"The current state of Bitcoin Layer2 feels like this: those that are already listed are underperforming, and those that are not yet listed have development situations that are mediocre at best."
Written by: Web3CN Editor
Since August 2023, I have been following the Bitcoin Layer2 track, and it has been over a year now. Like most people, my overall impression of the Bitcoin Layer2 track is: very disappointing, it feels like it's going to fail!
To avoid offending anyone, I won't name names.
The current state of Bitcoin Layer2 feels like this: those that are already listed are underperforming, and those that are not yet listed have development situations that are mediocre at best.
Is the Bitcoin Layer2 track really going to fail?
I have been trying to find the real reasons behind all this:
For example, is it because the investment institutions are not prestigious enough?
Of course not, many BTC Layer2 projects have received investments from top institutions like MultiCoin, Polychain, etc.
Is it because the project teams lack the ability to execute?
Of course not, many BTC Layer2 project teams are known for their strong execution capabilities.
If it's not an issue of institutional endorsement or team execution ability, then there must be deeper reasons!
I have been pondering!
Until recently, I read the latest technical framework white paper "Super Bitcoin" released by BEVM (a team known for its technical innovation, but its ecosystem is also underwhelming), and I seem to have found the answer.
This white paper is quite interesting, as it revolves around one term: sharing Bitcoin consensus security.
The proposed slogan is: Any Bitcoin Layer2 that cannot share Bitcoin consensus security must die!
Very harsh!
But, it makes sense!
The Super Bitcoin white paper also states: the reason Ethereum Layer2 exists is that Ethereum Layer2 can share Ethereum's consensus security, and people use Ethereum Layer2 based on their trust in the Ethereum network.
However, almost all Bitcoin Layer2 do not share Bitcoin's consensus security; they are basically just a multi-signature wallet plus an independently consensus chain, completely unrelated to Bitcoin, and they do not share Bitcoin's consensus security at all.
Therefore, for a new chain that claims to be a Bitcoin Layer2 but has no relation to Bitcoin's consensus, users have no trust or consensus foundation, and the market naturally does not accept it!
I found this very interesting, so I delved deeper into the research and now share some of the findings with everyone!
First, let's clarify a few concepts.
What is consensus security? What is shared consensus security?
What is consensus security?
Consensus security refers to the ability of a blockchain network to ensure the security and validity of transactions through a consistent consensus algorithm among its nodes. For most blockchain networks, consensus security means that the majority of nodes in the network must reach a transaction consensus through some form of verification mechanism to resist external attacks or tampering.
It can be said that consensus security is the core of blockchain; it represents the highest level of security because consensus security is maintained by all nodes at the consensus level to ensure network security.
Each independent public chain has its own consensus security mechanism, such as Bitcoin's POW mechanism, Ethereum's POS mechanism, TRON's DPOS mechanism, Solana's POH mechanism, etc.
However, the level of consensus security of a public chain is not fundamentally related to the mechanism used, but rather to the cost required to disrupt the consensus of that network.
For example, to disrupt Bitcoin's consensus, one needs to control 51% of Bitcoin's hash power to launch an effective attack on the Bitcoin network. Currently, the total Bitcoin hash power is about 725EH/s, so one would need to control at least 370EH/s (51%) or more to launch an effective attack on Bitcoin. According to the current market price of Bitcoin hash power, the cost of 370EH/s exceeds 15 billion USD, plus the corresponding electricity costs, totaling far more than 20 billion USD.
Public chains with POS mechanisms like Ethereum can estimate their consensus security level (i.e., attack cost) through the "total value of staked tokens by nodes." For example, the total amount of staked tokens by Ethereum's POS nodes is currently about 35 million, valued at approximately 9 billion USD, so the cost to attack the Ethereum network is about 4.6 billion USD.
From the data, the attack cost on Bitcoin's consensus is more than four times that of Ethereum's network consensus. Therefore, the consensus security level of the Bitcoin network is far greater than that of Ethereum!
