Exploring Bitcoin Rollups The Best Scaling Solution?
Bitcoin Rollups The Optimal Scaling Solution?
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Bitcoin, as the earliest and most popular blockchain, processes hundreds of thousands of transactions every day. However, when Bitcoin was designed, its decentralized framework prioritized security, leading to the neglect of scalability issues. As a result, Bitcoin is often seen merely as a digital asset and a store of value.
Although Bitcoin’s security and decentralization have always been its strengths, its limited transaction speed and scale have hindered the development of the Bitcoin ecosystem. In recent years, various solutions have emerged to address this problem and allow developers to build the entire Bitcoin ecosystem. Now, scaling solutions have become not only the focus of other blockchain networks but also of Bitcoin itself.
In our previous article exploring the BTC Layer2 track and opportunities, we discussed why Bitcoin needs to scale and introduced related Bitcoin Layer2 solutions, such as the Lightning Network and sidechains.
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In this article, we will focus on another scaling solution for Bitcoin: Rollups. Compared to the Lightning Network and sidechains, Rollups have the potential to improve Bitcoin’s scalability, privacy, and programmability without sacrificing its core value and functionality as a peer-to-peer electronic cash system.
The Necessity of Bitcoin Rollups
Rollups are typically associated with the Ethereum network. After transitioning to proof of stake in September 2022, the Ethereum blockchain has become more centralized. Additionally, many Rollups rely on centralized sequencers for transaction ordering on layer 2. While decentralization does bring higher security, especially in the case of Bitcoin, the contradiction between decentralization and computational scale has become increasingly prominent with Bitcoin’s growth. The key to mitigating this contradiction lies in improving the scalability of the blockchain.
The Lightning Network we mentioned earlier utilizes technologies such as multi-signature and Hash Time Locked Contracts to store data off-chain and batch multiple transactions into one for faster and cheaper payments. Sidechains create a separate chain where Bitcoin is locked on the main chain and a large number of transactions are processed on the sidechain, greatly improving transaction speed without compromising the security of the Bitcoin main chain. On the other hand, Rollups involve upgrading the technical architecture or system of the Bitcoin network and optimizing data on-chain.
Rollups serve as a scaling solution for the first layer of the blockchain network. They move transactions off-chain, where they are processed (usually on the second layer), bundle multiple transactions into a batch, and then send them back to the first layer chain. Smart contracts then validate the batch of transactions and update the blockchain’s state.
This chart intuitively demonstrates the Bitcoin Rollup layering. In this example, there are two L2 Rollups: one specifically for data availability and another specifically for high security payments and contracts. In addition to the L2 data availability Rollup, there are three L3 Rollups, each dedicated to different use cases: private peer-to-peer payments, financial contracts, and in-game asset ownership and transfers. Since L3 Rollups rely on L2 full nodes for data availability, their security can be considered lower than L2 Rollups that rely on Bitcoin L1 full nodes for data availability security.
Rollups are becoming increasingly popular because they increase transaction throughput while reducing transaction costs. This is because Rollups mean that the blockchain doesn’t need to process thousands of transactions individually; technically, they only need to process one transaction. This is particularly useful for dApps, as they require frequent and fast transactions to operate effectively. This is why Rollups are considered viable scaling solutions for blockchains like Bitcoin.
Currently, the main types of Bitcoin Rollup are ZK Rollup and Sovereign Rollup.
Applications of ZK Rollup on Bitcoin
ZK Rollup uses encrypted “validity proofs” to ensure that new Rollup blocks adhere to the rules of the Rollup protocol. Each time a Rollup block producer creates a validity Rollup block, the block producer submits state update transactions to the parent chain. Rollup state update transactions contain data on each state transition in the Rollup block, the new Rollup state root after the state transitions in the application block, and proof of data availability and proof of the validity of the new Rollup state root. Only state update transactions with valid proofs can successfully advance the Rollup state after confirmation on the parent chain.
ZK Rollup packs transaction data into the mainnet and submits a validity proof to prove that these transactions are valid. When receiving these transactions, the validity proofs are directly verified. If the proofs are valid, it means that these transactions are valid, and there is no need to wait when extracting assets.
In ZK Rollup, users reproduce and verify all state changes based on the packed data. However, ZK Rollup publishes less data and only needs to publish the minimum data required to reconstruct account balances and the latest state. This allows ZK Rollup to process more transactions simultaneously, reduces the computational and storage resources on the main chain, reduces congestion on the chain, and lowers transaction costs due to no transaction data backlog, resulting in faster and cheaper transactions on the chain.
Extension Improvements of ZK Rollup on Bitcoin
ZK Rollup improves throughput. As more and more transactions on the Bitcoin network need to be proven valid at each Rollup layer, the difficulty of creating the necessary validity proofs also increases. ZK Rollup’s solution to the computational requirements for creating these proofs is to use recursive proof composition for parallelization. Recursion is essentially “proving the validity of proofs,” so many computers can prove the validity of different transactions, and these proofs can be combined into one proof, allowing multiple computers to perform horizontal scaling simultaneously, which helps prove the validity of a transaction. Both SNARK and STARK proofs can achieve trustless recursive proof composition.
