Sidechain Observer - Bitcoin L2 Projects & current state of development

[d5000]

I thought that as we have a Lightning Network Observer, it could be nice to have a Sidechain Observer topic, too. The discussion is currently scattered among a lot of threads, most of them not really having sidechains as main topic (like Ordinals threads). So this should be a space to bundle the information a bit. And while the evolution of this technology was long stagnant, in 2023/24 there were some interesting developments in this area.

Basically this thread is to share all kinds of news & information regarding sidechains. Discussion about all sidechain types are allowed - while I prefer of course decentralized ones, there is currently none fully operational, so federated models like Liquid or RSK can also be talked about. Centralized "bridges" (like wBTC) however are OT.


What are sidechains?

Sidechains (often simply called "L2s" or "layer-2's", even if this term also includes Lightning) are blockchains with a token pegged 1:1 to the value of Bitcoin. This allows it to "scale up" the number of potential users and transactions. The ideal sidechain would be a totally decentralized "second layer" of the Bitcoin network, where users could "transfer" value to, and bring it back to the main chain, without having to trust new (centralized) parties. Currently such a network is still not operational, at least regarding Bitcoin; all operational sidechains have still centralized elements.

The big challenge is the two-way peg: It is easy to burn a BTC unit on mainchain and create a coin unit on a sidechain for it ("peg-in"). This is however only a "one way peg" (Spacechains do that exactly). But it is very difficult to design a system where this BTC unit could "return" to mainchain ("peg-out"). It can of course be "burnt" on the sidechain, but on Bitcoin no new units can be created due to the 21 million token limit. So what is needed is a way to temporarily retire the coin from circulation, and allow to transfer it to an address which can prove that it has burnt a sidechain token which can prove its "ancestry" goes back to a blocked Bitcoin and that it was never double spent.
 
Types of sidechains & Current projects

L2.watch is a website displaying the status of most of the known projects. There is also this overview about sidechains and related projects like Spacechains and Spiderchains. BitcoinLayers is doing risk analysis for some of the existing projects.

Drivechain: A merged mined sidechain, where the miners control peg-ins and peg-outs. The project was started by Paul Sztorc and is in beta state, only testnets are available. Would need new opcodes for Bitcoin Script.

Project website - Github repo - BIP 300

(Static) federated sidechains: A sidechain where a multisig "federation" controls the peg-ins and peg-outs. Such a federation is often composed of addresses controlled by several different publicly known entities, e.g. companies and "trustworthy" individuals. This makes this model relatively centralized.

Current projects:

- Rootstock (RSK) (operational). According to the project its model already incorporates some dynamic federation elements.
- Liquid Network (operational)

Dynamic Federations: Sidechains where the federation is not static, but instead is changed periodically. Normally the federation members are voted on the sidechain, and sidechain incentives ensure that they don't misbehave, for example via a security deposit which can be slashed if they double-spend funds.

Current projects:

- Nomic (partly operational, in an audit process, depends on PoS consensus via a partly premined token)
- Stacks (blockchain operational but the bridge is in beta, project announced that in 2024 it will become operational, depends on PoS consensus via a partly premined token)
- BEVM (seems operational) Claims to work with Taproot.

Rollups: A sidechain where some participants (normally the sidechain validators) store information about the sidechain state (transactions, owners etc.) on the mainchain, but in a compressed form. The idea is that there is always enough information on mainchain that the sidechain state can be proven, in some cases even the transactions can be "reconstructed". There are two main types: Optimistic rollups, where cheating/double-spending has to be proven, and ZK rollups, where a zero-knowledge proof can prove that the state is correct.

On Ethereum they are already quite widespread. However they have still often centralism problems. Examples are Optimism and Arbitrum.

There are proposals for Bitcoin rollups.

Extension blocks: This can also be described as a type of sidechain. Basically a sidechain block can be referenced by a miner in the mainchain block header. Thus, this kind of sidechain would need to be integrated into the protocol and thus, like Drivechain, it needs the approval of the developers of the reference implementation (Bitcoin Core). Only altcoins have implemented this model. The most famous example is probably Litecoins MimbleWimble extension block, operational since 2021.