Compared to other POS chains, for example, if the FDV is within 1 billion and the staking rate is below 20%, then its "total value of staked tokens by nodes" is less than 200 million USD, and the attack cost would only be 110 million USD. Its consensus security level would be relatively low.
Using the most intuitive "attack cost theory," we can make clear judgments about the consensus security levels of all public chains.
From the data, it is clear that the Bitcoin network is undoubtedly the most secure blockchain!
So, what is shared consensus security?
Shared consensus security refers to certain blockchains (mainly referring to sub-chains or Layer2) that can borrow the consensus mechanism of the main chain to ensure their own security. This means that even when transactions are conducted on Layer2, side chains, or parallel chains, users can still enjoy the security guarantees at the main chain level. For example:
1. Polkadot and Parallel Chains:
In Polkadot's architectural design, the main chain (Relay Chain) provides global security, while each parallel chain ensures its own security by sharing the consensus mechanism of the main chain. Parallel chains can focus on their specific functions without sacrificing security because they rely on the consensus of Polkadot's main chain. (Of course, currently, the overall market value of DOT is about 6 billion USD, with a staking rate of about 58%, which is about 3.48 billion USD, and its network attack cost is about 1.77 billion, indicating a relatively low level of network consensus security. Therefore, even if it shares Polkadot's consensus security, the significance is not very great, which is one of the important reasons why the Polkadot ecosystem has remained lukewarm.)
2. Ethereum and Ethereum Layer 2:
Ethereum's Layer 2 solutions, such as Optimistic Rollup and ZK-Rollup, ensure the security of Layer 2 transactions by recording simplified transaction states on the Ethereum mainnet and utilizing the main chain's security mechanisms. This means that while Layer 2 can independently handle a large number of transactions, its security still relies on Ethereum's consensus mechanism.
Through these examples, we can see that the core of shared consensus security is that it allows developers to create sub-chains or Layer2 networks with independent scalability while maintaining main chain-level security.
So, why must Bitcoin Layer2 share Bitcoin's consensus security?
The reason is already clear!
Because all mainstream Layer2 do not have their own independent consensus; they all rely on the consensus of the main network to exist. For example, Ethereum Layer2, whether it's Arbitrum, ZKSync, or BASE, has no independent consensus; the entire Layer2 network relies entirely on the official sequencer (which is generally the only sequencer for Layer2) to order transactions to the main network, ultimately depending on the main network to ensure the security and trustworthiness of Layer2.
In other words, Ethereum Layer2 shares Ethereum's consensus security. The essence of user trust in Ethereum Layer2 is based on trust in Ethereum's security, not on Layer2 itself.
So, if a Bitcoin Layer2 cannot share Bitcoin's consensus security, then it is not a true Bitcoin Layer2. Without the Bitcoin network to ensure security, Bitcoin Layer2 cannot truly gain the trust of users and funds. (After all, users need to put real money into Layer2; without trust, how can they participate?)
This is the dilemma faced by all Bitcoin Layer2 at present.
There are two more sets of data to support this viewpoint:
First: Comparison of TVL between Bitcoin Layer2 and Ethereum Layer2
Currently, the TVL on Bitcoin Layer2 chains is about 1.45 billion USD, while the TVL on Ethereum Layer2 chains is about 36 billion USD (data source: footprint.network). The difference is more than 30 times. This represents a much lower level of trust in Bitcoin Layer2 chains compared to Ethereum Layer2.
Second: Comparison of average market capitalization between Bitcoin Layer2 and Ethereum Layer2
The average market capitalization of Bitcoin Layer2 is generally below 1 billion USD (most Bitcoin Layer2 are currently valued below 500 million USD), while the market capitalization of mainstream Ethereum Layer2 is generally between 5 billion and 10 billion USD. The difference is 5-10 times. This indicates that the capital market's confidence in the Bitcoin Layer2 track is far lower than that in Ethereum Layer2.
According to the aforementioned blockchain network consensus "attack cost theory," the consensus security level of the Bitcoin network is more than four times that of Ethereum. Therefore, the theoretical valuation of Bitcoin Layer2 should be more than four times that of Ethereum Layer2, but currently, it is exactly the opposite!
