Bitlayer is the first Bitcoin Layer 2 network security equivalent project based on the BitVM solution. It aims to provide a security equivalent to Bitcoin while supporting Turing completeness, enabling it to execute any possible computation or program.

The core goal of Bitlayer is to address the trade-off between security and Turing completeness in Bitcoin Layer 2 technology. Its design is inspired by the BitVM, DLC/LN (Discrete Log Contracts/Lightning Network) technology protocols, and various VMs (including EVM, Ethereum Virtual Machine).

The project’s technical team has abstracted three key tasks from these inspirations:

1. Trustless entry and exit of first-layer assets
2. State transitions using a Turing-complete second-layer virtual machine
3. First-layer validation of second-layer state transitions

Its core functionality and operational principles are built around several key technical components to support more complex application scenarios, such as smart contract execution, high-throughput transaction processing, and cross-chain asset transfers.

Core Functions

1. Turing-complete Smart Contract Support: Bitlayer implements a Turing-complete virtual machine compatible with the Ethereum Virtual Machine (EVM), called BitVM, allowing developers to write and execute complex smart contracts on Bitcoin. This capability, not supported by Bitcoin’s native features, introduces a wide range of decentralized application (DApp) development possibilities to the Bitcoin ecosystem.
2. Efficient Transaction Processing: By utilizing optimistic rollup technology and layered verification mechanisms, Bitlayer significantly enhances transaction processing speed and system scalability. This enables the processing of a large volume of transactions on the second layer network, with on-chain verification required only in case of disputes, thus reducing the main chain’s load and lowering transaction costs.
3. Secure Cross-chain Asset Transfers: Through the OP_DLC bridge, Bitlayer enables secure and seamless transfers of Bitcoin and other assets between the Bitcoin main chain and the second layer. This bridging technology supports asset liquidity across different blockchain platforms while ensuring asset security and user control.
4. Core mechanism

Based on the BitVM Bitcoin Layer 2 solution, Bitlayer adopts Layered Virtual Machine technology, utilizing Zero-Knowledge Proofs (ZKP) and Optimistic Verification mechanisms to support various complex computations. Additionally, Bitlayer establishes a dual-channel, bidirectional asset-locking bridge through OP_DLC (Optimistic Discreet Log Contracts) and the BitVM bridge, achieving security equivalent to Bitcoin’s first layer.

1. BitVM

BitVM is the core component of the Bitlayer project, a Turing-complete virtual machine designed specifically for the Bitcoin ecosystem. Its primary goal is to extend Bitcoin’s functionality and programmability without compromising the inherent security and decentralization characteristics of the Bitcoin network. Here is a detailed introduction to BitVM:

1. Design goals

The design goal of BitVM is to overcome certain limitations of the native Bitcoin protocol, particularly in the areas of smart contracts and complex computational capabilities. While Bitcoin is one of the most secure blockchains, it does not inherently support complex smart contracts, which limits its utility in certain applications such as decentralized finance (DeFi).

1. Turing completeness

BitVM is Turing-complete, meaning it can execute arbitrarily complex computational tasks given sufficient resources. This feature allows developers to design and operate various complex decentralized applications (DApps) on the Bitcoin network, such as automated trading strategies, financial derivatives, and smart contracts.

In summary, BitVM is a key technology of the Bitlayer project. By providing a secure, scalable, and feature-rich virtual machine, BitVM enables Bitcoin to better meet current and future blockchain application demands. It not only addresses Bitcoin’s shortcomings in smart contracts and high throughput applications but also maintains its security and decentralized nature as a top-tier cryptocurrency.

1. Layered Virtual Machine Technology (Layered Virtual Machine, LVM)

Bitlayer’s Layered Virtual Machine (LVM) is an innovative architectural design aimed at enhancing the computational capabilities and programmability of the Bitcoin network while maintaining its core security and decentralization features. This technology enables the execution of complex smart contracts and other applications on Bitcoin’s Layer 2 without excessively burdening the main chain. Here’s a detailed explanation of the key components and working principles of this technology.