Reviewed projects:

You can find short reviews of the following projects which supposedly have already sidechain or rollup mainnets in this thread (last updated: June 26, 2024):

Potentially interesting projects: BEVM
Doubtful projects: Biop, CoreDAO, Gelios, ckBTC on ICP, Libre, Merlin Chain, Map Protocol,
Not sidechains (do not have sidechain-like two-way pegs for BTC): BVM, Elastos, Nervos Network, Kadena, MVC
Possible scams: ZKsats (rugpull accusations on X, see here)


Currently I'm following mainly the Nomic and Stacks projects, as all others seem either be evolving very slowly or are only papers/projects. Probably I will post news about them soon, because on both, in the next months a crucial event would take place.

[dkbit98]

I am interested in bitcoin sidechain projects for different reasons, but mostly because of privacy and reduction of transaction fees.
Jameson Lopp website is a nice resource for finding more information about sidechain and everything else related with Bitcoin:
https://www.lopp.net/bitcoin-information/other-layers.html#sidechains

[Wiwo]

I am interested in bitcoin sidechain projects for different reasons, but mostly because of privacy and reduction of transaction fees.
Jameson Lopp website is a nice resource for finding more information about sidechain and everything else related with Bitcoin:
https://www.lopp.net/bitcoin-information/other-layers.html#sidechains

Exactly achieving bitcoin privacy and low fees couple with faster transactions will indeed aids high bitcoin scalability and adoption among daily bitcoin holder's since achieving that won't be putting holes in bitcoin users pocket and at the same time supporting high privacy which is the original intention of having a decentralised asset and currency like bitcoin.

[d5000]

https://www.lopp.net/bitcoin-information/other-layers.html#sidechains

Thank you, very helpful website. Some of the projects described as "sidechains" would not meet my own definition (for example, they list Sequentia, which has no peg at all and for me is simply a "Bitcoin-anchored" altchain like Komodo) but others do and generally the site seems a good starting point too. So I've included it in the OP.

There is also L2.watch which lists a quite large list of projects and ideas (included it now in the OP) and the state of their development progress. They include "wrapped token" and other centralized mechanisms too, but there are also some interesting projects I didn't know about.

For example there is BEVM, which claims to work with Taproot contracts and according to L2 Watch is "operational". They claim also to be more decentralized than Stacks. I have however still not understood how their 2-way peg works; in their whitepaper they evade the term it seems and instead talk about "interactions". If someone knows BEVM better and can say if it could help with Bitcoin decentralization or it's just another vapourware/centralized project, more info about that project is welcome!

[d5000]

I'm currently examining the projects which already have a mainnet on L2.watch and are rollups or "traditional" sidechains (things like "wrapped tokens" aren't really interesting here). The big question is: Did they already solve the problem with the 2-way peg?

Ok, let's go through them one by one. Today I'll cover the first two rollups with active mainnet: Biop and BVM.


Biop is a rollup using the Optimistic Rollup technology we know from Ethereum projects like Optimism (they claim to be the first for Bitcoin). The mainnet was launched in Q1 2024.

There are two characteristics of this project I don't like that much: 1) they seem to come from the BRC-20/Ordinals space, and 2) they have a premined token where no less than 19% were allocated to the founders, and 20% to investors (3,x% in an "IDO), plus 10% which went to a "Foundation". Quite centralized even for the token space, as 49% of the tokens benefit the founders in some way, so I'm very skeptic that this rollup could really attract Bitcoiners.

The Whitepaper explains its inner workings. The chain uses Bitcoin's security and additionally has a PoS consensus. "Sequencers" create blocks on the sidechain, and "validators"' task is to provide fault proofs in the case a Sequencer includes an invalid transaction; so this Sequencer can be slashed. They have a virtual machine for turing-complete smart contracts called BVM (not to be confused with the other rollup!).

I haven't found anything in the whitepaper how their Bitcoin peg/bridge mechanism works and if it's already operative. Yes, I know, optimistic rollup, but how exactly are transactions written "back" to the Bitcoin blockchain and when? So it's a bit hard to take this project seriously. It's also not clear what the different versions of BIOP mean. To me it seems like an altcoin where only perhaps tokens like BRC-20 can be transferred to. Perhaps somebody can enlighten me ...


BVM (Bitcoin Virtual Machine) is another Optimistic Rollup, or it seems to be a set of different rollup chains: one dedicated to GameFi, one to AI, one to DeFi, and one to SocialFi. And again: they "use a technique akin to that of Ordinals to inscribe data". Good start  They have even a part of the whitepaper which sounds exactly like the Biop whitepaper: explaining that an Optimistic Rollup is "a fancy way of describing a blockchain that piggybacks off the security of another blockchain". Do they copy everything from the same source?

