Comparison of the Four Major Bitcoin Scaling Solutions: Who Will Truly Unlock the Trillion-Dollar Potential of BTCFi?

State channels (Lightning Network, sidechains (Stacks), Rollup (BitVM), UTXO + client validation (RGB++ Layer)... Who will stand out and truly unite the forces of the Bitcoin ecosystem, achieve scalability, interoperability, and programmability, and introduce innovative narratives and significant increments to the Bitcoin ecosystem?

Infrastructure oversupply is a community voice that cannot be ignored in this cycle. When supply > demand, we can see that both new public chains and L2s are doing everything they can to avoid becoming ghost towns, but in the Bitcoin ecosystem, we see a completely different picture:

Since the "everyone inscribes" craze, the market has seen the community's enthusiasm for participating in the Bitcoin ecosystem, but due to Bitcoin's scalability limitations, a robust infrastructure is urgently needed before the Bitcoin ecosystem can truly explode. The large investments of institutions, often in the tens of millions, have further driven the Bitcoin city to roar with machinery, paving roads and building bridges during this cycle.

For a time, it seemed that everyone wanted to share in the heat of the Bitcoin ecosystem, but this opportunity is not so easily accessible.

The reason is simple: Due to characteristics such as non-Turing completeness, achieving Bitcoin scalability is not an easy task. Major projects are taking different paths, and Bitcoin's scalability journey is currently experiencing a chaotic exploratory phase.

In this process, we can see established Bitcoin scalability solutions like the Lightning Network, known for their "orthodoxy," revitalized, and we also observe the wild growth of CKB proposing RGB++ based on RGB to bring more innovative narratives. Meanwhile, various sidechains and L2s are competing, with some directly borrowing from Ethereum's solutions and others deeply researching improvements based on Bitcoin's own characteristics.

Faced with the trillion-dollar market potential of the Bitcoin ecosystem and the dazzling array of technical implementation paths, which scalability protocols will stand out, truly unite the forces of the Bitcoin ecosystem, achieve scalability, interoperability, and programmability, and introduce innovative narratives and significant increments to the Bitcoin ecosystem?

This article aims to delve into Bitcoin scalability protocols, analyzing the future trends of Bitcoin scalability by horizontally comparing the advantages and disadvantages of major solutions.

1. Bitcoin Scalability: The Only Way for the Bitcoin Ecosystem to Explode#

Following the logical thinking of "first determine whether it is, then prove why," we first discuss: Is Bitcoin scalability a pseudo-demand?

The answer is obvious: it is definitely not; in fact, Bitcoin needs scalability solutions more than any other blockchain.

This argument is strongly supported by real situations from multiple angles.

From a market perspective, whether it is the craze for inscriptions or the large investments of institutions, we can see the market's enthusiasm for the Bitcoin ecosystem. This enthusiasm is not hard to understand; after all, over the past few years, a significant portion of Bitcoin holders have not just wanted to "hold" but have struggled due to a lack of more choices for ecosystem participation. When interesting narratives emerge in the Bitcoin ecosystem, holders naturally become eager to participate.

Regarding Bitcoin itself, as the pioneer of the crypto industry, Bitcoin has undergone over a decade of development, and the interests of various participants in the ecosystem are not only intertwined but also interconnected. How to achieve balance and maintain long-term attractiveness is a major topic. With the fourth halving expected to be completed in 2024, the reduction in block rewards will lead to decreased profitability for miners, further pushing Bitcoin to explore ecological prosperity and achieve richer value flows. Bitcoin also needs to empower network participants and further attract incremental users.

More importantly, in developing the ecosystem, Bitcoin possesses multiple advantages that no other public chain can match: Bitcoin is community-driven and has undergone over a decade of stable operation. Today, its market value has reached $1.2 trillion, enjoying the highest recognition and visibility among the global public and investors. This endows Bitcoin with an unparalleled degree of decentralization and a strong security foundation. It is worth mentioning that due to the past lack of ecosystem, a large amount of Bitcoin funds have remained dormant, lacking deeper value release, which undoubtedly makes more people confident in the explosion of the Bitcoin ecosystem.

