Coin World Report:
The scalability solution based on the Bitcoin UTXO account model is considered the “most authentic” layer 2 solution in the industry. This solution attempts to perform off-chain ledger calculations based on Bitcoin UTXO and ensure the authenticity of the ledger through client verification. It retains the original features of Bitcoin while achieving second-layer ledger sharing and security.
The implementation of this solution has always been considered very difficult in the industry. Well-known projects and protocols built on this solution include RGB, RGB++, BitVM, etc. Although well-known, the progress of these solutions has been relatively slow. For example, RGB involves several technically challenging points, and BitVM, although it provides a method for implementing complex contracts on the Bitcoin network, still faces disputes over some technical details.
Why do many projects still choose to practice this relatively difficult technical route? Compared with other models, the BTC homogeneous UTXO model layer 2 solution is undoubtedly both secure and elegant. Looking back at the development process of layer 2 expansion solutions based on UTXO, we can see that the popularity of the “asset issuance” model written into UTXO has injected a lot of attention and resources into this UTXO-based layer 2 expansion solution, prompting developers and project parties to carefully examine the possibility of implementing a second-layer solution through this path.
Unlike the clear plan of the Ethereum layer 2 expansion solution, there are various options for Bitcoin’s layer 2 solutions, accompanied by some upgrades to the Bitcoin protocol itself. Bitcoin’s layer 2 actually has many possibilities, which are fun and innovative.
What improvements and innovations have project parties made to Bitcoin’s layer 2 technology based on the UTXO model? In order to explore the answers to these questions, we interviewed TBC’s CMO, who explores the implementation path of Bitcoin’s layer 2 based on the UTXO model from a technical perspective.
Q: Can you introduce how the Bitcoin layer 2 based on the UTXO model is implemented technically?
TBC:
This technology encapsulates data into each UTXO of Bitcoin, and then ensures asset security through client verification.
For example, the idea of RGB is to bind off-chain RGB transactions with Bitcoin transactions’ UTXO. The RGB++ protocol is inspired by the RGB protocol and has a similar idea. It performs off-chain calculations, executes and verifies transactions, and finally settles on the Bitcoin chain. The difference between RGB and RGB++ lies in the different approaches taken in the transaction and asset verification process.
TBC is different from the above two solutions. We adopt a large block plus data pruning, plus smart contract solution. Our positioning is a smart contract layer for Bitcoin, introducing smart contract solutions to the Bitcoin system and bringing in massive applications. TBC is also the creator of the Bitcoin virtual machine BVM.
Currently, the Bitcoin ecosystem is thriving, with more and more developers joining in and new applications emerging. However, the mainnet blocks of Bitcoin are still limited to one megabyte, and in the case of increasing data packets transmitted every ten minutes, the mainnet cannot meet this demand. The design of small blocks in Bitcoin cannot sustain more than 100 megabytes per minute.
The large block plus data pruning plus UTXO smart contract model of TBC can help solve congestion and block limitations for BTC. TBC initially chose this path because it found that the UTXO model is naturally suitable for high concurrency and high performance.
Q: What difficulties did TBC encounter in the implementation process and how were they resolved?
TBC:
The main problem is actually the poor scalability of BTC. It was not until the activation of the SegWit upgrade in 2017 that some transaction malleability issues on the Bitcoin chain were resolved. In 2018, developers gradually started to deploy some nodes. Importantly, the upgrade of the parameters in 2012 brought Bitcoin a more efficient, flexible, and private transmission method. The core of this upgrade is the use of Schnorr signatures and module abstract syntax tree contracts.
These upgrades have provided a good foundation for further expansion of BTC. The development difficulties we mentioned earlier have been alleviated to some extent after the upgrade. Because of the technological development of Bitcoin itself, modifications to the signature, for example, have added a bridge between the first layer and the second layer, rather than simply expanding the first layer.
Q: There are many routes and projects for Bitcoin layer 2 currently. What is your perspective?
TBC:
In my opinion, it is feasible to use BTC as the asset settlement layer and then build local consensus and computational verification capabilities to achieve layer 2 expansion. A major difference between the Bitcoin ecosystem and the Ethereum ecosystem is that it does not adhere to any unified specification or orthodoxy, so it can have various possibilities.
Q: It is generally believed in the industry that the UTXO layer 2 model is too difficult to implement. How can this difficulty be solved?
TBC:
Currently, there is a misconception in the industry about the UTXO model. It is believed that the UTXO model cannot maintain a global state or achieve loop calls, so it cannot implement smart contracts. This view is one-sided and outdated. TBC has proven that the UTXO model blockchain can fully implement smart contracts, but the implementation method is different from other layer 2 solutions. Of course, the basic tools for implementing smart contracts based on the UTXO model are constantly maturing, and everyone is constantly trying.
For TBC, the key milestone is the upcoming TBC 20 standard protocol, which means that it will be easier for project parties to develop applications and protocols on TBC. This can promote the prosperity of the TBC on-chain ecosystem and even the entire Bitcoin ecosystem.
Q: What advantages and innovations does TBC have compared to other layer 2 solutions?
TBC:
We are an innovative route, and currently, only TBC is implementing this BVM solution. Simply put, this solution is a virtual machine based on the recovery and functional extension of Bitcoin’s script system, and it is also an execution engine for TBC smart contracts.
It includes language stacks such as input and output stacks, so that higher-level logic can be achieved when performing arbitrary operations. The execution structure of current programming languages largely relies on execution stacks. In principle, as long as a stack structure is used, any complex program can be implemented. Of course, sufficient memory resources need to be ensured. Although a stack structure is not necessary as the basis of a programming language, due to some restrictions on Bitcoin’s script system, only simple logic judgments can be made, and the number of usable opcodes is relatively limited, making it impossible to implement some complex smart contracts.
This requires Bitcoin’s core developers to continuously make proposals, such as the recent popular OP_CAT proposal. In simple terms, OP_CAT can combine and process the unlocking script byte strings of multiple UTXOs to enhance the programmability of the BTC mainnet.
Q: At what stage is the development of the Bitcoin ecosystem currently, and what are the current challenges?
TBC:
Currently, the Bitcoin ecosystem is still in its early stages, and the main challenge is the lack of developers. Developers who have just joined the Bitcoin ecosystem need to relearn the development language, which takes about one to two months. With the increase in developers, the number of applications developed will also increase, achieving a qualitative change through a quantitative change, and realizing a prosperous state similar to the Ethereum ecosystem. Currently, the Asia-Pacific region has more Bitcoin ecosystem teams.
Q: How can retail investors seize opportunities in the Bitcoin ecosystem?
TBC:
Protocols that can help Bitcoin achieve micro payments or large collateralized lending agreements are worth paying attention to. Additionally, a smart contract layer based on the UTXO architecture can also produce excellent projects.