But at least they seem to have a Bitcoin bridge that works, even if it is quite convoluted - see whitepaper. To "deposit" Bitcoin to BVM, you first have to go through WBTC (WTF???), i.e. a centralized Bitcoin<->Ethereum bridge. The same is true for withdrawals: you first exchange your BTC on the sidechain to WBTC, and then to BTC via the centralized bridge.

So this is basically a WBTC sidechain, not a Bitcoin sidechain.


I'm quite disappointed from these two projects I must say. Let's hope for the better in the next edition(s) of this Observer. Next ones will be BEVM and Elastos.

Of course, everybody having something to share about an existing or future sidechain project, or has experiences with one of the projects in L2.watch, is invited to participate in this thread

[d5000]

Ok, let's continue with BEVM. It seems that this sidechain is a little bit more interesting than the two I covered in the last post, so I'll dedicate a whole post to it.

Like BVM (do not confuse both!) this project's goal is to provide an EVM-compatible environment for dApps which can use Bitcoin for smart contracts and as "gas". The consensus algorithm is based on PoS, with up to 1000 "consensus nodes". Addresses are Ethereum-style, and Ethereum tokens can be swapped to the chain. It's build with the Substrate blockchain framework. The Whitepaper can be found on Github.

Now to the most important part: how does the bridge (2-way-peg) work?

The PoS consensus nodes manage the bridge as custodians. When a peg-in is performed, the user transfers the Bitcoin to the custodians. All custodians run a Bitcoin light node which is part of the consensus, and thus they can prove that the transaction occured on the mainchain. A peg-out is performed by a BFT vote. Each peg-out intent is checked by the custodians and only if 2/3 of them vote that the peg-out is legitimate (i.e. the ancestry of the pegged-out coins goes back to a peg-in and there was no double spend) one of the custodians creates a transaction to the user who pegs out.

This looks very similar to Thorchain: The chain works purely by the incentives the PoS consensus on the sidechain generates. However, the docs are not as detailed as I would have liked. They don't answer the following questions: 1) to which node the peg-in is performed, 2) which kind of transaction is generated in the peg-in (multisig? with whom?), 3) how the node is selected which pegs-out the coins on the mainchain, and also 4) what happens if a node misbehaves?

So I'll continue to investigate about this one. I'm not totally convinced it's a serious project but it could be one - it claims to have got investments from ViaBTC, for example.

What does not look that good is the tokenomics. 50% of the coins are beneffitting the founder team (15% direct team allocation, 20% investors, 15% foundation). Validator incentives make up only 22%. This is thus also a project where I would propose to fork it with 100% validator incentives if it works



PS: I found this blogpost which explains the peg mechanism a bit:

- The PoS consensus nodes form a multisig federation with up to 1000 nodes thanks to Schnorr signatures. Instead of a traditional multisig structure a MAST (Merkelized Abstract Syntax Tree) is used.
- If an user pegs-in into the sidechain, he sends the BTC to this federation.
- For a peg-out, 66%+ of the federation members have to "vote" for this peg-out via multisig consensus.

Not exactly a very complex solution and basically the same what Liquid is, only with far more members and driven by PoS consensus.

About the slashing mechanism I didn't find anything. What if 66% of the PoS federation collide to cheat? Is there any mechanism including Bitcoin mainchain proofs?

PS2: This however is a quite dumb blog post, so I question the technical ability of the BEVM team a bit. WTF, "Before the explosion of BRC20 tokens, few could have believed that it was possible to issue tokens on Bitcoin." Who wrote that utter bullshit?

[d5000]

Elastos is the next project in my list to present here. It's a L2 project initially launched in 2017, now having archieved mainchain stage.

The consensus is based on merged mining with Bitcoin, with "standard" block rewards through the ELA token, including halvings and a capped total supply. A quite "traditional" altcoin up to this point.

For Bitcoin scaling, the BE-L2 technology is presented as a solution (the link leads to the whitepaper). However, it seems that the Bitcoin stay on the mainchain. They can be used, through zero-knowledge proofs, on the sidechain for smart contracts, for example for lending contracts and other DeFi apps.

