Introduction
As technology continues to evolve, is no longer just a cryptocurrency, but its ecosystem is also constantly expanding and deepening. The ecosystem expansion covers various solutions and applications, which not only improve the transaction speed and efficiency of , but also provide support for emerging fields such as smart contracts, decentralized finance (), and non-fungible tokens (). These innovations have made the application scenarios of more extensive, no longer limited to value storage and peer-to-peer payments, but able to meet more complex and diversified needs, driving the progress of the entire industry.
However, with the expansion of the ecosystem, security issues have also gradually emerged. New technologies and applications bring more potential risks and challenges, and how to ensure the security of the system while enhancing its functionality has become a key issue. Security vulnerabilities, attack incidents, and technical defects not only threaten the asset security of users, but may also affect the overall stability and credibility of the network. BitsLab's ScaleBit will delve into the construction process of the ecosystem expansion, the security incidents faced, and the future outlook on security in this article. By analyzing the current technical solutions and security challenges, it aims to provide valuable insights and suggestions for the development of the ecosystem, ensuring that it can maintain a high degree of security and reliability even as it continues to expand.
Ecosystem Expansion
What is the Ecosystem Expansion?
The ecosystem expansion mainly refers to the various extension solutions and application ecosystem developed around the basic network. was originally designed primarily for peer-to-peer payments and value storage, but with the development of technology, the community and developers have also been exploring how to add more functionality on its basis, especially in smart contracts, decentralized finance (), , and more efficient transaction expansion.
How does the Ecosystem Expansion work?
The operation of the ecosystem expansion mainly depends on the extension technologies and protocols built on or outside the mainnet, which enable to support more diverse application scenarios. The following are the operating principles of several key technologies in the ecosystem expansion:
(1)
The is one of the most mature and widely used solutions for . It greatly improves the transaction speed and reduces the transaction fees of by establishing payment channels to move a large number of small transactions off-chain.
Trend: The infrastructure is constantly improving, and the user experience is also improving, with more and more merchants starting to support payments.
Challenge: Liquidity issues and routing efficiency still need further optimization, especially in large transaction scenarios.
Image 1 source:
https ://lightning.network/lightning-network-presentation-time-2015-07-06.pdf
(2) ()
is a sidechain running on the open-source blockchain platform, designed for faster transactions between exchanges and institutions. It is governed by a distributed alliance of companies, exchanges, and other stakeholders. uses a two-way peg mechanism to convert to , and vice versa.
supports confidential transactions and tokenization, making it suitable for enterprise applications. If is the value layer of the internet, and is the peer-to-peer payment network in the -driven financial system, then is the financial layer, adding multi-asset support and financial instruments such as securities and commodities.
Compared to , is a solution focused on facilitating larger and more complex transactions, such as issuing and trading assets (like securities and stablecoins). has built-in confidential transaction features that hide transaction amounts and asset types, while mainly provides privacy through its off-chain transactions. Although excels at small payments and everyday transactions, is more suitable for institutional finance, asset issuance, and cross-border transactions.
Currently, more than 50 exchanges have adopted the , and it has facilitated billions of dollars in transactions, proving its effectiveness in enhancing the utility of for institutional trading. The can provide exchanges with faster settlement times, improving the liquidity of the market and allowing institutions to operate more efficiently and securely.
Image 2 source:
https ://docs.liquid.net/docs/technical-overview
(3) Framework ()
Launched in 2018, is the longest-running sidechain, combining 's proof-of-work () security with Ethereum's smart contracts. As an open-source, EVM-compatible solution, provides an entry point for the growing dApp ecosystem and is committed to achieving complete decentralization.
Similar to , also uses a two-way peg mechanism, allowing users to easily exchange between and . is the native currency of the blockchain, used to pay miners for processing transactions and contracts. While focuses on fast, confidential transactions and asset issuance, expands the and dApp ecosystem through smart contracts.
As of the time of writing, the total value locked (TVL) in exceeds $170 million, with a market capitalization of $380 million.
