What Is Bitlayer? A Guide to the L2 with Bitcoin Finality

Bitcoin’s market share in the DeFi space keeps increasing, as of 2024 there is more than $4.3 billion in BTC locked in various protocols. As new Layer 2s (L2s) are being developed and launched, Bitcoin DeFi is likely to play an increasingly important role in the future of decentralized finance.

Bitlayer is a new Bitcoin L2 that aims to align with the ethos of this network while enabling developers to launch Bitcoin-powered applications without requiring hard forks or compromising its base layer. 

Read on to learn what Bitlayer is, how it works, and what it brings to the Bitcoin ecosystem. 

What Is Bitlayer?

Bitlayer is a Turing complete Bitcoin Layer 2 that aims to help the Bitcoin network scale and expand its ecosystem with new use cases while leveraging the network's security.

With its first version of the mainnet launched, Bitlayer is using an experimental BitVM solution, invented by Bitcoin developer Robin Linus, in order to achieve Bitcoin finality, trustless bridge, and multiple virtual machine support.

This allows smart contract developers on other blockchains to migrate their projects to Bitlayer by using already familiar tools.

Meanwhile, if the project is successful, you will be able to access innovative Bitlayer-powered dApps that leverage Bitcoin's security. It can be done not only via Ethereum Virtual Machine (EVM)-compatible wallets but also via other wallets such as Xverse. 

The L2 also aims to offer more competitive fees that are being paid in BTC as a native token of Bitlayer. You can already experiment with Bitlayer's capabilities in the testnet environment.

What Are Bitlayer’s Key Features?

The Bitlayer network architecture is built on three main features anchored by Bitcoin finality.

Source: Bitlayer

Bitcoin Security with OPVM 

The Optimistic Virtual Machine (OPVM) is the first verification layer for transactions on Bitlayer with Bitcoin finality. Using optimistic rollup principles, OPVM assumes that transactions are valid unless proven otherwise.

This assumption speeds up transaction processing, reduces resource consumption, and makes the network more efficient. OPVM scales up the transaction throughput and user experience.

Trustless Bridge for Secure Asset Transfers

The trustless bridge is a key part of Bitlayer, which is designed to support secure and decentralized asset transfers between the Layer 2 and Bitcoin. 

Two-way peg system

It uses BitVM and Optimistic Discreet Log Contracts (OP-DLC) to create a two-way peg system.

Challenge Response Protocol

This bridge uses a challenge-response protocol and binary circuit commitments to minimize on-chain activity while maintaining decentralization. 

Off-chain computations

The complex computations are handled off-chain, so the movement of assets between the layers is quick, while ZK-proofs make them reliable.

Realtime EVM Compatibility

Bitlayer supports real-time compatibility with the Ethereum Virtual Machine, allowing Ethereum-based applications to run on its network without modification. The familiar development tools make the transition smooth, attracting a wider developer community to the platform.

EVM compatibility provides Ethereum developers with best-in-class infrastructure to migrate their applications to Bitlayer and benefit from the most secure blockchain, Bitcoin.

How Does Bitlayer Work? A Look Under the Hood

Bitlayer aims to give more utility to Bitcoin by adding the ability to process computational verifications and run complex logical computations, all while relying on Bitcoin’s finality to the network. 

In layman's terms, Bitlayer gives the developers tools and infrastructure to deploy complex smart contracts on the platform and an environment for the smart contracts to run. 

Understanding the architecture of Bitlayer can be difficult, but we’ve broken it down here for you. 

Diagram of Bitlayer Network’s Architecture

Source: Bitlayer Docs

1. Transaction Initiation and Sequencing

To begin with, you need to initiate transactions through different smart contracts on Bitlayer. These transactions are received by the sequencer within Bitlayer, which is responsible for ordering and preparing them for processing. 

Communication protocol

The sequencer uses JSON-RPC for communication. JSON-RPC is a way for computers to communicate with each other over a network using a simple, text-based format, which makes it easier for them to send requests and get responses back. 

2. Transaction Processing

The transactions are then processed in the XVM (eXtensible Virtual Machine), which is capable of executing complex computations, making Bitlayer a Turing-complete network. 

State Management 

The current state (e.g., value of a unit)  of all computations is maintained and updated continuously, ensuring that the network accurately reflects the results of transactions.

3. Commitment and Verification

In the next step, the differences in state are prepared for verification. This means taking into account the differences in the network state before and after transactions. 

Data Accessibility

The Data Availability Committee (DAC) makes sure that all necessary data for verifying these state differences is accessible. 

This maintains the integrity and transparency of the network.

4. Verification and Finalization

In the next step, the transactions are bundled together and ZK-proofs are generated for them. 

Verification

Transactions are verified by a zero-knowledge-based optimistic mechanism between the Prover and Challenger that are tasked to confirm the accuracy of the state differences.