So in general I think this is not a full-fledged sidechain but a project addressing some limited scaling use cases. In contrast to the category it was put in on l2.watch, it seems also not to be really a rollup, more a kind of atomic swap technology. The technical concept looks okay though. But again, we have tokenomics with a centralized character, with 50% of the tokens pre-allocated. Another more or less disappointing project, but regarding its market cap one of the bigger ones.


Edit: Decided to expand the post because there are various projects on l2.watch which do not really deserve an own post, as they aren't really Bitcoin sidechains. Just to mention them here so to help people which projects on that site aren't that interesting.

CoreDAO is one of these. It's basically a DPoW altcoin anchored on the Bitcoin blockchain. Again we have shameless namedropping ("Satoshi Plus Consensus") and a highly centralized distribution where only about 40% are available for miners and through other rewards. There was a substantial airdrop (25% of total supply) though, but this doesn't necessarily mean the founders didn't benefit from it.

The Bitcoin bridge called coreBTC. To "move" BTC to the Core blockchain, you can select a custodian (called "lockers") from a list which will have to provide a collateral and are incentived to return the Bitcoin if there is a peg-out. So if I interpret it correctly, it works a bit like Thorchain. But on a whole this doesn't look really interesting, it's a mechanism you could build on most blockchains.

[d5000]

Let's go for the next group on l2.watch.

ckBTC on the ICP altcoin network is supposedly a decentralized bridge, converting ICP in a Bitcoin sidechain. But there is no good technical explanation available, much less about the incentives. There seem to be smart contracts (called "canisters") which track the Bitcoin network, probably with a SPV client (see Bitcoin Integration). These so-called "ckBTC minters" track if BTC users spend Bitcoins to an address controlled by them, and create a ckBTC token on ICP. While if a ckBTC is burnt, the ckBTC minters redeem it on the BTC chain.

The most ridiculous thing here is that they claim to use "no middlemen" and "no custodians", but - somebody has to operate the ckBTC minter contract. This is the middleman, FFS!

For me that sounds too easy to be convincing - if this was that easy, it could have been implemented 10 years ago in any altcoin, at least on any offering turing-complete smart contracts. I distrust ICP in general for the high amount of technobabble they use, so this "sidechain technology" doesn't improve my impression here.

In addition, I found this (lol):

Issuing and redeeming ckBTC goes through Know Your Transaction (KYT) checks to ensure no bitcoin enters the Internet Computer that is associated with criminal activity.

Source

Oh. So it does KYT and is decentralized? How does this magic tech work, is there some SchellingCoin-based blacklist for example? Or simply the founders maintaining a centralized blacklist ...


Libre doesn't seem to be really a sidechain, even if they talk about "improving" scalability on their website. They instead use a bridge called pNetwork. Nothing more to expect from a "tech" coming from the Ordinals/Runes sector, despite the "beautiful" name .

Quote from the pNetwork whitepaper:

The pNetwork is currently based on a hybrid decentralized approach in which a limited group of permissioned nodes operate the bridges, and third parties may join the network albeit with limited functionalities

They seem to be transitioning from a completely centralized bridge to an optimistic rollup approach, but the whitepaper lacks a description how this would work with Bitcoin.


Nervos Network is a chain I have stumbled upon somewhen in the past (Ah I remember now, it's the guys with the RGB++ protocol). It's a relatively old (2018) PoW altcoin with smart contract functionality. But even if they are listed on L2.watch as a Bitcoin sidechain, this functionality seems not to have been implemented yet. It seems to be in an early state of development.


And finally Gelios, another EVM-compatible "sidechain" and "the first Runes-based blockchain" (looks good right?). Their "bridge" has one characteristic I haven't seen before: they encode some data via OP_RETURN when doing a peg-in (see here), for example the Ethereum address of the receiver. But again, no info is provided about how the incentives of the bridge work. It's probably a completely centralized bridge like wBTC.

Again I found nothing really interesting here, but if my conclusions are wrong I'm grateful for any feedback The purpose of this Sidechain Observer is "not" to denigrate projects as "shitcoins", but actually to find interesting approaches. But the success has been limited until now, so I can actually understand why most Bitcoiners are still not really interested in sidechain technology.

The following protocols with a working mainnet are still missing: Kadena, MVC, Map protocol, Rollyx, Sovryn, U Protocol and ZkSats (seems to be a scam, see article linked by dkbit98 in the post below).

