January 25th 2024 | Kris
BSquared Network (B^2 Network) is a leading Layer 2 project on BTC, successfully introducing smart contracts to BTC, which unlocked Bitcoin’s $832 billion market potential. The project provides a new platform for innovative applications in the BTC ecosystem such as DeFi, NFTs, BTC derivatives, and more.
1. Unlocking the Value of the Bitcoin Ecosystem
Current Issues of BTC Network:
● Performance Issues of Bitcoin: Bitcoin was originally designed with a primary focus on decentralization and security, rather than performance. Due to its 10-minute block interval and limited block size, Bitcoin’s throughput is severely limited, capable of processing only a small number of transactions per second. As the Bitcoin user base continues to grow, this issue has become increasingly prominent, leading to network congestion, transaction delays, and soaring transaction fees.
● Turing Incompleteness of Bitcoin: Bitcoin’s scripting language was intentionally designed to be non-Turing complete, aiming to enhance network security and simplicity. This means that Bitcoin cannot natively execute complex smart contracts, thereby limiting its potential in the decentralized application domain.
● Transaction Fee Issue: With growing network traffic, users must pay higher transaction fees to ensure their transactions are prioritized. This dynamic makes small or frequent transactions economically impractical.
B2 Network is an EVM Compatible Layer 2 on BTC，enabling developers and consumers to directly experience a native Bitcoin Layer 2 network.
● It provides an off-chain transaction platform supporting Turing-complete smart contracts, enhancing transaction efficiency, and reducing costs.
● By integrating Zero-Knowledge Proof (ZKP) technology with Bitcoin’s Taproot, it ensures enhanced privacy and security of transactions.
● The network aims to develop Bitcoin into a diverse platform, setting the stage for innovative applications like DeFi and NFTs. It is suitable not only for traditional Bitcoin assets but also for emerging Bitcoin derivative assets.
2. The Design and Advantages of B2 Network
The technical architecture of the B2 Network is illustrated in the following diagram, which includes two layers: the Rollup layer and the Data Availability (DA) layer. The B2 Network aims to redefine users’ perceptions of the Bitcoin Layer 2 solution.
B2 employs ZK-Rollup as its Rollup layer. The ZK-Rollup layer adopts the zkEVM solution, responsible for the execution of user transactions within the Layer-2 network and the output of related proofs. User states are also stored in the ZK-Rollup layer. Batch proposals and generated zero-knowledge proofs are forwarded to the Data Availability layer for storage and verification.
The Data Availability layer includes distributed storage, B2 nodes, and the Bitcoin network. This layer is responsible for permanently storing copies of Rollup data, verifying the zero-knowledge proofs of Rollup, and ultimately executing final confirmations on the Bitcoin Network.
Distributed storage is a key aspect of the B2 Network, acting as a repository for ZK-Rollup user transactions and their associated proofs. Through decentralized storage, the network fundamentally enhances security, reduces single points of failure, and ensures data immutability.
To ensure data availability, B2 also writes a Tapscript into each Bitcoin block, as shown in the diagram below. This script anchors the data paths and zero-knowledge proofs of the Rollup stored effectively in decentralized storage for that period. This process is cost-controlled, generating six transactions per hour. Therefore, by comparing each transaction with the Taproot script data on the Bitcoin Layer 1, users can verify and ensure the final credibility of the Rollup data.
Additionally, the B2 Network will transform the zero-knowledge proof verification process conducted by B2 nodes into a Bit Value commitment. This commitment will be written into the Bitcoin network, and challengers can compare the results of zero-knowledge proof verification with the Bit Value commitment. In case of malicious behavior, challengers can initiate a challenge through a challenge mechanism to unlock rewards, as illustrated in the diagram below.
Through the above design, B2 Network achieves the following advantages:
● Transaction costs reduced by 50 times; speed increased by 300 times.
● Interaction is possible through familiar wallets like Unisat, Xverse, Metamask, OKX, etc.
● Utilizes account abstraction, allowing access using original BTC (bc1p…) or ETH (0x) addresses.
● Low costs:
○ The cost of the B2 Rollup Layer is the operational expense of the chain itself. With increasing demand, only horizontal addition of RPC services and ZKEVM Prover are needed.
○ The cost of the B2 DA Layer is the operational cost of B2 Nodes. An increase in Rollup transactions does not affect B2 Nodes.
○ The cost at Layer1 is the transaction fee of BTC itself. Each BTC block contains a Layer1 transaction, so the cost is fixed.
It’s noteworthy that the B2 Network will undergo future upgrades. B2 Nodes will be upgraded to B2 Hub, which will serve all developers and projects wishing to build Layer-2 Rollups on the Bitcoin network, providing a data availability (DA) layer based on the Bitcoin network and a state transformation verification/proof system.
3. How B2 Network Activates the BTC Ecosystem through Economic Incentives:
● Sequencer Staking: Sequencers participate in the validator election by staking BSQ tokens, and users can delegate BSQ to these validators.
● Bitcoin Miner Incentives: Bitcoin miners who contribute computational power can earn BSQ tokens. Those participating in generating ZK proofs for Bitcoin mining can earn BSQ (miners’ earnings will generate new revenue after halving).
● Cross-Chain Asset Incentives: Users will earn BSQ rewards when they bridge assets like BTC, ETH, BRC20, etc., to B2 Rollup (higher rewards for users who lock assets in Layer 2 DeFi to provide liquidity).
● Storage Node Incentives: Storage nodes store copies of Rollup data and submit stored ZK proofs to earn BSQ rewards.
● B2 Hub Transaction Fees: BSQ will be the native token of B2 Hub and deploying ZK-Rollup on the B2 Hub will incur BSQ as transaction fees.
● Governance: BSQ holders can vote on future protocol upgrades.
● Transaction Fee Discounts: Paying Gas fees with BSQ entitles users to a discount.
● Revenue Sharing: Users who stake BSQ can share in the platform’s Gas fee revenues.
4. Envisioning the Future
B2 Network introduces smart contracts to Bitcoin, fostering a new era for DeFi, NFTs, and derivatives, enriching the Bitcoin ecosystem with a robust new platform. In the foreseeable future, we anticipate a substantial reduction in Gas fees associated with Bitcoin asset transactions. Moreover, the enhanced programmability offered by Layer 2 solutions is poised to expand Bitcoin’s utility, catalyzing a diverse array of use cases and fortifying its position in the digital economy.
About ABCDE
ABCDE is a VC focused on leading investment in top Crypto Builders. It was co-founded by Huobi Cofounder Du Jun and former Internet and Crypto entrepreneur BMAN，who both have been in the Crypto industry for more than 10 years. The co-founders of ABCDE have built multi-billion dollar companies in the Crypto industry from the ground up, including listed companies(1611.HK), exchanges(Huobi), SAAS companies(ChainUP.com), media(CoinTime.com), and developers platforms(BeWater.xyz).
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