I have been paying attention to the Bitcoin Layer2 track since August 2023, and it has been more than a year. Like most people, my feeling about the entire Bitcoin Layer2 track is that it is very lagging and feels like it is going to fail!
In order not to offend anyone, I won’t name them one by one.
I feel that the current status of Bitcoin Layer2 is: those that have been listed are performing poorly, and those that have not been listed are developing mediocrely.
Is the Bitcoin Layer2 track really going to be a failure?
I've been trying to find the real reason for this:
For example, is it that the investment institution is not luxurious enough?
Of course not. Many BTC Layer2 projects have also received investments from leading institutions such as MultiCoin and Polychain.
Is it that the project team is not capable of causing trouble?
Of course not. Many BTC Layer2 project teams are known for their ability to stir up trouble.
If it is not a problem of institutional endorsement and the team's ability to do things, then there must be deeper reasons!
I've been thinking!
Until recently, I saw the latest technical framework white paper Super Bitcoin released by BEVM (the team has always been known for its technological innovation, but the ecological situation is also lagging), and I seemed to have found the answer from it.
This white paper is very interesting, and the whole article is about one word: shared Bitcoin consensus security.
The slogan put forward is: Any Bitcoin Layer2 that cannot share the security of Bitcoin consensus must die!
Very cruel!
But, that makes sense!
The Super Bitcoin white paper also states: Ethereum Layer2 was established because it can share Ethereum’s consensus security, and people play with Ethereum Layer2 based on their trust in the Ethereum network.
However, almost all Bitcoin Layer2s do not share the consensus security of Bitcoin. They are basically a multi-signature wallet plus an independent consensus chain. They have nothing to do with Bitcoin at all, and do not share the consensus security of Bitcoin.
Therefore, for a new chain that claims to be Bitcoin Layer 2 but has absolutely nothing to do with Bitcoin consensus, users have absolutely no trust or consensus basis, and the market certainly won’t buy into it!
I thought it was very interesting, so I did some in-depth research, and now I want to share some of the results of my research with you!
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 fact that nodes in a blockchain network use a consistent consensus algorithm to ensure the security and validity of transactions. For most blockchain networks, consensus security means that most nodes in the network need to 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, and consensus security is the highest level of security, because consensus security is the maintenance of network security by all chain nodes at the consensus level.
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 consensus security of a public chain has no essential relationship with the mechanism used, but only with the cost of destroying the consensus of the network.
For example, to undermine the consensus of Bitcoin, you need to control 51% of the Bitcoin computing power to launch an effective attack on the Bitcoin network. Currently, the total Bitcoin computing power of the entire network is about 725EH/s, so you need to control at least 370EH/s (51%) of the computing power scale to launch an effective attack on Bitcoin. According to the current market price of Bitcoin computing power, the cost of 370EH/s of Bitcoin computing power exceeds 150 billion US dollars, plus the corresponding electricity bill, the total is far more than 200 billion US dollars.
The consensus security level (that is, the attack cost) of public chains with POS mechanisms such as Ethereum can be estimated by the “total value of node staked tokens”. For example, the total amount of Ethereum POS node staked is about 35 million, with a current value of about US$90 billion. Therefore, the cost of attacking the Ethereum network is about US$46 billion.
According to the data, the cost of attacking the Bitcoin network consensus is more than 4 times that of attacking the Ethereum network consensus. Therefore, the security of the Bitcoin network consensus is much greater than that of Ethereum!
Compared with other POS chains, for example, if the FDV is less than 10 billion and the pledge rate is less than 20%, then the "total value of node pledged tokens" is less than 2 billion US dollars, and the attack cost is only 1.1 billion US dollars. Its consensus security is relatively low.
Through the most intuitive "attack cost theory", we can make a clear judgment on the consensus security level of all public chains.
Judging from the data, the Bitcoin network is undoubtedly the most secure blockchain!
So, what is shared consensus security?
Shared consensus security means that some blockchains (mainly sub-chains or Layer2) can use the consensus mechanism of the main chain to ensure their own security. This means that even if transactions are conducted on the second layer, side chain or parallel chain, users can still enjoy the security of the main chain. For example:
1. Polkadot and Parachains:
In Polkadot's architectural design, the main chain (Relay Chain) is responsible for providing global security, while each parachain ensures its own security by sharing the consensus mechanism of the main chain. Parachains can focus on their specific functions without sacrificing security because they rely on Polkadot's main chain consensus. (Of course, the overall market value of DOT is about 6 billion US dollars, and the DOT pledge rate is about 58%, which is about 3.48 billion US dollars. The cost of its network attack is about 1.77 billion, and the network consensus security is relatively low. Therefore, even if you share the consensus security of Polkadot, it is not very meaningful. This is also one of the important reasons why the Polkadot ecosystem has been tepid.)
2. Ethereum and Ethereum Layer 2:
Ethereum's Layer 2 solutions, such as Optimistic Rollup and ZK-Rollup, record simplified transaction states on the Ethereum mainnet and use the mainchain's security mechanism to ensure the transaction security of Layer 2. This means that although Layer 2 can process a large number of transactions independently, its security still depends on Ethereum's consensus mechanism.
Through these examples, we can see that the core of shared consensus security is that it enables developers to create sub-chains or second-layer networks with independent scalability while maintaining the security of the main chain.
So, why does Bitcoin Layer2 have to share Bitcoin consensus security?
The reason is clear now!
Because all mainstream Layer2s do not have their own independent consensus and rely on the consensus of the main network. For example, Ethereum Layer2, whether it is Arbitrum, ZKSync or BASE, does not have its own consensus. The entire Layer2 network relies entirely on the official sequencer (that is, Sequencer, generally there is only one official sequencer for Layer2) to sort to the main network, and ultimately relies on the main network to ensure the security and reliability of Layer2.