[dkbit98]

I found one article claiming that most Bitcoin Layer solutions are just marketing scams.
We could argue if that is true or not, but there is one interesting screenshot in this article that shows all Bitcoin sidechains compared.
I am looking to find website origin of that screenshot, if someone knows about it please post link below


https://blockspace.media/insight/most-bitcoin-layer-2s-are-marketing-scams/

[d5000]

Thank you for that interesting screenshot and the Blockspace article! That's indeed the impression I'm getting too, that most "L2s" are more or less traditional shitcoins with some wBTC-style bridging, but few have really mechanisms qualifying them as a "sidechain" or "rollup" with a convincing, decentralized 2-way-peg.

I've done some googling and found BitcoinLayers.org, which seems to be the origin of the screenshot. It's a very interesting website, and they've done basically what I'm doing in this thread but with a much more systematic approach. They do a risk analysis of a couple of known layer-2's, their categories being Bridge custody, Data availability, network operators and settlement assurance (that seem to be these green, yellow and red icons).

It's really shocking that apart from Lightning all other projects have at least one point marked in red. This could of course mean that the site is run by "Lightning network fans", but I think in general the criticism they do on the existing projects is mostly valid. Have to dig a bit deeper though.

PS: Ah, interesting, so ZKsats already is known as a scam according to the Blockspace article? Then of course it won't be covered by my "Observer" posts. L2.watch should then also remove them ...

PS2: Didn't find really info about the ZKsats rugpull, but they went silent on X/Twitter two months ago, so this may be the red flag here. There are also some users complaining in this post.

[d5000]

Fifth and penultimate group of short reviews of the sidechain/rollup chains shown on l2.watch as having a working mainnet: Kadena, Merlin, MVC and Map Protocol.


Merlin Chain is one of the sidechains covered on the Bitcoinlayers website linked above. And unfortunately their review is quite clear: at least in the current state it seems to be completely centralized (the committee is selected by the admin, the sequencer "producing blocks" is a single node).

It claims to be a ZK rollup and is built upon Polygon technology. But according to BitcoinLayers it seems to be unclear which chain is used for settlement. It seems not to be Bitcoin (nor Ethereum) at least. Another red flag is that not all code is open source.

Merlin plans to transition to a to another rollup technology, more in line with Optimistic Rollups, on Bitcoin.

Another one which currently doesn't look interesting, even if it seems to be supported by some big names like OKX and ViaBTC.


Map Protocol is another older project, launched in 2018. It claims to be the "Layer 0 of Bitcoin L2s, aimed at achieving interoperability among various Bitcoin L2s". Or taking the buzzword for such chains: an "omnichain".

A superficial high-level description of the architecture is here. It has a "Relay Chain" operated by a PoS algorithm, and a bridge for BRC-20 tokens based on an own Ordinals-based protocol called BRC-201  .

The "omnichain" design is explained a bit deeper in the whitepaper. Basically it seems to be a network of light client operators of different blockchains forming a committee. These "maintainers" create ZK proofs that the blocks of the origin chain are valid.

There is however no good description of the Bitcoin bridging mechanism with an incentive analysis. Thus I'm also quite skeptic about this project. In general I conclude it's also a design similar to Thorchain, where the incentives for the committees to operate honestly are only generated on the sidechain. That their technical documents are bloated with trivialities doesn't improve the general impression.


Just for the records, the following two protocols listed on L2.watch seem not to be Bitcoin sidechains:

Kadena does use some sidechain technology in its Chainweb concept, but there seems to be no Bitcoin-pegged token - it's a sidechain architecture enabling an altcoin to be created on several chains instead of one. While not sounding uninteresting it's OT in this topic.

MV or Microvisionchain is also seemingly not really a L2 project. It's main feature is the "Smart Contract on UTXO" functionality, i.e. the blockchain is based on UTXOs but anyway supports turing-complete smart contracts. Again we see much technobabble, but one thing is unique: they opt explicitly for the "proven" "Big Block" model It has a bridge but for ETH, so it's also OT.


P.S.: I have linked the reviews of the last posts in the OP and categorized them into different classes according to the potential they have.

[d5000]

Last issue of the l2.watch reviews. This time I'll cover Rollux, Sovryn, U Protocol and MintLayer.


