The expert evaluates the concept of an Ethereum-compatible network for Bitcoin


Casa co-founder and CTO Jameson Lopp drew the community’s attention to the concept of the Spiderchain second-level solution based on Bitcoin from Botanix Labs and noted its advantages.

The expert said that one of the advantages of the proposed network is that it can be implemented without making changes to the blockchain of the first cryptocurrency.

The L2 solution is a sidechain with two-way binding. Such protocols typically use the underlying blockchain’s coin, rely on its security mechanism, and allow access to more features such as scalability, programmability, and privacy.

Developers at Botanix Labs have noted the growth of DeFi applications in the Ethereum ecosystem, which are largely unavailable for Bitcoin.

Less than 0.1% of the total supply of digital gold is locked in L2 protocols based on the network of the first cryptocurrency. At the same time, the volume of “wrapped bitcoins” on Ethereum exceeds 2% of the issue.

Spiderchain Compatibility with Ethereum Will Expand the Use of Bitcoin in DeFi Applications

Spiderchain is fully compatible with EVM, uses the Proof-of-Stake (PoS) consensus algorithm, staking and smart contracts. The protocol consists of several layers, with the underlying blockchain as the settlement layer.

Lopp called it the right decision to use existing tools from the EVM ecosystem. The Solidity smart contract programming language ensures a high level of trust and adoption, he added.

Lopp admitted that even the oldest and most well-known Bitcoin sidechains, like Liquid and Rootstock, are not widely used. However, the demand for the use of digital gold for more complex financial functions does confirm the volume of tokenized bitcoins on Ethereum, he emphasized.

The expert named one of the problems as the security of the binding mechanism—the transfer of assets between networks. This usually involves the need for intermediaries to be involved in the transactions.

“Trusted third parties are security holes,” Lopp quoted renowned cryptographer Nick Szabo as saying.

According to the developers, they solved this problem by using multi-signature.

The sidechain is managed by so-called “Orchestrators”, who make a deposit in Bitcoin. They simultaneously run two nodes on both networks.

“Orchestrators” manage requests for linking and unlinking assets, controlling the multi-sig wallets opened for each new input. Users place coins in staking through them, receiving “synthetic bitcoin” in a 1:1 ratio.

Wallets are controlled by a random set of currently active “orchestrators”. One of them is selected by calculation to control the epoch, at the end of which transactions are finalized.

Blocks in Spiderchain are not synchronized with the Bitcoin blockchain and, most likely, their interval is 12 seconds, Lopp suggested.

Visualization of Spiderchain operation. Source: Lopp’s blog

Spiderchain decentralization is in question

In his opinion, the tendency towards centralization, which PoS networks are prone to, is balanced by Bitcoin’s Proof-of-Work algorithm. However, this means that stakers will not receive core network fees. Their income will come from transaction fees on Spiderchain and fines from “orchestrators” for improper behavior,” which raises questions about the adequacy of incentives, Lopp noted.

He also questioned whether there were sufficient mechanisms in place to prevent malicious majority attacks on the network.

At the initial stage, Botanix Labs will control 100% of the nodes, with a further step-by-step transition to decentralization.

The expert evaluates the concept of an Ethereum-compatible network for Bitcoin
Spiderchain Decentralization Roadmap. Data: Lopp’s blog.

Lopp expressed skepticism about this approach, adding that most projects going this route are becoming increasingly centralized.

He also drew attention to certain technical vulnerabilities of Spiderchain in terms of share restrictions for “orchestrators”. Because of their approval mechanism, there is a risk of losing funds if the Bitcoin network is reorganized to a depth of more than five blocks, he pointed out.

Let us recall that in the Ethereum ecosystem, for the first time in history, two L2 solutions – Base and zkSync Era – surpassed the base blockchain in the number of transactions per second.

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