1. Key components
2. Front-end Execution Environment: The front-end execution environment is primarily responsible for handling the execution of smart contracts. It supports multiple smart contract languages and frameworks, allowing developers to choose the most suitable tools and languages for specific applications.
3. Back-end Verification Environment: The back-end environment focuses on verifying the results of front-end execution. This part typically utilizes Zero-Knowledge Proof (ZKP) technology to ensure the correctness of computational results without revealing specific execution details.
4. Working principle

The core idea of a layered virtual machine is to separate computation and verification. This layered architecture allows for extensive computational processing on the second layer while only submitting necessary verification information to the Bitcoin main chain. This approach significantly reduces the burden on the main chain.

1. Executing smart contract:
   1. Developers deploy smart contracts in the front-end execution environment. These contracts can include financial derivatives, games, or other applications requiring complex logic processing.
   2. During contract execution, relevant computations occur on the second layer rather than directly on Bitcoin’s main chain.
2. Generating a zero-knowledge proof:
   1. Once smart contract execution is completed, the back-end verification environment generates zero-knowledge proofs. These proofs can verify the correctness of the front-end execution without revealing the specific details of the execution.
   2. These proofs can then be submitted to the Bitcoin main chain, where they are available for anyone needing to verify these computations.
3. On-chain verification:
   1. Once zero-knowledge proofs are submitted to the Bitcoin main chain, anyone can verify that the smart contract execution was correct without needing to redo the computations.
   2. This ensures transparency and verifiability of the computations while preserving the privacy of execution details.
4. Advantage

• Efficiency: By executing the majority of computations on the second layer, the layered virtual machine significantly reduces pressure on the main chain, thereby increasing overall system throughput and efficiency.
• Flexibility: Supporting multiple smart contract languages and execution environments provides developers with a wide range of choices, fostering innovation and development across various applications.
• Security: Utilizing zero-knowledge proof technology protects user privacy while ensuring the correctness and tamper resistance of computation results.

Layered Virtual Machine (LVM) technology is a crucial innovation that Bitlayer employs to enhance the Bitcoin network’s capability for complex smart contracts without compromising security and decentralization. This innovative framework opens up new possibilities for extending Bitcoin’s functionality, enabling it to better serve the diverse needs of modern blockchain applications.

1. Zero-Knowledge Proofs (ZKP)

Zero-Knowledge Proofs (ZKP) are an encryption technology that allows one party (the prover) to prove to another party (the verifier) that a statement is true without revealing any information other than the truth of the statement itself. This technology ensures data integrity and security while preserving privacy. In the Bitlayer project, zero-knowledge proof technology is used to enhance security, improve efficiency, and protect user privacy.

1. Fundamental principle

The core concept of zero-knowledge proofs is the ability to prove the correctness of certain information without revealing any specifics about that information. For instance, a prover can demonstrate knowledge of a password without disclosing the password itself. This is achieved through a series of mathematical challenges and responses, ensuring that only someone possessing the correct information can successfully provide the proof.

1. Application in Bitlayer

In Bitlayer, zero-knowledge proofs are used in the following key aspects:

1. Enhanced Privacy Protection: By using Zero-Knowledge Proofs (ZKP), users can prove they possess sufficient funds for transactions without revealing the specific amount of their account balance. This protects user privacy while ensuring network security.
2. Improved Transaction Efficiency: In traditional blockchain systems, every transaction detail is publicly recorded on the chain, which can lead to privacy leaks and network congestion. Using ZKP, it’s possible to prove the validity of transactions without revealing all transaction details, thus reducing data transmission and storage requirements.
3. Secure Execution of Smart Contracts: Using ZKP in smart contracts ensures that the contract’s execution results are correct while keeping the contract’s internal state and logic private. This is particularly crucial for applications involving sensitive data and logic.
4. Technical challenges

While zero-knowledge proofs offer many advantages, they also face some technical challenges, including:

1. Computational Complexity: The process of generating and verifying zero-knowledge proofs is typically computationally intensive, which can lead to performance issues, especially in resource-constrained environments.
2. Design Complexity: Designing an effective and secure zero-knowledge proof system requires advanced cryptographic knowledge and precise implementation. Incorrect designs may introduce security vulnerabilities.
3. Interoperability Issues: Standards and implementations of zero-knowledge proofs may be incompatible across different systems and platforms, which could limit their ability to be applied cross-platform.