Rollux is an Optimistic rollup mentioned, but still not reviewed on BitcoinLayers.org. Its native chain is not Bitcoin but Syscoin, a quite old altcoin (from 2014/15, if I remember well) which is merge-mined with Bitcoin. According to their website, it "introduces DeFi, NFT’s and cheap smart contracts". So the data to reconstruct the transactions and create proofs is stored on an altchain. This is not bad per se, but as the altchain itself was premined, it doesn't exactly improve the decentralization, and also of course there may be additional attack vectors in comparison to a rollup settling on Bitcoin. It also relies on  "Syscoin’s masternodes" "to provide finality", i.e. the Syscoin masternodes vote about the proofs.

At this moment the rollup is centralized, only the Syscoin foundation runs a sequencer node (i.e. produces blocks on the sidechain). According to the website this is temporary ... let's see. There seems to be currently no decentralized Bitcoin bridge either. While the project looks a bit more serious than those coming from the Ordinals/BRC-20 space, at least in the current state it's also not really interesting.


Sovryn uses currently the Rootstock sidechain, which is still federated, for their Bitcoin-backed stablecoins. In the future, they claim to be developing a Bitcoin bridge using an Ethereum-based Optimistic Rollup called BOB ("Build on Bitcoin") as its base. Website looks nice but the project in its current state is not a Bitcoin sidechain but a simple altcoin.


U Protocol claims to be a "Layer 3" for Bitcoin. After a lot of projects which didn't have even a Bitcoin bridge, it has at least one - the Bitcoin "synthetic currency" uBTC. Arbitrum is mentioned on the start page of the website so probably Optimistic Rollup technology is used. There is also an utility token called YOU.

The Bitcoin bridge is however unfortuntately also not really a Bitcoin bridge. The uBTC coin is backed by Lido Staked Ether and BTC.b, "a decentralized Bitcoin (WTF?) bridged to EVM via the Avalanche Bridge" according to their website. The model thus looks very similar to BVM where wBTC was bridged instead of BTC itself.

Thus again, we have not really a Bitcoin sidechain but this time a combined Avalanche and Ethereum sidechain. But at least a sidechain with a Bitcoin bridge, which is more than most of the products on l2.watch do offer. I'd have to analyze the BTC.b bridge to know if there's some interesting tech behind it.


MintLayer is one I forgot to review. It's however even less interesting than the other ones: simply a PoS blockchain allowing atomic swaps with Bitcoin. A bridge is not mentioned on their website. Tokenomics are extremely ugly and  shameless namedropping ("Von Neumann" and "Lovelace" testnets) also leave an extremely bad impression.


In conclusion to my reviews of the projects with working "mainnets" on L2.watch, it was really disappointing. At least, 2 or 3 projects have some interesting elements, and I will also review in the future the tBTC Ethereum bridge (not to be confused with testnet Bitcoins, of course!) and perhaps the BTC.b Avalanche bridge. But L2.watch should really change the way they categorize the projects. Most projects are not sidechains, and those that are, are not more decentralized than the well-known federated sidechains Rootstock and Liquid. The BitcoinLayers project is thus totally correct - most "L2s" are probably marketing technobabble.

[franky1]

i appreciate d5000 taking the time to delve into the wider world of subnetworks so ill give him some merit


but the wordage of the whole L2/"layer" tag is becoming defunct/redundant

its not like most subnetworks remain layers that only wrap around a core network and function solely to secure the enclosed value of that one mainnet.. instead many are subnetworks that bridge between multiple mainnets so thats why the community prefer words like subnetworks and bridges (think subways and highways and bridges with on and off ramps between multiple communities)

the terminology of analogies is not fixed but the "layer" term is getting less and less relevance when most subnetworks start offering access to different currencies and no long just wrap around and function with one network

as for the definition of subnetworks. is similar/akin to subdomains and also illustrating the analogy that these subnetworks are below the mainnet in terms of security. as many subnetworks will never be as secure as the mainnet, thus a subclass of network security, rather than the illusion/delusion of top quality penthouse, top security, leader, subliminal word garbage done for fame stealing and false promising of being 'solutions'/better than the mainnet

[d5000]

but the wordage of the whole L2/"layer" tag is becoming defunct/redundant

its not like most subnetworks remain layers that only wrap around a core network and function solely to secure the enclosed value of that one mainnet.. instead many are subnetworks that bridge between multiple mainnets so thats why the community prefer words like subnetworks and bridges (think subways and highways and bridges with on and off ramps between multiple communities)

I actually agree with you a bit about this issue, above all if we talk about sidechains. From a networking point of view, a sidechain is indeed a subnetwork, or in some cases a separate network with some overlap with the main network (if not all nodes on the "L2" chain are also nodes of the L1 chain).