However, unfortunately, the performance limitations brought about by Bitcoin's underlying design severely hinder the explosion of the Bitcoin ecosystem: As is well known, Bitcoin can only process about 3 to 7 transactions per second, and during peak transaction periods, the network will experience congestion. To prioritize their transactions, users need to pay high fees, resulting in a series of negative experiences such as slow transaction speeds, high costs, and long confirmation times. More importantly, Bitcoin's non-Turing complete nature means it lacks the ability to execute complex logic, which significantly dampens many developers' motivation to build complex smart contract functionalities based on Bitcoin.

Faced with such a powerful Bitcoin, which is market-expectant but has inherent limitations, scalability has become the only way for the Bitcoin ecosystem to explode. And in the current context of discussing more about demand and less about technology, combining Bitcoin's strengths and weaknesses, we can reverse-engineer solutions based on demand. The Bitcoin scalability protocol is gradually developing its principles of "change" and "unchange."

Focusing on Bitcoin's own limitations, the Bitcoin scalability protocol aims to bring a series of changes: one of the core goals of the Bitcoin scalability protocol is to enhance the user transaction experience, including improving efficiency and reducing costs.

Additionally, the Bitcoin scalability protocol will also strive to help Bitcoin achieve Turing-complete smart contract functionality, enabling developers to build complex logical applications within the Bitcoin ecosystem. The realization of this functionality will allow Bitcoin to support a wider variety of financial products and services, such as decentralized finance (DeFi) applications and automated contract execution. This will greatly enrich Bitcoin's application scenarios and attract more developers and users.

Another important change that the Bitcoin scalability protocol aims to bring is to enhance interoperability between Bitcoin and other blockchains and ecosystems. By breaking the existing isolation, it will enable aggregation and collaboration between different blockchains, allowing users to transfer assets and data more conveniently across different platforms. This interoperability will strengthen the connections within the entire blockchain ecosystem, promote resource sharing and collaboration, and drive innovation and development.

Regarding Bitcoin's advantages, the Bitcoin protocol will strive to inherit and promote: the Bitcoin scalability protocol will pursue a greater degree of inheritance of Bitcoin's decentralization and strong security. This not only ensures greater security but also truly brings innovation to the Bitcoin ecosystem, rather than simply serving as a bridge to introduce Bitcoin assets into other ecosystems and prosper them.

It is also worth noting that the Bitcoin scalability protocol should expand without significantly altering the mainnet. We know that the Bitcoin ecosystem has previously attempted on-chain scalability solutions and undergone multiple upgrades, such as expanding block space and Segregated Witness (Segwit), which laid a solid foundation for subsequent Bitcoin scalability. However, since most on-chain scalability solutions alter the mainnet code and sacrifice decentralization and security to some extent, on-chain scalability solutions are approached with caution. The community is beginning to lean more towards building off-chain solutions based on Bitcoin L1, which neither affects Bitcoin's underlying structure nor solves performance issues.

After understanding the "change" and "unchange" of the Bitcoin scalability protocol, we have established some specific evaluation dimensions for measuring Bitcoin scalability protocols. Based on these dimensions, comparing the mainstream Bitcoin scalability protocols currently on the market may help readers establish a clearer understanding of the advantages and disadvantages of various technical implementation paths.

2. Introduction to Mainstream Bitcoin Scalability Solutions and Comparison of Advantages and Disadvantages#

Following different technical implementation paths, the mainstream Bitcoin scalability solutions in the market can be roughly divided into the following types:

State channels
Sidechains
Rollup
UTXO + client validation

2.1 State Channels#

State channels can be considered one of the earliest attempts at Bitcoin scalability and the most orthodox solution, with the most famous representative project being the Lightning Network.

According to its definition: Establish a channel between two or more parties, and then conduct multiple transactions within the channel, with only the final state recorded on the Bitcoin main chain, thereby increasing speed and reducing costs.

We can explain the working principle of state channels through a very vivid example: a group of people submits a deposit to establish a WeChat payment group, where transactions not only incur low fees but also occur quickly. Finally, when the group is dissolved, all payment states that occurred in the group will be updated to the Bitcoin mainnet after confirmation.

Understanding the operational logic of state channels reveals their clear advantages and disadvantages:

The advantages are: on one hand, state channels significantly reduce the computational load on the mainnet, achieving lower transaction fees and higher transaction efficiency; on the other hand, the Bitcoin mainnet verifies the final state, so state channels inherit the security of the Bitcoin mainnet well; additionally, since multiple transactions can occur within the channel, theoretically, state channels can achieve unlimited TPS.