In terms of application, this recursive proof will allow the ZK Rollup account model to compress Layer 2 transactions, improve scalability by increasing the number of transactions, and provide additional transaction capacity to support more Lightning Network transactions. This can increase the number of users who join and use the Lightning Network in a self-hosted manner, and also expand the Lightning Network.
Application of Sovereign Rollups on Bitcoin
Sovereign Rollups are different from current Rollup designs. Previous OP Rollups and ZK Rollups required the use of smart contracts to confirm Rollup execution, but Sovereign Rollups do not require smart contracts or settlement layers, hence the name “Sovereign”.
Observing OP and ZK Rollups, they tend to use L1 as the data availability layer and consensus layer. However, Sovereign Rollups only use the first layer to achieve data availability, ensuring a more direct connection with the underlying layer. The difference between Sovereign Rollups and common Rollups is that it has a fork selection rule that allows it to fork independently of its underlying layer. In contrast, a regular Rollup delegates its fork selection authority to its settlement layer because it needs to ensure the correctness of the Rollup.
The core of Sovereign Rollups is a blockchain that publishes its transactions to the data availability layer to achieve consensus and data availability. The data availability layer does not ensure that Sovereign Rollup transactions are correct. It only orders the transactions and checks if they are available. Previous OP and ZK Rollups relied on Ethereum smart contracts to check the correctness of their transactions, usually through fraud or validity proofs. In contrast, Sovereign Rollups rely on nodes to determine the correctness of transactions. Nodes download all transactions and check if they are valid. If a transaction is invalid, it will be rejected.
Expansion Improvements of Sovereign Rollups on Bitcoin
Sovereign Rollups is currently the most popular solution in Bitcoin Rollups. Its main difference from ZK Rollups is that Sovereign Rollups are independent of the main network. ZK Rollups use the main network as the data availability layer and settlement layer, where related data is stored on the main network and transactions are verified by smart contracts on the main network. In contrast, Sovereign Rollups only use one layer of the blockchain as the data availability layer, but do not perform settlement on that layer. Therefore, for Bitcoin, which has limited computing power on the main network, this solution is more friendly than ZK Rollups.
In this solution, using the modular framework of Rollups, developers can insert custom execution layers and data availability layers. Sovereign Rollups manage their own execution and settlement, while transferring consensus and data availability to the Bitcoin main network at the layer 1. This solution does not require smart contracts or the use of settlement layers for Rollup verification. Layer 2 is not affected by attacks on layer 1 of the main network and has its own consensus, making it more scalable.
In terms of applications, the future Sovereign Rollup is more like a RaaS (Rollup as a Service), utilizing the data availability of Bitcoin. Developers can create Rollups with arbitrary execution environments, inheriting the data availability and security guarantees of Bitcoin. For example, Rollkit, a modular Rollup framework product under the modular blockchain Celestia, integrates the data availability layer of Bitcoin Sovereign Rollup, enabling the execution of EVM on Bitcoin as Rollkit Sovereign Rollup. This extends the applications of Rollup and helps Bitcoin open up a broader ecosystem.
In the ZK Rollup solution, its security heavily depends on its relationship with the main chain. Various applications on ZK Rollups will be able to inherit the decentralization and security of the Bitcoin network, improving the scalability issues of the Bitcoin network’s economic model. This relationship solves the two key functionalities that other “off-chain” protocols lack: inherited double-spend security and secure bidirectional bridging. Although it can bring benefits to Bitcoin, including increased transaction throughput, better transaction privacy, and greater flexibility, these advantages are not without costs or risks, as it also bears the risks associated with Bitcoin software updates and consensus changes.
In the Sovereign Rollup solution, it has its own consensus and can operate independently of a layer-one blockchain. It can define its own transaction validation and settlement rules, providing higher autonomy. However, it is this independence that to some extent sacrifices the security guarantees of a layer-one blockchain. Additionally, due to the separate consensus mechanism, implementing Sovereign Rollup upgrades may be complex. The development of Sovereign Rollup is still in its early stages, and as research and exploration in this field continue, it is worth paying attention to how future technologies will develop to enhance its security.
The development around Rollup has proven that Bitcoin can become a foundational chain for more operations than before. Overall, whether on Bitcoin or any other L1, Rollup has changed the way we perceive on-chain transaction data, proof verification, and on-chain transactions involving large amounts of data. It has driven the latest progress in discussions on how we store, retrieve, and utilize on-chain data, providing another dimension to the discussion on Bitcoin scalability, especially when developers are trying to create a complete ecological economy on the Bitcoin blockchain. Rollups are still in their early stages, but their potential impact is promising.