In the Bitlayer project, zero-knowledge proof (ZKP) technology plays a critical role as it enables the Bitcoin Layer 2 network to maintain core Bitcoin security attributes while also offering improved efficiency and enhanced privacy protection. By selectively using ZKP where necessary, Bitlayer can provide a blockchain platform that is both secure and efficient, supporting a wide range of complex and sensitive blockchain applications.

1. Optimistic Verification

Optimistic Verification is a technology used in Layer 2 solutions for blockchain, particularly effective in enhancing the scalability of the main chain and reducing its load. This approach assumes participants behave honestly and allows transactions and contracts to be executed without immediate validation. Only in cases of dispute is necessary verification performed. This method effectively reduces the number of transactions on the main chain, thereby improving overall network performance and scalability. In the Bitlayer project, Optimistic Verification is a key technology for achieving high throughput and low latency.

1. Working principle

The fundamental principle of Optimistic Verification is that most transactions or contract executions are assumed to be correct, and validation processes are triggered only when necessary. This approach reduces the need for on-chain operations, thereby lowering transaction fees and latency while enhancing the overall scalability of the system.

1. Submission stage:
   1. Transactions or state changes are initially executed on the second layer network, such as Bitlayer, and are presumed valid. During this phase, immediate on-chain validation is not required, significantly reducing latency and costs.
2. Challenge window:
   1. Each submitted state or transaction in a system like Bitlayer typically has a “challenge window” during which network participants can dispute the submitted state. If no challenges are raised during this window, the transaction is considered valid.
3. Dispute Resolution:
   1. If a challenge occurs, it must be resolved through on-chain validation. This process involves submitting evidence to prove the validity or invalidity of the state in question. If the challenge is successful, meaning the evidence proves the state to be incorrect, the incorrect state will be rolled back. Conversely, if the challenge fails, the state will be confirmed as valid.
4. Applications in Bitlayer

In the Bitlayer project, optimistic verification enhances transaction processing speed and system scalability while maintaining core Bitcoin security attributes. Here are several key applications of optimistic verification in Bitlayer:

1. Smart contract execution:
   1. Bitlayer can execute complex smart contracts on the second layer, requiring on-chain validation only in case of disputes. This allows Bitlayer to support more complex and feature-rich applications compared to the native Bitcoin protocol, while maintaining core security and decentralization.
2. Batch transaction processing:
   1. Using optimistic verification, Bitlayer can process a large number of transactions on the second layer first, and then batch-submit the final states of these transactions to the Bitcoin main chain as a single record. This reduces the load on the main chain and increases overall transaction throughput.
3. Cost efficiency:
   1. By reducing the need for immediate on-chain validation, optimistic verification significantly lowers transaction costs, making microtransactions economically feasible on the blockchain.
4. Challenges and considerations

While optimistic verification provides significant performance advantages, it also introduces challenges, particularly concerning security and data integrity. Relying on challenge mechanisms to ensure transaction correctness requires careful system design to prevent fraud and ensure timely and effective responses from network participants to any potential challenges. Additionally, meticulous consideration is needed for designing the duration of challenge windows and dispute resolution mechanisms to ensure fairness and efficiency in the system.

Overall, optimistic verification provides an effective scalability path for second-layer solutions like Bitlayer. By reducing the need for on-chain operations while ensuring security, it greatly enhances the scalability and cost-effectiveness of blockchain systems.

1. OP_DLC Bridge (Optimistic Discreet Log Contracts Bridge)

The OP_DLC Bridge (Optimistic Discreet Log Contracts Bridge) is a crucial technology within the Bitlayer project designed to facilitate cross-chain asset transfers. This technology combines Discreet Log Contracts (DLC) with optimistic protocols to provide a secure, reliable, and decentralized method for assets to move between the Bitcoin main chain and the Bitlayer second layer.