The disadvantages are: on one hand, creating a channel has a high technical and cost threshold; on the other hand, users can only transact with users within the channel, which brings many limitations; furthermore, state channels require funds to be locked in advance, which affects the liquidity of funds; more importantly, state channels do not support smart contracts, which clearly does not meet the needs of the Bitcoin ecosystem.

2.2 Sidechains#

In fact, the concept of sidechains has been around for a long time. This solution is essentially an independent chain that runs in parallel with the main chain and supports users to transfer assets from the main chain to the sidechain for interaction, connected through a two-way peg mechanism.

There are quite a few projects adopting this technical implementation path, including the well-known old project Stacks and the rapidly rising newcomer Fractal Bitcoin, which has also attracted the community's attention.

Since sidechains operate independently from the Bitcoin mainnet, they can theoretically break through Bitcoin's own technical framework limitations, selecting the most advanced designs to achieve higher performance and better experiences.

However, because sidechains operate independently from the Bitcoin mainnet, they cannot inherit Bitcoin's strong security foundation well; their trust basis is built on their own consensus mechanisms, and there are significant centralization issues during the initial operation phase. Of course, many sidechain projects are currently proposing innovative solutions to address this issue, striving to better bind their consensus mechanisms to Bitcoin's security foundation.

2.3 Rollup#

Many people's understanding of Rollup comes more from Ethereum L2. In the competitive Ethereum L2 space, projects adopting Rollup solutions are numerous, occupying a significant portion of the market. In this round of Bitcoin infrastructure boom, Rollup technology paths have also shone in the Bitcoin ecosystem, with projects like B² Network and Bitlayer becoming popular in the Bitcoin ecosystem.

Regarding the specific operational logic, Rollup executes transactions off-chain, aggregates multiple transactions into batches, and then publishes these batches to the main chain all at once. This mechanism places data availability on the main chain to inherit its security and decentralization, significantly reducing the amount of data that must be stored on-chain, potentially alleviating congestion on the Bitcoin network and lowering transaction costs.

However, unlike Ethereum Rollup, Ethereum has a virtual machine, which means most Ethereum Rollups use the Ethereum blockchain as a data availability layer and consensus layer. But Bitcoin lacks a virtual machine; how does Bitcoin L1 verify the validity of Rollup proofs? This presents more challenges for Bitcoin scalability projects that choose the Rollup technology solution.

Currently, there are three different types of Rollup in the Bitcoin ecosystem, but none of the three models are perfect:

OP Rollups are based on trust principles, where transactions are assumed to be valid by default but have a challenge period. This model is simpler, easier to integrate, and allows for greater scalability, but the existence of a dispute window leads to delays in the final confirmation of transactions.
Sovereign Rollups take a more independent approach, placing data availability on the main chain but verifying and executing transactions through their own consensus mechanisms. This model allows Rollups to share Bitcoin's security foundation while not being limited by Bitcoin's scripting, but it places high demands on the consensus mechanisms of the Rollups themselves.
Validity Rollups (including ZK Rollups) use cryptographic proofs to verify the correctness of off-chain transaction batches without revealing underlying data. This method balances efficiency and security; however, the complexity and computational demands of generating ZK proofs have always been a challenge.

2.4 UTXO + Client Validation#

If Rollup is seen as an "imported product" in the eyes of most people, then UTXO + client validation is more like a customized solution designed based on Bitcoin's own characteristics.

To intuitively introduce UTXO + client validation, more explanation is necessary, partly due to its technical complexity and partly due to the multiple optimizations and evolutions this solution has undergone in recent years.

We know that Bitcoin does not have the concept of accounts but uses the UTXO (Unspent Transaction Output) model, which is the core concept of Bitcoin transactions and the design foundation of the UTXO + client validation technology path. Specifically, this solution attempts to perform off-chain ledger calculations based on Bitcoin UTXO and ensures the authenticity of the ledger through client validation.

This concept originated from Peter Todd's ideas of Single-use seal and Client-Side Validation proposed in 2016, ultimately leading to the birth of the RGB protocol.

As the name suggests, Single-use seal acts like an electronic seal, ensuring that a message can only be used once, while client validation aims to move the validation of token transfers from Bitcoin's consensus layer to off-chain, verified by specific transaction-related clients.