(4)
The technical architecture of the includes two layers: the Rollup layer and the Data Availability (DA) layer. aims to redefine users' perception of second-layer solutions.
adopts ZK-Rollup as the Rollup layer. The ZK-Rollup layer uses a zkEVM solution to execute user transactions and output the relevant proofs within the second-layer network. User transactions are submitted and processed in the ZK-Rollup layer, and user states are also stored in the ZK-Rollup layer. The batched proposals and generated zero-knowledge proofs are forwarded to the Data Availability layer for storage and verification.
The Data Availability layer includes distributed storage, nodes, and the network. This layer is responsible for permanently storing copies of the Rollup data, verifying the Rollup's zero-knowledge proofs, and ultimately executing the final confirmation on .
Distributed storage is a key aspect of the , serving as the repository for user transactions and their related proofs in the ZK-Rollup. By decentralizing storage, the network fundamentally improves security, reduces single points of failure, and ensures the immutability of the data.
To guarantee data availability, also writes a Tapscript script to the network in each block, as shown in the image below. This script anchors the data path and zero-knowledge proofs of the Rollup that are effectively stored in the decentralized storage for that time period, a cost-effective process generating 6 transactions per hour. Therefore, when verifying, users will cross-reference the transactions and the Taproot script data on the to ensure the ultimate trustworthiness of the Rollup data.
Image 3
(5) Protocol ()
Since its mainnet launch in 2018 under the name , has become a leading solution.
Image 4 source: https ://docs.stacks.co/stacks-101/proof-of-transfer
directly connects to , allowing the construction of smart contracts, dApps, and on , significantly expanding the functionality of beyond just a value storage tool. It uses a unique Proof-of-Transfer () consensus mechanism, directly tying its security to without modifying itself.
has a total value locked (TVL) of over $99 million, and its established infrastructure and growing developer community make it a significant project in this field.
(6)
Babylon's vision is to extend the security of Bitcoin to protect the decentralized world. By leveraging three aspects of Bitcoin - its timestamp service, block space, and asset value - Babylon can transmit Bitcoin's security to numerous Proof-of-Stake (PoS) chains, creating a more robust and unified ecosystem.
Babylon's Bitcoin staking protocol uses a remote staking method, overcoming the lack of smart contracts through cryptography, consensus protocol innovations, and optimized use of the Bitcoin scripting language. Babylon's staking protocol can allow Bitcoin holders to stake Bitcoin in a trustworthy manner without the need to bridge to PoS chains, providing full and reducible security guarantees for that chain. This innovative protocol from Babylon eliminates the need to bridge, wrap, or custody staked Bitcoins.
A key aspect of Babylon is its BTC timestamp protocol. It timestamps events from other blockchains onto Bitcoin, allowing these events to enjoy Bitcoin's timestamp like Bitcoin transactions. This effectively borrows Bitcoin's security as a timestamp server. The BTC timestamp protocol enables fast stake unlocking, composable trust, and reduced security costs, maximizing the liquidity of Bitcoin holders. The protocol is designed as a modular plugin, usable on top of various PoS consensus algorithms, and provides a foundation for building reset protocols.
Image 5
After exploring various technical solutions for expanding the Bitcoin ecosystem, we can clearly see that these innovations not only significantly improve the performance and functionality of the Bitcoin network, but also provide a solid foundation for diversifying its application scenarios. However, as the expanding ecosystem continues to grow and the technology becomes increasingly complex, security issues have also emerged as an important aspect that cannot be ignored. The new expansion technologies introduce more potential risks and attack vectors, posing greater challenges to the overall security of the system.
In this context, ensuring the security of the Bitcoin expansion ecosystem is not only crucial for the protection of user assets, but also for the stability and trustworthiness of the entire network. Therefore, this section will provide a detailed introduction to the vulnerabilities discovered in the Lightning Network in 2023, providing valuable reference for future security protection.
Security Incidents in the Bitcoin Expansion Ecosystem
In October 2023, a potential security vulnerability was discovered in the Bitcoin scaling technology - the Lightning Network. Developer Antoine Riard publicly disclosed the details of this vulnerability after its discovery.