1. Discreet Log Contracts (DLC)

Discreet Log Contracts (DLC) are a form of smart contract based on Bitcoin. They enable the execution of contracts under predefined conditions without relying on external oracles. DLC implementations primarily utilize Bitcoin scripting and multisignature technology to ensure contract execution is on-chain, transparent, and tamper-proof.

1. How the OP_DLC bridge works
2. Asset Locking:
   1. Users first lock their assets on the Bitcoin main chain through DLC contracts. This means the assets are held in a specific smart contract address and can only be released or transferred upon fulfilling the contract conditions.
3. Cross-Chain Transfer:
   1. Once assets are locked on the main chain, corresponding tokens representing the assets are created on the Bitlayer second layer. These tokens are fully controlled by DLC contracts, ensuring a one-to-one correspondence with the assets on the main chain.
   2. Users can freely trade these tokens on Bitlayer, enjoying low fees and high-speed transaction experiences.
4. Asset Redemption:
   1. When users want to redeem tokens from the second layer back to main chain assets, they initiate a redemption request on Bitlayer.
   2. This request triggers the execution of the DLC contract, where tokens are destroyed, corresponding assets are released from the smart contract, and sent to the user’s Bitcoin address.
5. Optimistic Verification:
   1. Throughout the entire process, optimistic protocols ensure that transactions only require on-chain verification in case of disputes. This greatly enhances system efficiency and scalability.
6. Advantages of OP_DLC Bridge
7. Security: Using Bitcoin-based DLC contracts ensures the security and transparency of asset locking and transfer.
8. Efficiency: By leveraging optimistic protocols, the need for on-chain verification is reduced, thereby increasing transaction processing speed and lowering costs.
9. Decentralization: Operations are conducted on-chain automatically, without relying on any centralized oracle or third-party services, ensuring the decentralized nature of the system.
10. Flexibility: Supports various types of cross-chain asset transfers, expanding the application scenarios within the Bitcoin ecosystem.

In summary, the OP_DLC Bridge is the core technology of Bitlayer for securely and efficiently facilitating the circulation of assets between the Bitcoin main chain and its Layer 2 network. It combines the security of DLC with the efficiency of optimistic protocols, providing users with a powerful tool for cross-chain asset management.

1. Bitlayer NFT

Bitlayer has announced that following the launch of its mainnet V1, it will introduce its first official NFT — the Bitlayer Lucky Helmet. This NFT is not just an image but a symbol representing the identity and contributions of Bitlayer community builders. A total of 5000 Lucky Helmets will be distributed via whitelist to active participants in the Bitcoin and Bitlayer communities.

The holders of the Lucky Helmet will enjoy a range of practical rights and benefits, including priority governance rights, potential token airdrops, official event points, and multiplier advantages in ecosystem projects. Additionally, the Lucky Helmet adopts the Ordinals issuance paradigm, optimizing circulation efficiency and minimizing transaction costs.

Ways to acquire the Lucky Helmet include priority passes and public whitelistings. These are aimed at the earliest and most active participants within the Bitlayer ecosystem. Additionally, a limited whitelist can be obtained through the Bitlayer x OKX Wallet event held in cooperation with OKX Wallet. These NFTs will be minted within specified timeframes and require completion of the minting process within the designated period on the official website.

1. Team/Partners/Funding Status

Bitlayer was co-founded by Charlie Yechuan Hu and Kevin He.

Charlie Yechuan Hu is a co-founder of Bitlayer. Previously, he served as a managing partner at LucidBlue Ventures and has been involved in projects such as Polygon, Tezos, and Polkadot. He graduated from Nehru College of Commerce and Beijing Foreign Studies University. Charlie Hu played a crucial role in expanding the influence of Tezos and Polygon, particularly as the Head of Business Development for Tezos China and overseeing Polygon’s operations in China and Southeast Asia.

Kevin He is also a co-founder of Bitlayer. His previous roles include Vice President of Technology at Xfire Technology, Senior Technical Director at Huobi, and Chief Scientist at YOUChain. He holds a master’s degree in Software Engineering from Peking University.