What is the reason?
The reason is: almost all Bitcoin Layer2 cannot share Bitcoin's consensus security. They are using a chain that has nothing to do with Bitcoin, plus a multi-signature solution, and they call it Bitcoin Layer2. Then they attempt to gain user trust through the concept of Bitcoin Layer2 and airdrop expectations. However, the real data represents the true attitude of funds and users.
Bitcoin Layer2 that cannot share Bitcoin's consensus security indeed cannot gain user trust!
No wonder the entire Bitcoin Layer2 track is so disappointing; the reason lies here!
So, is there really no Bitcoin Layer2 that can share Bitcoin's consensus security?
There is indeed one!
That is the Lightning Network!
The Lightning Network can maintain 5,000 BTC in circulation within the network for a long time without any token incentives, a figure that surpasses most so-called Bitcoin Layer2 that rely on token incentives to attract BTC.
What is the reason?
There is only one reason: the Lightning Network fully shares Bitcoin's consensus security.
People choose to use the Lightning Network because they trust Bitcoin's security, which provides the same level of security as Bitcoin; this is the crux of the issue.
So, how does the Lightning Network achieve shared Bitcoin consensus security?
The principle is as follows:
The Lightning Network allows nodes to freely establish state channels (these state channels are fast payment channels built on the Bitcoin chain, a concept proposed by Satoshi Nakamoto). Opening a channel involves creating a signed output on the Bitcoin blockchain, while closing the channel requires broadcasting the final state to the main chain. This is the core mechanism through which the Lightning Network shares Bitcoin's consensus security. If you compare carefully, you will find that Ethereum Layer2's rollup solution is inspired by the state channel concept of the Lightning Network.
Each time the channel state is updated, a new commitment transaction is generated. These transactions can be broadcast to the Bitcoin mainnet when needed. The design of the commitment transaction ensures that even if one party in the channel does not cooperate, the other party can still close the channel and receive the funds they are entitled to by broadcasting the latest commitment transaction. This mechanism directly relies on Bitcoin's consensus rules and security, making the security of the Lightning Network effectively guaranteed by the Bitcoin network, thus fully sharing Bitcoin's consensus security.
The Lightning Network, which can share Bitcoin's consensus security, can attract over 5,000 BTC to circulate within the network for years, even without any token incentives. This is the sense of security that sharing Bitcoin's consensus brings to users.
Of course, the Lightning Network, as a Bitcoin Layer2, also has its drawbacks.
That is, the Lightning Network only supports payment scenarios and does not support more complex smart contract scenarios.
Super Bitcoin has precisely seized on this point of the Lightning Network and proposed its own solution: to use Bitcoin as the foundational ledger layer and the Lightning Network as the only Bitcoin Layer2. Then, by upgrading the point-like Lightning Network nodes to chain-like nodes that support smart contracts, it breaks through the limitation that the Lightning Network can only handle payments and cannot execute smart contracts, thus achieving further expansion of Bitcoin while ensuring shared Bitcoin consensus security.
Moreover, Super Bitcoin also shares Bitcoin's consensus security with various Lightning Chains built on the Super Bitcoin modular stack functionality through modular abstraction. This is the solution provided by Super Bitcoin. For more details, you can research the Super Bitcoin white paper https://bevm-blog.webflow.io/post/super-bitcoin-a-value-internet-sharing-bitcoins-consensus-security.
To summarize:
By studying the importance of "sharing Bitcoin consensus security" for Bitcoin Layer2, I have found the deeper reason why the current Bitcoin Layer2 track is so disappointing—there is no shared Bitcoin consensus security!
If Bitcoin Layer2 is to truly develop in the future, it must return to Bitcoin and explore how to share Bitcoin's consensus security. The Lightning Network, as the only Bitcoin Layer2 that can share Bitcoin's consensus security, indeed has significant reference value. If one truly wants to create a Bitcoin expansion solution, returning to Bitcoin and continuing to expand in the direction of shared Bitcoin consensus security (for example, based on the Lightning Network) may indeed be the only way forward.
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