The core idea of RGB is that users need to run the client themselves and verify changes in assets related to themselves. In simple terms, the asset receiver must first ensure that the asset sender's transfer declaration is correct before that transfer declaration can take effect. This series of processes occurs off the Bitcoin chain, placing complex smart contract calculations off-chain to achieve efficiency and privacy protection.

So how does it inherit Bitcoin's strong security? RGB uses Bitcoin UTXO as a seal, binding RGB state changes to the ownership of Bitcoin UTXO. As long as the Bitcoin UTXO has not been double-spent, the bound RGB assets will not experience double spending, achieving inheritance of Bitcoin's strong security.

Indeed, the birth of RGB is of great significance for the Bitcoin ecosystem, but things are always rough in the initial stages of development, and RGB still has many flaws:

For example, ordinary users using simple client products do not have the ability or resources to save all historical transactions, making it difficult to provide proof of transactions to counterparties. Moreover, different clients (users) only store data related to themselves and cannot see others' asset statuses, which easily leads to client data silos. This lack of global visibility and data transparency severely hinders the development of applications like DeFi.

Additionally, RGB transactions, as Bitcoin's extended transactions, rely on a P2P network for propagation. Users need to perform interactive operations when conducting transfer transactions, all of which depend on a P2P network independent of the Bitcoin network.

More importantly, the virtual machine of the RGB protocol mainly uses AluVM, lacking complete development tools and practical code, and there is currently no comprehensive solution for interaction with ownerless contracts (public contracts). This makes multi-party interaction difficult to achieve.

It is precisely because of these issues that the well-established public chain project Nervos Network, known for its technical strengths, began exploring more optimized solutions, leading to the emergence of RGB++.

Although RGB and RGB++ are closely related in name and both stem from important concepts like single-use seals and client validation, RGB++ is not an extension of RGB. In fact, RGB++ does not use any RGB code; more rigorously, RGB++ is a complete reconstruction based on the RGB concept to achieve a series of optimizations.

The core idea of RGB++ is to delegate the data validation work originally performed by users to ensure global verifiability. Of course, users can also run clients themselves to verify RGB++ data and related transactions.

Who is it delegated to? Public chains and platforms that support UTXO and extend UTXO to give it programmability, such as CKB and Cardano.

How is it delegated? This involves the important concept of "isomorphic binding": Bitcoin is the main chain, while CKB and Cardano act like shadow chains of the Bitcoin main chain, using the extended UTXO on CKB and Cardano as containers for RGB asset data, writing the parameters of RGB assets into these containers, achieving binding between the main chain and shadow chains, and directly displaying data on the blockchain.

Taking CKB as an example, due to the properties of the Cell extended UTXO, Cells can establish a mapping relationship with Bitcoin UTXO, allowing CKB to serve as a public database for RGB assets and an off-chain pre-settlement layer, replacing the RGB client to achieve more reliable data hosting and RGB contract interaction.

In this way, on one hand, RGB++ inherits the strong security foundation of Bitcoin; on the other hand, the non-interactive RGB transactions, the promise of aggregating multiple transactions, and the ability for BTC assets to interact directly with CKB chain assets without cross-chain requirements will further unlock more use cases like DeFi.

The outstanding advantages in security, efficiency, and programmability have made RGB++ highly praised in the industry since its inception, despite having a high cognitive threshold, becoming one of the mainstream Bitcoin scalability protocols. With the upgrade to RGB++ Layer expected to be completed in July 2024, Bitcoin scalability is once again ushering in a moment of innovation.

From the name of this upgrade, we can capture a lot of information: From protocol to Layer, RGB++ will undoubtedly develop towards a broader service scope, deeper aggregation, and more seamless interaction.

It is like each country (blockchain) initially having its own operating rules, while RGB++ Layer aims to find a common point (UXTO) and leverage this common point to connect important elements of ecological development, achieving a higher degree of "common language and shared tracks," building a stronger infrastructure layer for the development of the Bitcoin ecosystem.

First, as an infrastructure, RGB++ Layer must be easy to understand and widely accepted: RGB++ Layer has a complete native AA solution that can well accommodate the account standards of other public chains. This feature not only facilitates support for some key scenarios but also clears obstacles for UX.

