Clarifying the Concepts of Layer2 and L2 Rollup
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Clarifying the Concepts of Layer2 and L2 Rollup
There hasn't yet emerged a Layer2 solution in the UTXO technical ecosystem analogous to Rollup.
Navigating Web3 tides with focused insightsAuthor: Huang Shiliang
With the issuance of numerous tokens on the Bitcoin ecosystem—almost all labeled as L2s to gain legitimacy—it's necessary to seriously examine the concept of Layer2.
On the Bitcoin network, we've previously referred to the following types of products as Layer2:
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Lightning Network
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Sidechains (including drivechains, federated chains, etc.)
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Client-side validation: Omni protocol, Ordinals protocol, RGB protocol, etc.
From a problem-solving perspective, Layer2 should address blockchain scalability—or more specifically, increase average transactions per second (TPS), improve transaction speed, and reduce transaction fees.
If we adhere strictly to this functional definition, I believe the Lightning Network and sidechains qualify as Layer2, but client-side validation does not.
Transactions within the Lightning Network and sidechains operate independently from Bitcoin’s mainnet. Bitcoin transactions in these systems do not require processing by mainnet miners, except when depositing into or withdrawing from the Lightning Network or sidechain.
This significantly increases Bitcoin’s transaction throughput and speed while greatly reducing miner fees.
Client-side validation, by contrast, remains fundamentally based on Bitcoin mainnet transactions. It involves optimizing within Bitcoin’s transaction data structure, embedding new data fields to express additional functionality.
Yet today, many client-side validation projects also label themselves as Layer2, likely because they’ve redefined Layer2’s purpose to mean: enhancing the functionality of L1.
Due to Bitcoin L1’s limited native functionality—essentially only supporting transfers—various client-side validation projects aim to expand Bitcoin’s capabilities, primarily by enabling token issuance and non-custodial decentralized exchanges (DEXs).
Given this trend, I expect the Bitcoin community may eventually refine the definition of Layer2 to: solutions that either address Bitcoin’s scalability issues or enrich the mainnet’s functionality.
From an asset security standpoint, assets and transactions within Layer2 should ideally be no different in nature from those on L1.
Currently, however, the Lightning Network stands out as the most secure among Bitcoin’s various Layer2 implementations.
Sidechains rely mostly on multi-signature schemes to secure assets, which is insufficient.
Client-side validation mainly expands Bitcoin L1 functionality for asset issuance, but the security of such issued assets depends on the consensus mechanisms of the respective clients—fundamentally differing from Bitcoin L1’s security model.
Among existing token issuance protocols, Taproot Assets comes closest to Bitcoin L1 in terms of security model.
Viewing Layer2 through the lens of computing principles, any transaction can be broken down into three components: computation, storage, and transmission.
In Layer2 products like the Lightning Network, computation, storage, and transmission all occur independently from Bitcoin L1. Only when depositing BTC into or withdrawing from the Lightning Network does the mainnet become involved.
Sidechains are similar in this regard.
Client-side validation, however, uses Bitcoin L1 for both storage and transmission, performing computation only locally on the user’s client.
In summary, the concept of Layer2 is currently in a pre-consensus state of confusion and may evolve into the following definition:
Layer2 refers to efforts aimed at solving L1 scalability issues or enriching L1 functionality, with security designed to make Layer2 assets as close as possible to L1 in safety.
Here, the word "or" is key.
Looking at Ethereum’s practices provides greater clarity. I believe Ethereum’s Rollup design represents an excellent implementation of Layer2.
The essence of Rollup can be explained in one sentence:
1. Design centralized server-run software (which could also be called a client) and deploy a smart contract wallet on L1;
2. Deposit Ethereum assets into an L1 contract wallet, mapping them 1:1 to tokens within the client; conversely, burning tokens in the client triggers a 1:1 withdrawal from the L1 contract wallet.
3. Perform any asset-related functions and computations within the client, periodically submitting only the final state (i.e., state root) back to the L1 contract wallet.
4. In terms of security, Rollup achieves asset safety nearly equivalent to L1.
5. Regarding computational resource usage, transactions in Rollup consume most resources within the client software, requiring minimal computation on L1 (with compression ratios ranging from 20:1 to several thousand:1).
Rollup effectively achieves all three goals—asset security, chain scalability, and enhanced functionality—ensuring asset safety while increasing transaction throughput (TPS) and speed, and vastly improving functional capabilities.
And Rollup transforms the earlier “or” into an “and.”
Currently, no UTXO-based system has produced a Layer2 implementation analogous to Rollup. I feel bitVM has a small chance of achieving this.
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