🟣 Bitcoin L2: Narrowing the definition
ZK rollups’ timeline
Macauley Peterson & Donovan Choy
September 12, 2024
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What is a Bitcoin L2?
Polygon x Fabric VPUs
ZK-ifying the OP stack
Chart: Autonolas usage
Bitcoin L2 week, day 4.
The term "layer-2" is somewhat loosely applied to a wide variety of Bitcoin scaling solutions.
A commonly invoked definition involves three main criteria:
The network uses bitcoin as its native asset, including to pay transaction fees. Or, as Breez CEO Roy Sheinfeld CEO told Blockworks, "you don't change the bearer asset of the L1." It should be the same asset without modification.
Users should be able to return funds to the base layer, permissionlessly. Sergio Demian Lerner, co-founder of Rootstock Labs, calls this "the formal definition." "You should have a unilateral exit opportunity, going back to the main chain without trusting intermediaries or being censored," he told Blockworks.
An L2 must depend on the Bitcoin network to function. In the unlikely event that Bitcoin were to fail, an L2 of Bitcoin must also fail.
Haseeb Qureshi, a managing partner at Dragonfly Capital, hasn’t found this to be the definition used in practice, however.
"In Bitcoin, the word ‘L2’ means something different," he said on the Chopping Block podcast in April. "In Bitcoin, L2 means that you are Bitcoin-aligned."
Lerner also doesn’t necessarily find point two specifically to be useful in practice. "Once you start using the definition, then you can create L2s that are very not aligned with Bitcoin." He recalls debates over the definition of a sidechain in the Bitcoin Talk forum from as far back as 2012, in which fealty to the asset BTC — point one — was the most important factor.
But, a sidechain — of which the Rootstock blockchain is the longest-running — is by definition a separate chain, "which is not part of the definition of L2." "In an L2, you can have a chain fully embedded in Bitcoin," Lerner said.
None of this is to say that Bitcoin must be used as a data availability (DA) layer — often considered part of the definition of an L2 on Ethereum. In fact, that is too impractical, according to early Bitcoin contributor Jeff Garzik, who now runs Hemi Labs.
"There's no way that Bitcoin itself is a DA layer. It just doesn't have that level of bandwidth," Garzik told Blockworks. He also predicts that Ethereum L2s will outgrow the blob space of EIP-4844.
Sheinfeld agrees that using Bitcoin for DA is not a sensible part of the definition. Many projects are simply trying to tap into Bitcoin liquidity by calling themselves an L2.
"I had to choose the definition, I'm opting for a very narrow definition because you see the hundreds of L2 projects that change the trust profile completely," Sheinfeld said. "So you no longer know if you're even connected cryptographically or in what way you're connected cryptographically to L1 — and that becomes more and more confusing."
ZK tech progression
Zk rollups are considered to be the "holy grail" of blockchain scalability, enabling instant verification and finality for L2s to post transactions back down to the L1. They’re a superior option to the seven-day wait that burdens the settlement time of optimistic rollups.
Due to technical complexity, it was believed that zk rollups were a north star in a five-ten year timeline, but that now seems like a drastic overestimation. Today, several zk rollups are already in production and their accompanying technology seems to be constantly improving.
Two days ago, Polygon Labs announced it was spending $5 million on Fabric Cryptography’s "Verifiable Processing Units" (VPU) to enable real-time proving in the AggLayer, Polygon’s zk-powered interoperability bridge.
Think of VPUs as a general-purpose processor chip optimized for zk cryptography, akin to what the Nvidia A100 GPUs are doing for AI.
Fabric is developing software to work with Plonky2 and Plonky3, Polygon’s signature open-source prover systems.
"Fabric’s VPUs can accelerate the timeline for wider adoption of zero-knowledge technology from three-five years to six-twelve months," Polygon Labs co-founder Mihailo Bjelic said in a press release.
Fabric first raised $33 million in a Series A last month. Notable investors included Polygon Labs, Blockchain Capital and 1kx.
In collaboration with Optimism, Succinct Labs separately announced on Tuesday "OP Succinct," a framework to conveniently upgrade optimistic rollup chains in the OP Stack into a zk rollup within an hour, all while retaining EVM-equivalency.
The only catch is that the upgrade leverages much of the smart contract dependencies in the OP Stack, so it’s limited to OP Stack chains for now.
Succinct claims proving costs are initially expected to average $0.05-$0.1 cents, a substantial reduction from the current average of $0.2 to $0.54 cents on current optimistic rollup chains.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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Autonolas transactions:
In crypto-AI land, Autonolas is hitting near its all-time highs of service transactions at about 150,000 for August. Autonolas is used for the deployment of off-chain AI agents (or Autonomous Economic Agents) to interact with smart contracts on a blockchain, though it can also be used for oracles and keeper bots. Autonolas AI agents have various onchain use cases such as DeFi trading, or simple DAO governance with "Governatooorr," an autonomous DAO governance service.
— Donovan Choy
Vertex has established itself as a formidable player in the perps DEX landscape. Its innovative hybrid orderbook AMM design, coupled with the groundbreaking Vertex Edge technology, has allowed it to capture a respectable market share and expand across multiple EVM chains efficiently.
Vertex has established itself as a formidable player in the perps DEX landscape. Its strategic approach to chain expansion by focusing on EVM-compatible networks and leveraging incentive programs has proven largely successful. The reduced time-to-launch for each new chain integration highlights the team's growing expertise and the scalability of their technology. As Vertex continues to expand, it’s well-positioned to capitalize on the increasing fragmentation of the perpetual DEX market, potentially consolidating liquidity across multiple chains through its Edge technology.
MetaDAO offers a platform for DAOs to engage in futarchy, using conditional markets and profit incentives for improved decision-making. Conditional markets allow market participants to speculate on whether or not the passage of a proposal will increase a token’s market value. By crowdsourcing information from market actors, DAOs can utilize futarchy to identify decisions that will be most beneficial for their token’s market price. MetaDAO as an organization is explicitly engaged in decision-making on the criteria that market participants believe a decision will be accretive to the price of the META token.
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.
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