RGB++ Layer is also more committed to achieving unified asset issuance: RGB++ Layer supports the issuance of various RGB++ assets, including user-defined tokens (UDT) similar to ERC20 and digital collectibles (DOB) similar to ERC721. Thanks to the advantages of the UTXO model, RGB++ Layer can create a new paradigm for asset issuance, supporting the simultaneous issuance of the same asset on multiple chains, with different proportions on each chain. This not only achieves coordination and unity between different chains but also provides high flexibility for asset issuers.

Since asset issuance can be unified, asset interaction will also be more seamless: Through RGB++ Layer's bridge-less cross-chain (Leap), assets on UTXO chains can cross to another UTXO chain without a cross-chain bridge, bringing not only stronger security but also higher interoperability, allowing various assets based on UTXO chains like Cardano, Dogecoin, BSV, and BCH to be seamlessly integrated into the Bitcoin ecosystem.

After breaking through the two major barriers of asset issuance and asset interaction, RGB++ Layer also aims to bring a unified smart contract framework and execution environment to the Bitcoin ecosystem through CKB-VM, endowing Bitcoin with stronger programmability: Any programming language that can support the RISC-V virtual machine can be used for contract development on RGB++ Layer, enabling the construction of complex logical applications and making the explosion of BTCFi and the landing of more innovative scenarios possible.

At this point, this article has introduced the basic operational logic, representative projects, and advantages and disadvantages of the four mainstream Bitcoin scalability protocols. Readers can review the content through the chart below and gain a more intuitive and clear understanding of the comparative advantages and disadvantages of various Bitcoin scalability protocols.

Of course, the above content is based on a summary and analysis of the past performance of various solutions. In the current cycle, as the Bitcoin ecosystem is poised for action, the representative projects within various technical implementation paths are not idle but are continuously seeking innovation and breakthroughs to seize better ecological positions.

Therefore, after comparing the past, we should focus our attention on the future, exploring the "seeking change" rules of leading projects in various solutions to gain insight into the future competitive landscape of Bitcoin scalability solutions.

3. Ecological Status and Future Potential of Major Protocols#

3.1 Lightning Network: A Symbol of "Orthodoxy," Moving Towards a Multi-Asset Network#

The orthodoxy of the Lightning Network can be traced back to 2009 when Bitcoin's creator Satoshi Nakamoto included a draft of payment channel code in Bitcoin 1.0, which is the prototype of the Lightning Network.

After more than a decade of development, the Lightning Network has become very mature. According to statistics from 1ML, there are currently 12,700 nodes in the Lightning Network; 48,300 payment channels; and approximately 5,212 Bitcoins in channel funds, with collaborations established with multiple social and payment projects.

Comparing this to the data from May of this year, which had 13,600 nodes, 51,700 channels, and 4,856 Bitcoins in funds, we can see that the growth rate of funds in the Lightning Network has slowed, and the number of channels has even declined. Additionally, observing community sentiment, we have heard some negative comments in recent years.

On one hand, during the early development stage of the Lightning Network, many developers recognized the numerous limitations and challenges of this technology in terms of scalability, and the Lightning Network protocol is overly complex, making the development process slow, difficult, and time-consuming.

On the other hand, after several years of development, most people's understanding of it has been limited to payment aspects. A core developer of the Lightning Network, Anton Kumaigorodski, once candidly stated on social media: apart from payments, people should look for other directions. This further pushed the Lightning Network to a crossroads of transformation.

What is even more lamentable is that it seems that team disagreements have always accompanied the development of the Lightning Network. Over the past year, several developers have left, further complicating the already challenging development process.

Of course, in the face of difficulties, the Lightning Network has not sat idly by. While continuing to leverage its advantages and delve into the micropayment track, it has gradually realized that compared to Bitcoin assets, the narrative of Bitcoin as a currency network is more attractive and has begun to move towards building a multi-asset network.

On July 23, 2024, Lightning Labs released the first mainnet version of the multi-asset Lightning Network, officially introducing Taproot Assets into the Lightning Network.

Before the emergence of the Taproot Assets protocol, the Lightning Network only supported Bitcoin as a payment currency, and its application scenarios were very limited.

With the launch of the multi-asset Lightning Network mainnet version, anyone or any institution can use the Taproot Assets protocol to issue their own tokens, and it also supports the issuance of stablecoins corresponding to fiat currencies. The assets of the Taproot Assets protocol are fully compatible with the Lightning Network, making global instant settlement of foreign exchange transactions and purchasing goods with stablecoins through the Lightning Network a reality, further promoting the Lightning Network to become the infrastructure for a global payment network.

