Bitcoin is plagued by a scaling difficulty.
The system was created to make payments easier without relying on third-party trust. To do this, it must be verifiable by all users.
This is diametrically opposing to the other.
The cost of verifying all these transactions will increase dramatically if the system allows everyone to do so. This forces people to rely on a third-party who is able to pay for the costs. The system must maintain a low verification cost for all participants. Otherwise, everyone will have to pay hefty fees in order to conduct transactions on the Blockchain.
We’ll use Layer 2s to scale Bitcoin, correct? What does this mean? When most people read this, they probably think of scaling in terms only of the number transactions per second. Scaling is achieved by increasing the amount of bitcoin transactions that we are able to do per second.
No, I’d say. It is important, but not everything we do is to make it bigger. In order to increase the censorship resistance of Bitcoin, we are scaling its important features. It would be enough to call the day if that scaling aspect didn’t matter. Exchanges, banks, other centralized custodians are available.
Trustlessness
To maintain trustlessness, we want to create solutions for throughput scaling. The users should not be dependent on another party’s honesty to ensure the safety of their money. Users must be able to ensure the security of their money within certain constraints, without relying on anyone else.
The security model is not necessarily the same. Send your money to an address, and you’re done. Just keep your keys secure. The user may need to remain online or log in periodically during a defined period of time, or they might have to store information that cannot be determinedistically recreated.
Final Settlement
The users need a high level of confidence that the transactions they conduct are final and cannot be retracted. The blockchain is responsible for the core functionality of the system: processing the transaction and guaranteeing settlement finality.
There is currently no Layer 2 system. Off-chain settlement is finalized. They provide a settlement assurance backed by a third-party, like a custodian or system operator or federation. You can also click here to find out more about To exercise finality of settlement when desired by the user in pre-signed transactions.
Layer 2 would theoretically provide final settlement off-chain. This may not be feasible, but we can still look for more efficient and flexible finality designs and stronger third-party settlement guarantees. “options” Layer 2s can be ejected unilaterally by using exit plans.
Cost
It is important to reduce costs so that users can use these systems. The efficiency of the settlement is very much affected by this. When exercising the settlement finality option becomes too costly, users may opt to use systems in which they can delegate their finality assurances to third parties.
Costs of blockchains are based on the amount of data you need to use it. Costs increase as data increases. The more blockspace users demand, the higher fees.
Lifeness requirements
All Layer 2s currently available that offer a finality option have some type of requirement for liveness, i.e. The user has to be online regularly or remain online in order for the Layer 2’s trustless properties and settlement features to work.
Systeme like Lightning demand that you be always online. You could either use a third-party to do this for you or trust people with whom you’ve opened channels to not steal your funds with outdated states. Ark, for example, requires that you check in and rotate your coins online because the Ark batch will expire soon and any funds can be swept by an operator.
Delegating settlement finality to third parties and ensuring trustless funds security is the only solution. It is important to reduce the requirements for liveness as much as we can in systems that don’t require it. You can also check out our other blog posts. Delegate control to third parties.
It’s All Here: Putting It Together
After we have thought about what properties we would like to keep while increasing throughput, we can start thinking about the functionality that is needed within the Bitcoin protocol to enable that scaling.
To make current Layer 2s trustless, users must approve balance updates outside of the chain. It is necessary for users to communicate with one another to authorize updates. Any opcodes or changes to Bitcoin, which would enable users to interact more quickly with one another to ensure settlement finality and pre-sign transaction would therefore be helpful for maintaining the trustlessness of scaling.
This could be further enhanced by an opcode allowing a certain portion of a UTXO (but not the entire thing) to remain restricted to one user and the remaining balance to be accessible only to others. It would maintain the lack of trust while reducing the requirement for the users to work together or limiting the coordination to the initial point in a protocol.
In order to scale this protocol effectively and sustainably, we need to consider the final result, specifically the properties that we would like it to possess. We can only then take a pause and start thinking about what functionality is needed to achieve the desired result on a technilogical level.
Scaling Bitcoin involves more than simply increasing the amount of transactions that it can handle per second. Custodians can help us do this right away. Scaling Bitcoin means increasing the number of trustless transactions, finality that is resistant to censorship, that are not burdened by liveness requirements, that cost a price that more users can afford.
Bitcoin is not scaling if these properties can’t be scaled. It doesn’t matter how many bitcoin transactions are happening per second.
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Source: bitcoinmagazine.com
