe, and Bitmap. Developers can use Ethereum smart contracts to build dapps where transactions are executed on the Bitcoin blockchain.
Compatibility: Merlin Chain is simultaneously compatible with the EVM and various Bitcoin native protocols, allowing Ethereum users to interact with dapps on the Bitcoin L2 network without needing to switch to a Bitcoin wallet. Bitcoin wallet connection to the Merlin network is powered by Particle Network’s account abstraction protocol BTC Connect. BTC Connect assigns a Bitcoin wallet as a signer for a smart account on the Bitcoin L2/EVM chain. This could bring more users from the Bitcoin ecosystem to the Ethereum ecosystem, and vice versa.
Features:
Staking? Yes, yield is in assets on the Merlin Chain.
BIP upgrade required? Not specified, but probably not as this is an EVM chain operating on top of Bitcoin’s existing infrastructure.
Degree of Bitcoin security inheritance? Merlin claims to maintain the security level (or close to) of the Bitcoin network.
BOB is a Bitcoin L2 protocol designed to bridge the gap between Bitcoin adoption and innovation with full EVM compatibility, focusing on DeFi and capital efficiency.
Category: L2 — EVM (optimistic rollup transitioning to ZK rollup); more like Merlin than RGB++
Description: BOB is an EVM rollup stack tailored to and secured by Bitcoin, aiming to onboard millions of new Bitcoin users. It seeks to close the gap between BTC adoption and innovation by providing a platform enabling Ordinals for Ethereum users, stablecoins for BTC users, and Bitcoin DeFi.
Core tech / VM: BOB uses an EVM rollup stack for usable decentralization and fast go-to-market. It’s secured by Bitcoin through merged mining and plans BTC staking in the future. Their roadmap also includes multi-rollup capabilities between Bitcoin and the EVM. Merged mining will allow Bitcoin miners to mine for Bitcoin and BOB at the same time, securing both networks without adding computation costs.
Compatibility: Initially bootstrapped as an optimistic ETH rollup to tap into liquidity, assets, and users; then, BOB plans to integrate Bitcoin security and ZK validation, transforming it into a Bitcoin ZK rollup. It is designed to be integrated with Bitcoin’s stack including Lightning, Nostr, Ordinals, BRCs, P2P, and more.
Features
Staking? Planned, but specifics wrt how it will work and what assets the yield would be in are not specified. Native EVM compatible.
BIP upgrade required? Not specified, but the use of merged mining suggests that no BIP upgrade is necessary. Merged mining doesn’t require interaction between the Bitcoin node and the BOB node software.
Degree of Bitcoin security inheritance? Not specified.
BEVM is a Bitcion L2 that aims to bring EVM compatibility and dapps to the Bitcoin ecosystem.
Category: L2/sidechain — EVM
Description: BEVM is another Bitcoin L2 with EVM compatibility, allowing for seamless and easy deployment of various dapps from the EVM ecosystem onto Bitcoin. It stands out for its use of BTC as gas, enabled by a cross-chain mechanism between Bitcoin and BEVM which requires the deployment of Bitcoin light nodes on the BEVM chain nodes for synchronizing data from Bitcoin mainnet to BEVM. The result is potentially far expanded use and consumption scenarios for BTC.
Core tech / VM: BEVM is based on technologies, such as the Schnorr signature algorithm (brought by Taproot upgrade) allowing for decentralized Bitcoin cross-chain operations. Together, they enable BEVM to function as a decentralized BTC L2 using BTC as gas while being fully EVM compatible.
Compatibility: EVM compatibility means BEVM supports the execution of any smart contract or dapp in the Ethereum ecosystem.
Features:
Staking? Not specified.
BIP upgrade required? Not specified, but likely no, as the architecture appears to work with existing Bitcoin infrastructure and upgrades like Segwit and Taproot.
Degree of Bitcoin security inheritance? Not specified.
Bsquared is a Bitcoin L2 network aiming to enhance Bitcoin’s scalability and application diversity through ZK proofs.
Category: L2 — EVM (ZK rollup)
Description: Bsquared attempts to solve Bitcoin’s scalability challenges by introducing a ZKP-based, EVM-compatible L2 aimed at increasing transaction speed and broadening application diversity without compromising security. The litepaper details a ZKP verification commitment rollup combined with Taproot integration on Bitcoin that is capable of running Turing-complete smart contracts for off-chain transactions. The result is increased transaction efficiency and cost reductions paired with enhanced privacy and security during confirmation on the Bitcoin network.
Core tech / VM: Bsquared utilizes ZKPs and adopts a zkEVM architecture for the execution of transactions within the L2 network and the output of related proofs. The capacity for Turing-complete smart contracts can enhance Bitcoin’s utility for applications across DeFi, NFTs, social, and more.
Compatibility: Fully compatible with the EVM and native Bitcoin assets via Particle Network’s BTC Connect.
Features:
Staking? Not specified, but as a ZK EVM with full EVM compatibility, it can issue its own protocol staking rewards.
BIP upgrade required? Not specified, but the design is like Ethereum ZK rollups, with off-chain compute and reliance on the base chain (Bitcoin mainnet instead of Ethereum mainnnet) for final transaction verification (settlement) and data availability. So, probably not.
Degree of Bitcoin security inheritance? Not specified.
Nostr Assets is a decentralized protocol for digital asset issuance and management on the Bitcoin network. It is built on Nostr but by a separate team.
Category: Digital asset issuance
Description: Nostr Assets integrates Taproot Assets (formerly Taro) and native Bitcoin payments (denominated in Satoshis) into the Nostr ecosystem, enabling the management of digital assets issued on Bitcoin. It aims to bridge the gap between social networking and financial transactions, with the Nostr ecosystem being a decentralized network for social networking and messaging. By leveraging the public and private keys of Nostr, users can send and receive Bitcoin-based assets via wallets linked to their Nostr accounts.
Core tech / VM: Nostr Assets operates by integrating Taproot assets (e.g., stablecoins, NFTs) and satoshis into the Nostr ecosystem. While Nostr Assets do not directly issue assets, it facilitates their introduction and transaction within the ecosystem. The protocol leverages Bitcoin’s Lightning Network for asset transactions for faster speeds and lower costs.
Compatibility: Nostr Assets adds a native asset layer to the Nostr protocol, which is compatible with Bitcoin’s Taproot assets and the Lightning Network. This compatibility expands the utility and applications of the Nostr protocol, and also could significantly increase adoption and usage of the Lightning Network.
Features:
Staking? Not specified. Unlikely as Nostr is not a blockchain but a social networking protocol.
BIP upgrade required? No.
Degree of Bitcoin security inheritance? Not specified.
We conclude with a condensed table including key information from each section above.