3.2 Stacks: An Established Sidechain Project, Nakamoto Upgrade Completed#

In the Bitcoin ecosystem, Stacks is a very unique existence. It is not only an OG project launched in 2017 but also became the first token sale approved by the U.S. Securities and Exchange Commission (SEC) under Regulation A+ in 2019.

According to data from DeFi Llama, with the craze for inscriptions, Stacks' TVL has been continuously growing since the beginning of 2024, peaking at $183 million in early April. However, with the retreat of the inscription craze, Stacks' TVL has fallen back to around $100 million. It is worth mentioning that after years of development, the DeFi activity on the Stacks chain is remarkable, with the liquid staking project StackingDao, which ranks first in TVL, having over 30,000 real staking users, and the cumulative number of independent wallets on Stacks has exceeded 1.21 million.

However, as a sidechain project, Stacks' development also faces many challenges:

On one hand, the security of the chain highly depends on the budget of Stacks miners. Although the connection structure between the Stacks chain and the Bitcoin network (such as the transfer proof mechanism) helps improve decentralization and security, it limits on-chain performance and scalability.

On the other hand, while sidechains have greater flexibility, they essentially build a new chain outside the Bitcoin chain, possessing independent governance structures and transaction models. Therefore, some people believe that Stacks does not possess orthodoxy and lacks strong recognition within the Bitcoin community.

Recently, a milestone moment in the Stacks ecosystem was the completion of the Stacks Nakamoto upgrade: this upgrade not only brings stronger security to Stacks but also significantly improves block confirmation times, achieving transaction speeds of around 5-10 seconds, approximately 100 times faster than the current transaction speed.

At the same time, the core team of Stacks is also developing sBTC, a trustless solution that bridges BTC from the Bitcoin main layer to another chain. sBTC establishes a bridge for BTC assets between the Bitcoin network and the Stacks chain, and its permissionless, open-participation characteristics will further unleash DeFi innovations for Stacks, bringing a $10 billion TVL opportunity.

3.3 BitVM: Bringing Expressive Logic Directly into Bitcoin#

As mentioned earlier, Bitcoin lacks a virtual machine, making it difficult to verify the validity of Rollup proofs. The birth of BitVM aims to bring expressive logic directly into Bitcoin without requiring any changes to Bitcoin itself, helping achieve off-chain computation and verifying any computation on the Bitcoin blockchain. This development not only emphasizes security and efficiency but also opens the door to Bitcoin programmability (such as Turing-complete smart contracts).

Although BitVM is still in its early stages, it has attracted attention from projects and the community. Currently, several projects, including Bitlayer, Citrea, Yona, and Bob, are adopting BitVM.

Currently, BitVM is also continuing to improve its mechanism, with the upcoming major upgrade BitVM2 and BitVM Bridge being notable examples:

BitVM2 aims to execute complex computations off-chain and perform fraud proofs on-chain. This design cleverly achieves Turing-complete computation verification within Bitcoin's limited scripting capabilities.

BitVM Bridge employs a novel 1-of-n security model, where as long as there is one honest participant, theft can be prevented. It is seen as a catalyst for significantly enhancing the cross-chain security and decentralization of Bitcoin and promoting the development of BTCFi.

It is worth noting that while BitVM2 greatly simplifies the verification process, the Gas costs for on-chain verification remain high. Additionally, BitVM is essentially an unimplemented concept of a virtual computer, and its operational logic does not fundamentally break through the limitations of ZK Rollup and Optimistic Rollup. Therefore, many members hold a wait-and-see attitude towards BitVM.

3.4 RGB++ Layer: Bitcoin Asset Issuance Layer, Smart Contract Layer, and UTXO Interoperability Layer#

After completing the RGB++ Layer upgrade, RGB++ Layer has shifted its focus from brand narrative to more refined implementation paths, choosing BTCFi as the construction focus to carry out a series of technical iterations and ecological construction. It subsequently announced a series of important updates and innovative products, aiming to integrate the Bitcoin asset issuance layer, smart contract layer, and interoperability layer into one, rapidly advancing towards a more secure, seamless, and efficient Bitcoin infrastructure layer.