But only a bit

Because if we look at the whole thing from a transaction-centric view, i.e. instead of looking at the node network graph, looking at the transaction graph, then I think the Layer-2 analogy still holds.

If an user pegs-in 1 BTC into a sidechain, and then 1 month later another users pegs-out this 1 BTC after with the "sidechainBTC" (i.e. the utxos created on the sidechain as a result of the peg-in) 1000 transactions were done on the sidechain, from Bitcoin's transaction graph's point of view what you do is bundling 1000 transactions into one (very simplified). The sidechainBTC transactions thus can be considered a layer to the "true BTC" of the mainchain.

Perhaps we can agree on that sidechains can act as a layer for transactions, but they aren't only a layer but actually can have a lot of other functions too, and from a networking point of view they are actually often not really a layer.

[franky1]

but the wordage of the whole L2/"layer" tag is becoming defunct/redundant

its not like most subnetworks remain layers that only wrap around a core network and function solely to secure the enclosed value of that one mainnet.. instead many are subnetworks that bridge between multiple mainnets so thats why the community prefer words like subnetworks and bridges (think subways and highways and bridges with on and off ramps between multiple communities)

I actually agree with you a bit about this issue, above all if we talk about sidechains. From a networking point of view, a sidechain is indeed a subnetwork, or in some cases a separate network with some overlap with the main network (if not all nodes on the "L2" chain are also nodes of the L1 chain).

But only a bit

Because if we look at the whole thing from a transaction-centric view, i.e. instead of looking at the node network graph, looking at the transaction graph, then I think the Layer-2 analogy still holds.

If an user pegs-in 1 BTC into a sidechain, and then 1 month later another users pegs-out this 1 BTC after with the "sidechainBTC" (i.e. the utxos created on the sidechain as a result of the peg-in) 1000 transactions were done on the sidechain, from Bitcoin's transaction graph's point of view what you do is bundling 1000 transactions into one (very simplified). The sidechainBTC transactions thus can be considered a layer to the "true BTC" of the mainchain.

Perhaps we can agree on that sidechains can act as a layer for transactions, but they aren't only a layer but actually can have a lot of other functions too, and from a networking point of view they are actually often not really a layer.

but many side chains bridge to many mainnets
take liquid for instance.. it has many different tokens/assets/pegged coins. so its not solely a skin of bitcoin, it doesnt just cover bitcoin

i know you are trying to interpret the contracts(federations) within the sidechain which are pegged/linked to a particular mainnet justify the "layer" buzzword. but thats then assuming that a sidechain that operates with many networks is not the layer due to bridging to many networks, but within the sidechain its the contract(federation) that is the (?)layer(?) of a mainnet, thus making it appear that the mainnet must be then within the sidechain if the (?)"layer"(?) is within the sidechain.. it starts to not make sense in that way.

this is why the main community prefer the wordage of bridges. offramps, subnetworks rather than 'layers'(skins)
especially people are not going along with the "ontop"(better) subliminal's too when talking about subnetworks as most subnetworks are less secure then mainnets

anyway a good stat to update regularly in the top post of topic is how much value in locked utxo's are pegged to a particular subnetwork bridge, as that then shows which ones are populating the most

[dkbit98]

Thank you for that interesting screenshot and the Blockspace article! That's indeed the impression I'm getting too, that most "L2s" are more or less traditional shitcoins with some wBTC-style bridging, but few have really mechanisms qualifying them as a "sidechain" or "rollup" with a convincing, decentralized 2-way-peg.

I can find only few of them useful but I would never keep any large amounts of coins long term in any of bitcoin sidechains.
It's funny that some people are promoting Lightning Network so much but only 5,122 BTC is locked so far, that is nothing compared to 21 million.
I won't even get into less know sidechains that are making a bunch of false promises.
Instead of using sidechains, it would be much more interesting with drivechain.info.

[d5000]

but many side chains bridge to many mainnets

Myself I'm not particularly fond of the "layer" buzzword. But it seems to be the most popular at this moment, more so than "sidechain".