As of now, Bitlayer has successfully completed a $5 million seed financing round. This round was led by Framework Ventures and ABCDE Capital, with participation from notable investment firms such as StarkWare, OKX Ventures, Alliance DAO, UTXO Management, and Asymmetric Capital. Additionally, the project attracted several prominent angel investors including Ryan Selkis, CEO of Messari, Dan McArdle, co-founder of Messari, and Dan Held, founder of Asymmetric Capital.

In addition to the seed financing, Bitlayer announced a $50 million developer airdrop initiative, which has attracted over 500 project teams to participate. These projects span various categories including infrastructure, DeFi, NFTs, SocialFi, cross-chain bridges, among others. Within 48 hours of its launch, the initiative received over 300,000 votes from users supporting their preferred projects. Registration for this initiative remains open until April 29, with the official competition expected to commence in mid-May. Participating projects will compete for a share of the $50 million token airdrop rewards and grants through ranking on leaderboards and accelerator programs.

1. Project evaluation
2. Track analysis

Bitlayer is positioned within the domain of second-layer solutions for Bitcoin, focusing on expanding Bitcoin’s functionality, increasing its processing speed, and enhancing programmability while maintaining its security and decentralized nature. This sector is crucial for addressing scalability and flexibility issues within the Bitcoin network, enabling support for more complex financial and commercial applications.

1. Similar projects
2. Lightning Network is one of the most famous second-layer scaling solutions for Bitcoin, mainly addressing Bitcoin’s transaction speed and scalability issues. By establishing payment channels, it allows participants to conduct almost instant transactions, significantly reducing transaction costs and increasing network throughput.
3. Liquid Network, developed by Blockstream, is a Bitcoin-based sidechain technology primarily aimed at exchanges, brokers, market makers, and other financial institutions. It supports faster Bitcoin transactions and asset issuance while providing enhanced privacy features.
4. RSK (Rootstock) is another sidechain project that introduces smart contract functionality to the Bitcoin network. RSK aims to achieve functionality similar to Ethereum, including support for Turing-complete smart contracts, while maintaining Bitcoin’s security properties.
5. Target customers
6. Blockchain developers: Provide a feature-rich development environment compatible with EVM (Ethereum Virtual Machine), attracting developers from Ethereum and other blockchain platforms to develop and deploy applications on the Bitlayer platform.
7. Enterprise users: Offer efficient and cost-effective blockchain solutions for enterprises that require handling large volumes of transactions, especially those looking to optimize business processes or explore new business models using blockchain technology.
8. Financial institutions: Provide secure cross-chain asset transfer and management services, assisting financial institutions in asset management, trading, and settlement on the blockchain.
9. Cryptocurrency investors and traders: Offer a secure and fast trading platform for investors, particularly attractive to high-frequency traders who require instant transaction execution and low fees.
10. Privacy and security-conscious users: Utilize zero-knowledge proof technology to provide enhanced security for users who prioritize privacy, protecting their transactions and data from disclosure.
11. Project benefits

The advantages of the Bitlayer project are mainly reflected in its unique technological innovation and strong ecosystem cooperation:

1. Layered Virtual Machine technology provides flexible front-end smart contract execution and back-end zero-knowledge proof generation. This layered approach optimizes computation and verification processes, improving efficiency and reducing costs.
2. Zero-knowledge proofs (ZKP) enhance privacy and security. Bitlayer can verify transaction correctness without revealing specific transaction details, offering users enhanced privacy protection.
3. Optimistic Verification only resorts to on-chain validation when disputes arise, effectively reducing network congestion and transaction fees.
4. The OP_DLC bridge achieves highly secure interoperability with the Bitcoin main chain. This technology allows assets to be securely locked and transferred between the two chains while maintaining complete user control over assets.
5. Bitlayer has established ecosystem partnerships and collaborations with over 80 projects, spanning infrastructure, stablecoins, wallet services, and other critical domains. These extensive partnerships provide Bitlayer users with a wide range of services and applications, enhancing the platform’s attractiveness and competitiveness.
6. By combining technological innovation with a broad cooperation network, Bitlayer not only delivers efficient and secure solutions but also establishes strong ecosystem support in the market. This positions Bitlayer favorably in the competitive blockchain market, laying a solid foundation for future development.
7. Potential disadvantages of the project

