While the Bitcoin community has recently been distracted by the reignited debate around transmission chains, Jameson Lopp, CTO of Casa, says the Botanix EVM Layer 2 protocol’s proposal to attach Bitcoin to its Spiderchain sidechain has been overlooked .
While the native drag-chain and merge-mined sidechain mechanism for Bitcoin would require a controversial fork, Spiderchain could be implemented today without requiring changes to Bitcoin’s base layer, Lopp said in his latest article of blog.
Sidechains are secondary blockchains parallel to the main blockchain, allowing the transfer of assets between the two chains. The challenge is to do it in a decentralized way.
Botanix Labs recently published a white paper on its proposed Layer 2 protocol compatible with the Botanix Ethereum Virtual Machine and its Spiderchain sidechain solution. Although the software is not yet operational, Lopp said Spiderchain makes sense at a high level, but whether it can withstand real-world edge cases and adversarial conditions remains to be seen.
Why Spiderchain?
Ethereum’s DeFi boom has left Bitcoin somewhat in the shadows, particularly when considering the total value locked in their respective second layers, Botanix claims in the white paper. Botanix EVM aims to fill this gap by introducing a second layer on Bitcoin with full compatibility with the Ethereum Virtual Machine. This means that developers could leverage the vast array of Ethereum smart contracts while maintaining the security of Bitcoin’s base layer via the Spiderchain sidechain. Synthetic BTC acts as the native currency of Botanix EVM, pegged 1:1 with bitcoin on Spiderchain.
The Casa CTO noted that detractors have said Bitcoin sidechains are useless, with the oldest and most notable, Liquid and Rootstock, struggling to achieve significant adoption. However, Lopp says that continued research into permissionless bi-directional pegging mechanisms is a worthwhile pursuit, especially since centralized solutions such as wrapped BTC have seen strong demand, with over 150 000 BTC ($4 billion) deposited with a third-party custodian to issue Bitcoin. tokens indexed on Ethereum.
The Ethereum Foundation’s vision for scalability involves multiple layers of EVM-enabled chains, with the Ethereum base layer providing settlement. However, Lopp says Ethereum still faces centralization issues, with Botanix saying Bitcoin provides a more suitable foundation for building these layers thanks to its high level of immutability and proof-of-work security.
How does Spiderchain work?
Spiderchain operates using a series of multisig wallets managed by entities called Orchestrators, Lopp explained. Users deposit Bitcoin collateral into a multisig wallet as a stake to run an Orchestrator, which is discounted in the event of malicious activity. These orchestrators run a Bitcoin node, a Botanix EVM node, and a Spiderchain node, ensuring the integrity of pegs and pullbacks and verifying that other orchestrators are acting honestly.
Peg-ins result in the creation of a new multisig wallet managed by a random subset of active orchestrators, with one orchestrator chosen to manage each epoch (a Bitcoin block). This management of funds by dynamic actors contrasts with the static consortium model of federated multisig sidechains and the dynamic signing model of miner transmission chains, Lopp added.
Botanix uses a proof-of-stake consensus model, leveraging Bitcoin’s proof-of-work system to counteract the potential vulnerabilities of centralization, Lopp said, adding that the security model is robust, provided a majority of orchestrators act honestly. However, this also means that punters do not receive any base fee rewards and can only collect transaction fees.
Spiderchain Challenges
Although Spiderchain presents an interesting solution, it is not without its problems, Lopp pointed out. Questions arise around UTXO management, Orchestrator reliability, and potential attack vectors. If someone were to stake more than 50% of the funds tied to the network, if a Spiderchain multisig contained an adversarial 33% quorum, or if a significant reorganization of Bitcoin occurred, the security model could fail and the peg would break, Lopp warned. Additionally, the cost and complexity of launching such sidechains remains a concern.
However, to avoid silent malicious majority attacks, Spiderchain plans to be started in phases, with the initial phase consisting of centralized orchestrators controlled by Botanix, becoming increasingly decentralized over time.
And after?
After a decade of research into permissionless pegging of sidechains, Lopp says there are only two viable options: federated models or a pegged bitcoin pool.
Federated sidechains distribute trust among a large number of reputable entities. Pools attached to transmission chains incentivize miners to manage bitcoin, while Spiderchain pools incentivize stakeholders. Each model has its own tradeoffs, Lopp added. But ultimately the test will come from performance in real-world conditions.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