In terms of asset issuance, RGB++ Layer is introducing a new asset issuance model called IBO (Initial Bitcoin Offering), characterized by supporting the creation of funding pools directly on UTXOSwap, allowing newly issued assets to be traded with high liquidity, balancing fairness and community engagement, and bringing a new paradigm for asset issuance for RGB++ assets and the Bitcoin ecosystem.

As a decentralized exchange built on RGB++ Layer, UTXOSwap adopts intent-based trading as its core, implementing off-chain matching and on-chain verification processes, leveraging the parallelism of UTXO to improve transaction efficiency, aiming to become the central hub of RGB++ Layer, aggregating liquidity from various UTXO chains and laying a solid foundation for DeFi development.

Stablecoins, as one of the three driving forces of DeFi development, have also been strategically planned by RGB++ Layer: Stable++, as a decentralized over-collateralized stablecoin protocol, can efficiently build over-collateralized vaults and liquidation modules using the powerful Turing-complete programmability of RGB++ Layer, allowing users to use BTC and CKB as collateral to mint stablecoins pegged to the US dollar (RUSD). Thanks to the strong interoperability of RGB++ Layer, RUSD is compatible with all UTXO chains and circulates freely within the Bitcoin ecosystem, becoming an important component of BTCFi liquidity.

Beyond being an innovator, RGB++ Layer is also committed to becoming an enabler of the Bitcoin ecosystem, further integrating liquidity and application scenarios through strong alliances, promoting the further explosion of the Bitcoin ecosystem. UTXO Stack and Fiber Network are prime examples of this.

In September, UTXO Stack announced its transformation into a staking layer for the Lightning Network, launching corresponding token incentive mechanisms to encourage users to stake CKB and BTC to enhance the liquidity of state channels. This series of measures aims to provide better liquidity and yield models for the Lightning Network, paving the way for its widespread adoption.

Fiber Network, on the other hand, is an L2 network based on CKB, with initial functions similar to the Lightning Network, aiming to become a high-performance, low-cost micropayment network. However, compared to the Lightning Network, Fiber Network has greater flexibility in liquidity management due to CKB's Turing completeness, offering higher efficiency, lower costs, and better user experience. More importantly, while the Lightning Network focuses on a single asset (BTC), Fiber Network's other significant new feature is its support for multiple assets, including BTC, CKB, and RGB++ assets like the native stablecoin RUSD, paving the way for complex cross-chain financial applications.

However, the birth of Fiber Network is not intended to replace the Lightning Network; rather, Fiber Network's ultimate pursuit is to become a scalability solution for Bitcoin programmability. In this process, Fiber Network will closely collaborate with the Lightning Network. The technical stack of Fiber Network mainly includes CKB's Cell, RGB++ Layer, Bitcoin scripts' HTLC, and the Lightning Network's state channels. The first test version released by Fiber Network has already validated the feasibility of transferring BTC assets on the Lightning Network to CKB in a decentralized manner, allowing more BTC assets to circulate on CKB.

Due to the technical isomorphism between Fiber Network and the Lightning Network, there is a natural foundation for achieving cross-chain atomic swaps between the two. This combination of "Bitcoin-level security + Ethereum-level functionality + Lightning Network-level speed" will not only shine in the payment field but also promote the implementation of native stablecoins, native lending, native DEX, and other DeFi applications in the Bitcoin ecosystem, further driving the explosion of BTCFi.

Conclusion#

Through this article, we have understood the flourishing landscape of Bitcoin scalability solutions: state channels can theoretically achieve unlimited TPS; sidechains have outstanding flexibility advantages; Rollup's success in the Ethereum ecosystem has led to increased expectations for its development in the Bitcoin ecosystem; and UTXO + client validation has undergone multiple iterations, with RGB++ Layer appearing to be a culmination of various attributes, inheriting the security of the Bitcoin mainnet while possessing multiple advantages in user experience, programmability, and interoperability, making it a relatively mature and complete Bitcoin scalability solution from a technical theory perspective.

However, it is worth noting that although RGB++ Layer has been iterating and optimizing, and has a clear development path, its specific performance still needs to be further validated in the practice of ecological construction. With the roadmap of multiple projects in the ecosystem being implemented and products being launched, will RGB++ Layer become a significant driving force in unleashing the potential of BTCFi?

The competition for Bitcoin scalability is still undefined, with various solutions showcasing their strengths. Ultimately, who will stand out remains to be seen by the community.

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