That is to say, Ethereum Layer2 is all about shared Ethereum consensus security. The essence of users trusting Ethereum Layer2 is trusting the security of Ethereum, not Layer2 itself.
So, if a Bitcoin Layer2 cannot share Bitcoin’s consensus security, then it is not a real 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 to play, how can they participate without trust?)
This is the dilemma faced by all Bitcoin Layer2s today.
There are two sets of data to support this view:
First: TVL comparison between Bitcoin layer 2 and Ethereum layer 2
Currently, the TVL on Bitcoin Layer2 is about 1.45 billion US dollars, while the TVL on Ethereum Layer2 is about 36 billion US dollars (data from footprint.network). The difference between the two is more than 30 times. This means that the trust of funds in Bitcoin Layer2 is far lower than that of Ethereum Layer2.
Second: Comparison of the average market value of Bitcoin layer 2 and Ethereum layer 2
The average market value of Bitcoin Layer2 is basically below 1 billion US dollars (most Bitcoin Layer2s are currently valued below 500 million US dollars), while the market value of mainstream Ethereum Layer2 is basically 5 billion or even 10 billion US dollars. The difference between the two is 5-10 times. This means that the capital market's confidence in the Bitcoin Layer2 track is far lower than that of Ethereum Layer2.
According to the above blockchain network consensus "attack cost theory", the consensus security of the Bitcoin network is more than 4 times that of Ethereum. Then, the theoretical valuation of Bitcoin Layer2 should be more than 4 times that of Ethereum Layer2, but now it is just the opposite!
What is the reason?
The reason is that almost all Bitcoin Layer2 cannot share the consensus security of Bitcoin. They all use a chain that has nothing to do with Bitcoin, add a multi-signature scheme, and call it Bitcoin Layer2. Then they try to gain user trust through the Bitcoin Layer2 concept and airdrop expectations. However, the real data represents the real attitude of funds and users.
Bitcoin Layer2, which cannot share the security of Bitcoin consensus, cannot gain the trust of users!
No wonder the entire Bitcoin Layer2 track is so weak, the reason is here!
So, is it true that there is no Bitcoin Layer2 that can achieve shared Bitcoin consensus security?
There really is one!
That’s the Lightning Network!
Without any token incentives, the Lightning Network can still keep 5,000 BTC circulating in the network for a long time. This figure has exceeded the vast majority of so-called Bitcoin Layer2s that rely on token incentives to attract BTC.
What is the reason?
There is only one reason: the Lightning Network fully shares the Bitcoin consensus security.
People choose to use the Lightning Network because they trust the security of Bitcoin and believe that it has the same security as Bitcoin. This is the root of the problem.
So, how does the Lightning Network achieve shared Bitcoin consensus security?
Here’s how it works:
Lightning Network nodes can freely establish state channels (this state channel is a fast payment channel built on the Bitcoin chain, and the scheme was proposed by Satoshi Nakamoto). Opening a channel involves creating a signature output on the Bitcoin blockchain, and closing a channel requires broadcasting the final state to the main chain. This is the core mechanism for the Lightning Network to share Bitcoin consensus security. If you compare carefully, you will know that the rollup scheme of Ethereum Layer2 borrows the concept of the state channel of the Lightning Network)
Each channel status update generates a new commitment transaction, which can be broadcast to the Bitcoin mainnet when needed. The design of the commitment transaction ensures that even if one party of the channel does not cooperate, the other party can still close the channel and obtain the funds it deserves by broadcasting the latest commitment transaction. This mechanism directly relies on the consensus rules and security of Bitcoin, so that the security of the Lightning Network is actually guaranteed by the Bitcoin network, that is, it fully shares the consensus security of Bitcoin.
The Lightning Network, which can share the security of Bitcoin consensus, can attract more than 5,000 BTC to circulate in the Lightning Network for many years even without any token incentives. This is the sense of security that shared Bitcoin consensus brings to users.
Of course, the Lightning Network, Bitcoin Layer 2, also has its shortcomings.
That is, the Lightning Network only has payment scenarios and does not support more complex smart contract scenarios.
Super Bitcoin has grasped the point of the Lightning Network and proposed its own solution: that is, to use Bitcoin as the basic ledger layer and the Lightning Network as the only second layer of Bitcoin. Then, by upgrading the point-like Lightning Network nodes to chain nodes that support smart contracts, it breaks through the limitation that the Lightning Network can only be used for payments but not smart contracts, thereby achieving further expansion of Bitcoin, that is, achieving unlimited expansion of Bitcoin while ensuring the security of the shared Bitcoin consensus.
Not only that, Super Bitcoin also shares Bitcoin consensus security with various Lightning Chains built on the Super Bitcoin modular stack function through modular abstraction. This is Super Bitcoin's solution. If you want to know more details, you can study Super Bitcoin's white paper by yourself https://bevm-blog.webflow.io/post/super-bitcoin-a-value-internet-sharing-bitcoins-consensus-security
To summarize:
By studying the importance of "shared Bitcoin consensus security" to Bitcoin Layer2, I found the deep reason why the current Bitcoin Layer2 track is so weak - there is no shared Bitcoin consensus security!
If Bitcoin Layer2 is to truly develop in the future, it must return to Bitcoin and study how to share Bitcoin consensus security. As the only Bitcoin Layer2 that can currently share Bitcoin consensus security, the Lightning Network does have great reference significance. If you really want to develop a Bitcoin expansion plan, returning to Bitcoin and continuing to expand in the direction of sharing Bitcoin consensus security (such as based on the Lightning Network) may really be the only way out at present.