And for me it's also different than a simple "bridge". Current "bridges" like wBTC are not tied strong enough to Bitcoin's consensus mechanisms as they often imply trust in some bridge custodian. In other words: if "wBTC" is a bridge, then I'd like another word for a sidechain or another mechanism where no direct trust is required, be it "layer" or whatever. L-BTC if we follow this definition is a bridge though, not a layer, due to the necessary trust in a Federation.

For a "layer" I would personally expect such a strong tie, like provided by mechanisms like Drivechain. I would tolerate however that the layer is based on a set of additional, but decentralized incentives. This means: a decentralized system external to the Bitcoin main chain which rewards custodians to play by the rules and punishes them if they don't, could be enough to classify it as a "layer".

i know you are trying to interpret the contracts(federations) within the sidechain which are pegged/linked to a particular mainnet justify the "layer" buzzword. but thats then assuming that a sidechain that operates with many networks is not the layer due to bridging to many networks, but within the sidechain its the contract(federation) that is the (?)layer(?) of a mainnet, thus making it appear that the mainnet must be then within the sidechain if the (?)"layer"(?) is within the sidechain.. it starts to not make sense in that way.

If the "layer" is the contract dealing with the Bitcoin-pegged token (multisig federation etc.), the rest of the chain functionality not necessarily has to be part of the "layer". In my transaction-graph centric "layer definition" the chains are independent from each other. So a chain can without problems contain a "layer" to infinite mainnets. The chains are only the technical infrastructure.

I can find only few of them useful but I would never keep any large amounts of coins long term in any of bitcoin sidechains.

From the current point of view I agree - with current transaction fees I would stay on mainchain, with Lightning as an option for smaller payments in hign-fee times.
Of course the point of this thread however is to find projects which have the potential to change that. For now, still Nomic, Stacks, perhaps BEVM and tBTC are the most interesting ones.
Drivechain is cool but I don't know if it will happen in the next 10 years on BTC. Perhaps if it's first tried on a "real" altcoin, not only on testnets.

[dkbit98]

Drivechain is cool but I don't know if it will happen in the next 10 years on BTC. Perhaps if it's first tried on a "real" altcoin, not only on testnets.

It doesn't take years for Drivechain and most of the stuff is already ready to be deployed with BIP 300 and BIP 301.
Than you can create any sidechains you want, we could have actual privacy on bitcoin, and most of the shitcoins would become useless and dead.
https://github.com/bitcoin/bips/blob/master/bip-0300.mediawiki
https://github.com/bitcoin/bips/blob/master/bip-0301.mediawiki

[Bellarg]

So many l2 projects without any real users. We already have lightning network and it still not wide supported, that's sad especially when you know how fast it is

[d5000]

It doesn't take years for Drivechain and most of the stuff is already ready to be deployed with BIP 300 and BIP 301.
Than you can create any sidechains you want, we could have actual privacy on bitcoin, and most of the shitcoins would become useless and dead.

Well I hope you are right, but BIP 300/301 were already created in 2019, and the problem is that there are several high-profile developers skeptical about the concept. Unfortunately I have read no recent news about that to be changing.

Regarding shitcoins becoming useless and disappear, I really doubt it. The incentives for shitcoins aren't that much "that they offer something different" than Bitcoin. For example if you start a simple Bitcoin clone from 0, a lot of people could actually buy it only because they would even make a profit if the coin gets 0.001% of Bitcoin's market cap, even if all the difference is that it has a new genesis block. That's what happened with some of the first altcoins, namely Bytecoin (BTE), but you could say it even about LTC which managed to survive until today in the top-25 altcoins. There are lots of other coins out there having a lot in common, that's also true for the 999 "Ethereum clones". They'll never put Bitcoin's (and Ethereum's) leadership in danger, but they survive.

I think Sztorc's opinion there is of course directed to those that say that Bitcoin is "outdated" and there will be a "flippening", and in this case I somewhat agree.

So many l2 projects without any real users. We already have lightning network and it still not wide supported, that's sad especially when you know how fast it is

The issue is that it is extremely easy to build a blockchain today. There are a lot of open source libraries. And then you add a centralized bridge and call it a "L2". Or directly clone Ethereum's Optimism rollup and add a wBTC bridge. That's what happened with most projects I've reviewed on the l2.watch website.

Not that this is bad per se, maybe somebody actually creates an interesting project. But a 50% premined "L2" with no convincing 2-way peg and only vague ideas how this could be decentralized is a no-go for me.