This vulnerability, known as the "replacement cycling attacks", could jeopardize the security of funds flowing through the Lightning Network, leading to delayed or unexpected processing of transactions, and potentially resulting in the risk of fund loss within the Bitcoin Lightning Network channels.
This event highlights that in the rapidly evolving expansion ecosystem, security must always be the top priority. Developers and the community need to continuously monitor and improve the existing expansion solutions to prevent potential security threats and ensure the safety of user funds.
Image 6
Outlook for the Security of the Bitcoin Expansion Ecosystem
Although the Bitcoin expansion ecosystem has made significant progress in improving transaction efficiency and functional diversity, its security still needs to be continuously strengthened. This section will explore the future development directions and challenges of the Bitcoin expansion ecosystem in terms of security.
The Bitcoin expansion ecosystem aims to solve the transaction throughput issues of the mainnet, while ensuring security and decentralization.
Trust model of off-chain transactions: The Bitcoin expansion ecosystem uses off-chain technologies to improve transaction speed, and developers need to ensure the trust mechanism of off-chain transactions is reliable enough. For example, the bidirectional payment channels in the Lightning Network require the use of multi-signature technology, and the channel closure process must be secure to prevent fund freezing or loss.
Privacy and transparency: While the channel transactions in the Lightning Network can be completed without being publicly disclosed, which enhances privacy, it also increases the difficulty of regulation and potentially leads to malicious behavior. Layer 2 networks need to strike a balance between privacy and transparency, by selectively disclosing part of the transaction records to enhance compliance.
User experience and security: The complexity of the expansion ecosystem brings difficulties in user operations, such as the management of Lightning Network channels, which may not be user-friendly for ordinary users, increasing the risk of operational mistakes. The Bitcoin expansion ecosystem can improve user experience and reduce security risks by designing more user-friendly interfaces and simplifying operation tools.
Looking to the future, the Bitcoin expansion ecosystem needs to continuously optimize its technical solutions, improve user experience, and strengthen regulatory compliance, while maintaining decentralization and security, in order to achieve more robust and widespread applications.
Conclusion
The Bitcoin expansion ecosystem has significantly improved the functionality and transaction efficiency of the Bitcoin network through various Layer 2 solutions and innovative protocols, driving the development of emerging fields such as smart contracts, DeFi, and Non-Fungible Tokens (NFTs).
However, as the ecosystem continues to expand, security issues have gradually emerged, requiring the attention of developers and the community. In the future, while the Bitcoin expansion ecosystem pursues higher transaction throughput and more diverse applications, it must continuously strengthen its security mechanisms, optimize user experience, balance privacy and transparency, and ensure its widespread and robust development on the basis of decentralization and security.
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About ScaleBit
ScaleBit, the security sub-brand of BitsLab, is a blockchain security team that provides security solutions for Web3 Mass Adoption. Leveraging our expertise in blockchain cross-chain and zero-knowledge proof technologies, we primarily provide detailed and cutting-edge security audits for ZKP, Bitcoin Layer 2, and cross-chain applications.
The ScaleBit team is composed of security experts with rich experience in both academia and industry, dedicated to providing security assurance for the scalable blockchain ecosystem's mass adoption.
About BitsLab
BitsLab is a security organization committed to safeguarding and building the emerging Web3 ecosystem, with the vision of becoming a respected Web3 security institution. It has three sub-brands: MoveBit, ScaleBit, and TonBit.
BitsLab focuses on infrastructure development and security audits for emerging ecosystems, covering but not limited to Sui, Aptos, TON, Linea, BNB Chain, Soneium, Starknet, Movement, Monad, Internet Computer, and Solana. BitsLab also demonstrates deep professional capabilities in auditing various programming languages, including Circom, Halo2, Move, Cairo, Tact, FunC, Vyper, and Solidity.
The BitsLab team includes top-tier vulnerability research experts who have won international CTF awards and discovered critical vulnerabilities in projects such as TON, Aptos, Sui, Nervos, OKX, and Cosmos.
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