Final State Submission

The final verified state is then sent back to the Bitcoin blockchain, reaching its finality.

5. Securing the Asset Transfers 

The Bitlayer team uses DLC (Discreet Log Contracts) along with the BitVM to secure the transfers of assets. 

DLCs 

DLCs are a type of contract that executes transactions on the Bitcoin blockchain once certain pre-defined conditions are met in the smart contract.

Reducing the Risk

This reduced the risks associated with Multiparty computation and threshold signature scheme, wherein the security of the assets is on the platform. Now, with DLCs the bridge is much more reliable as it removes the excessive parties involved.

Having grasped the architectural framework and operational processes of Bitlayer, it's time to highlight the key features that make it stand out in the blockchain space.

What’s Making Bitlayer Scalable, Secure & Interoperable?

Now that we know about Bitlayer’s key features and architecture, let’s look at the components that collectively enhance Bitlayer’s scalability, security, and interoperability. 

Layered Virtual Machine (LVM)

Source: Bitlayer

LVM separates smart contract execution from zero-knowledge proof generation, allowing support for different proof systems like ZK-STARKs and ZK-SNARKs.

Transaction Processing and Verification

Combines the Sequencer, LVM, and a zero-knowledge-based optimistic mechanism to handle transactions efficiently while maintaining compliance with network rules.

Data Availability Committee (DAC)

The Data Availability Committee (DAC) ensures that all necessary data for transaction verification is accessible and shared across the network.

By preventing data withholding attacks and maintaining transparency, the DAC plays a vital role in protecting the integrity of the Bitlayer network. It ensures that participants can trust the system and rely on its data for accurate processing.

Multi-VM Support

Bitlayer supports multiple virtual machines, including CairoVM, SolVM, MoveVM, in addition to the XVM and EVM. This flexibility gives developers the freedom to choose the virtual machine and programming language that best suits their needs. 

Together, LVM, DAC, and multi-VM support help to make Bitlayer a versatile and powerful Layer 2 for Bitcoin. 

LVM processes and validates transactions efficiently, while the DAC ensures trust in the system by maintaining data transparency. Finally, Bitlayer’s multi-VM support broadens the network’s appeal by accommodating diverse developer needs.

What Can You Already Find in the Bitlayer Ecosystem

Since its mainnet V1 launch, dozens of dApps have been launched on Bitlayer. Some of the most exciting ones you can access using your Xverse Bitlayer wallet are listed below.

Bedrock

Bedrock is a liquid restaking protocol that brings multi-asset staking to the Bitlayer ecosystem. It allows you to earn yields through synthetic tokens such as uniBTC and uniETH while benefiting from Bitlayer’s secure infrastructure. 

bitSmiley

bitSmiley introduces decentralized finance to Bitcoin with stablecoins, lending, and derivatives powered by Bitlayer. bitSmiley has helped in improving Bitcoin’s role in DeFi with already $30M in total assets locked.

Ordzaar

Ordzaar serves as Asia’s first Bitcoin NFT marketplace, which specializes in minting and trading Bitcoin Ordinals. It offers a user-friendly platform for artists and traders with drag-and-drop functionality and no platform fees. 

Xverse Is Your Gateway to the Bitlayer Ecosystem

You can use your Xverse Bitcoin Web3 wallet to explore the Bitlayer ecosystem. 

The non-custodial wallet allows you to seamlessly bridge assets from Bitcoin to Bitlayer and vice versa and interact with a range of Bitcoin dApps built on Bitlayer, all while retaining complete ownership and control over your Bitcoin and Bitlayer-based assets. 

Download Xverse to start exploring Bitlayer today. 

FAQs

Is Bitlayer EVM-compatible? 

Yes, Bitlayer is EVM-compatible. Ethereum-based applications can run on the network without any modifications. This allows developers to use familiar tools while benefiting from Bitlayer’s scalability and Bitcoin’s security.

How is Bitlayer different from other Layer 2 solutions? 

Bitlayer stands out with its modular architecture and its multi-virtual machine support. Additionally, the BitVM infrastructure helps it support Turing-complete operations, which means it can perform complex computations and smart contracts. Lastly, its trustless bridge seals the deal with secure and quick asset transfers with the least risk between the L2 and Bitcoin.

What is the role of BitVM in Bitlayer? 

BitVM provides the environment to run Turing-complete smart contracts on Bitlayer without having to fork the Bitcoin protocol. It uses cryptographic proofs and off-chain computation for scalability to make sure that Bitcoin's base layer remains secure and lightweight. This allows DeFi and dApps to grow with its decentralized and trustless architecture.

Is Bitlayer secure?

Yes, Bitlayer has security features like zero-knowledge proofs and optimistic Discreed Log Contracts (OP-DLC), which keep the privacy and integrity of the data intact. Moreover, Bitlayer is aiming to achieve Bitcoin’s finality, making transactions immutable.