How does the Rollups solution help Bitcoin scale?
How does Rollups help Bitcoin scale?
Bitcoin, as the earliest and most popular blockchain, has hundreds of thousands of transactions every day. However, when Bitcoin was designed, its decentralized framework prioritized security, which led to the neglect of scalability issues, resulting in Bitcoin being seen only as a digital asset and store of value.
Although Bitcoin’s security and decentralization have always been its advantages, 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 exploration of the BTC Layer2 track and opportunities, we discussed why Bitcoin needs scalability and introduced related Bitcoin Layer2 solutions such as the Lightning Network and sidechains.
In this article, we will focus on another solution for Bitcoin scalability: 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 often associated with the Ethereum network. After transitioning to proof-of-stake in September 2022, the Ethereum blockchain became more centralized. Additionally, many Rollups actually rely on centralized sequencers for transactions on Layer2. Decentralization does bring higher security, especially in the case of Bitcoin, but as Bitcoin develops, the contradiction between decentralization and computing power becomes more and more prominent. The source of this contradiction lies in the increase in the number of users and the computational workload when verifying blocks, and the key to alleviating this contradiction lies in improving the scalability of the blockchain.
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As we mentioned before, the Lightning Network adopts technologies such as multi-signature and Hash Time Lock Contracts to store data off-chain and merge multiple transactions into one, enabling fast and cheap payments. Sidechains create separate chains that lock Bitcoin from the main chain without affecting the security of the Bitcoin main chain, allowing for a large number of transactions to be processed on the sidechain, greatly improving transaction speed. Rollups, on the other hand, upgrade the technical architecture or technical system of the Bitcoin network and optimize data on-chain.
Rollups serve as a scaling solution for the first-layer 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 verify the batch of transactions and update the blockchain’s state.
This chart intuitively demonstrates the layers of Bitcoin Rollup. 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 targeting different use cases: private p2p 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 improve transaction throughput while reducing transaction costs. This is because Rollups mean that the blockchain does not 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. That is why Rollups are considered viable scaling solutions for blockchains like Bitcoin.
Currently, the types of Bitcoin Rollups mainly include ZK Rollup and Sovereign Rollup.
Application of ZK Rollup on Bitcoin
ZK Rollup uses encrypted “proofs of validity” to ensure that new Rollup blocks follow the rules of the Rollup protocol. Each time a Rollup block producer creates a valid Rollup block, the block producer submits state update transactions to the parent chain. Rollup state update transactions contain data about each state transition in the Rollup block, the new Rollup state root after state transitions in the application block, and proof of data availability and the validity proof that the new Rollup state root is a valid update confirmed on the parent chain. Only state update transactions with valid proofs can successfully advance the Rollup state after confirmation.
ZK Rollup packages transaction data into the mainnet and submits a proof of validity 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 users do not need to wait when withdrawing assets.
In ZK Rollup, users reproduce and verify all state changes based on the packaged data. However, ZK Rollup publishes less data, only the minimum data needed 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.
ZK Rollup’s extension and improvement of 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 proofs of validity also increases. The solution of ZK Rollup 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 horizontally scale simultaneously, which helps prove the validity of a transaction. Both SNARK and STARK proofs can achieve recursive proof composition without trust.
In terms of application, this recursive proof allows the ZK Rollup account model to compress second-layer transactions and improve scalability by increasing the number of transactions. The additional transaction capacity can be used to support more Lightning Network transactions, thereby increasing the number of users who can join and use the Lightning Network in a self-custodial manner, and expanding the Lightning Network.
Application of Sovereign Rollups on Bitcoin
Sovereign Rollups are different from current Rollup designs. Whether it’s OP Rollup or ZK Rollup, previous designs required the use of smart contracts to confirm Rollup execution. However, Sovereign Rollups do not require smart contracts or settlement layers, hence the name “Sovereign”.
When 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 forking selection rule, allowing it to fork independently of its underlying layer. In contrast, a regular Rollup delegates its forking selection power to its settlement layer, as 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 guarantee that Sovereign Rollup transactions are correct. It only sorts 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 have nodes that determine the correctness of transactions. These nodes download all transactions and check if they are valid. If a transaction is invalid, it will be rejected.
Expansion and improvement of Bitcoin with Sovereign Rollups
Sovereign Rollups are currently the most popular solution in Bitcoin Rollups. The main difference between Sovereign Rollups and ZK Rollups is that Sovereign Rollups are independent of the mainnet. ZK Rollups use the mainnet as the data availability layer and settlement layer, where the relevant data is stored on the mainnet, and transactions are verified by smart contracts on the mainnet. On the other hand, Sovereign Rollups only use one layer of the blockchain as the data availability layer and do not perform settlement on the first layer. Therefore, for Bitcoin, which has limited computing power on the mainnet, this solution is more friendly compared to ZK Rollups.
In this solution, developers can use the modular framework of Rollups to insert custom execution layers and data availability layers. Sovereign Rollups manage their own execution and settlement, while transferring consensus and data availability to the first layer of the Bitcoin mainnet. This solution does not require smart contracts or the use of settlement layers for Rollup verification. The second layer is not affected by attacks on the first layer of the mainnet and has its own consensus, making it more scalable.
In terms of applications, in the future, Sovereign Rollups are more like a RaaS (Rollup as a Service). Developers can create Rollups with arbitrary execution environments, inheriting Bitcoin’s data availability guarantees and security guarantees. For example, Celestia, a modular blockchain, has a Rollkit product that integrates Bitcoin’s Sovereign Rollup data availability layer. It can run EVM on Bitcoin as Rollkit Sovereign Rollup, expanding the application of Rollups and helping Bitcoin open up a broader ecosystem.
In the ZK Rollup solution, its security strongly depends on its relationship with its main chain. Various applications on ZK Rollups will be able to inherit the decentralization and security of the Bitcoin network, and improve the scalability issues of the Bitcoin network’s economic model. This relationship solves two key functionalities that other “off-chain” protocols lack: inherited double-spend security and secure bi-directional bridging. Although it can bring benefits to Bitcoin, including increased transaction throughput, better transaction privacy, and greater flexibility, these advantages are not without cost or risk, 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, thus having higher autonomy. However, it is precisely this independence that to some extent sacrifices the security guarantees of a layer-one blockchain, and the implementation of Sovereign Rollup upgrades may be complex due to separate consensus mechanisms. The development of Sovereign Rollup is still in its early stages, and as research in this field deepens, it is worth paying attention to how future technologies can be developed to enhance its security.
The development around Rollup has demonstrated that Bitcoin can become the underlying 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, read, and utilize on-chain data, which in turn provides another dimension to the discussion on Bitcoin’s scalability, especially when developers are trying to create a complete economic ecosystem on the Bitcoin blockchain. Rollups are still in the early stages, but their potential impact is promising.