Despite Bitlayer demonstrating excellence in technological innovation and ecosystem development, like many tech projects, it also faces potential challenges and drawbacks. These disadvantages could impact its widespread adoption and ultimate success. Here are some major disadvantages Bitlayer may face:

1. Technical complexity
2. User adoption barriers: Bitlayer’s advanced features such as layering virtual machines and zero-knowledge proofs, while powerful, may be too complex for regular users and developers to understand and utilize, thereby hindering widespread adoption.
3. Maintenance and upgrade challenges: Highly complex systems may encounter more technical challenges during maintenance and upgrades. Even minor errors or vulnerabilities could lead to security risks or performance issues.
4. Security issues
5. Security risks of new technologies: Despite Bitlayer’s use of advanced encryption and security technologies, the introduction of new technologies always comes with unknown security risks. For instance, if zero-knowledge proofs and optimistic verification mechanisms are not implemented properly, vulnerabilities could be exploited.
6. Dependency on external systems: Some of Bitlayer’s functionalities may rely on external systems and services, such as cross-chain bridges. The security and stability of these systems could impact the overall security of Bitlayer.
7. Market competition
8. Competition with other Layer 2 solutions: There are many other Layer 2 solutions in the market, such as Lightning Network and Liquid Network, which already have mature technologies and user bases. Bitlayer needs to demonstrate the superiority and unique value of its technology to stand out in this competitive landscape.
9. Market acceptance and adoption speed: Despite being technologically advanced, Bitlayer’s market acceptance and adoption speed will also depend on its real-world use cases, user experience, and the overall market environment.
10. Economic and regulatory factors
11. Funding requirements: The development and operation of advanced blockchain projects require substantial financial support. Insufficient future financing may potentially hinder the project’s ongoing development.
12. Regulatory uncertainty: Blockchain technology, especially projects involving financial applications, faces stringent and evolving regulatory environments. Regulatory uncertainty could impact Bitlayer’s operations and expansion.
13. Future plan

Bitlayer’s development roadmap shows its major milestones over the next few releases:

1. Mainnet-V1 (expected to be launched in April 2024):
   1. Plans to include over 30 ecosystem projects.
   2. Targeting a Total Value Locked (TVL) of $100 million.
   3. Processing daily transaction volume (TXs) of 1 million.
2. Mainnet-V2 (expected to be launched in the third quarter of 2024):
   1. Focus on addressing cross-chain bridging issues.
   2. Expanding ecosystem to 500 projects.
   3. Increasing TVL to $1 billion.
   4. Raising daily transaction volume to 3 million.
3. Mainnet-V3 (expected to be launched in Q2 2025):
   1. Implementing first-layer verification with BitVM.
   2. Significant growth to 3000 ecosystem projects.
   3. The explosive increase in TVL to $10 billion.
   4. Achieving daily transaction volume of 5 million.

Overall, Bitlayer’s plan involves a series of upgrades aimed at significantly increasing the number of ecosystem projects on its platform, enhancing the total locked value of assets, increasing daily transaction processing volume, and promoting integration and verification with BitVM at the first layer chain (L1). These goals demonstrate Bitlayer’s commitment to building a robust network that offers highly scalable solutions to support the growing demands of blockchain applications.

1. Conclusion

Bitlayer is advancing towards becoming a revolutionary Bitcoin Layer 2 solution with its innovative BitVM technology and layered virtual machine architecture. It aims to significantly enhance the scalability and smart contract capabilities of the Bitcoin network. As it progresses through its development roadmap, Bitlayer is committed to expanding its ecosystem to encompass thousands of projects, accumulating billions of dollars in total locked value, and processing millions of daily transactions. These efforts are expected to greatly enhance the practicality and market penetration of Bitcoin. Through continuous iteration from Mainnet-V1 to Mainnet-V3, Bitlayer demonstrates its ambition to become a hub of economic activity and innovation within the Bitcoin ecosystem.

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