Topic: Sidechain Observer - Bitcoin L2 Projects & current state of development (Read 873 times)

we are meandering away from topic of sidechains due to conversations of valuations of different networks

but when it comes to side chains my view is if they are sidechains and 'layers' of a main network. the different unit of measure on the subnetwork to the mainnet should be a fixed/stable peg, to easily get in and out of the networks without loss of value....
as appose to altcoins that have de-fi exchange/bridges to mainnets which can have variable pegs and have their own 'market caps' and other value measures

in short: to be a subnetwork/sidechain (aka 'layer') they need to be fixed peg if using different unit of measure

thus locked value of bitcoin in a 'vault'/smartcontract would also be the value of the other sidechain unit. thus not offsetting/doubling/creating more 'market cap' valuation silly games people play to make bitcoin look less valued

Talking about market caps of altcoins is like too blindly and naively believe in a whore.

Altcoins can be created and minted from the air and this abusement of code makes altcoin market caps are like big jokes.

Like talking about cap of fiat currency, that does not exist because government can order central bank to create more fiat currency and add it to circulation anytime.

Bitcoin vs. Altcoins – projected Marketcap

Like there is only one Bitcoin and people are preferrable to say Bitcoin market cap dominance decreases with time, but they don't see a big fact that there are more and more thousands of new altcoins created by scammers with time.

you just stop caring about market cap.. its meaningless

as for calculating the underlying value of a coin, thats for another topic that has already been answered multiple times over the years on this form [use search]

So how do you know the true marketcap or value of an altcoin, or calculate it?

you are talking more about altcoins, not what this topic describes as 'sidechains', but lets clarify a few things about those altcoins

ethereum and solano are not at market prices due to speculation of their own merit of utility. but instead they are used by traders as a arbitrage path round the order books back to the main bitcoin market

people only stake these altcoins because the market is bubble manipulated to premium prices due to bitcoin arbitraging, and with such a low cost to stake-to-mint new coin, they take the risk of reward to get literally free coins via staking, hoping they dont get hacked(by simply not changing their wallets to some wacky hackers wallet.)


altcoins are not worth tens of billions.
there is no billions of dollars held in vaults backing a coins market cap.. i still laugh at anyone that thinks a '$$ marketcap' means anything... its just blind math of one units $ price multiplied by total units in circulation.. there is no $$ held in vaults to cover the market cap

anyone can create a new currency thats pre-mined/minted with a trillion coins. then public market spend 1 coin for $1 and create a market cap of trillions for the cost of $1.. yep thats how easy it is to manipulate market cap $ measures

in short, stop caring about $$market cap.
its the single unit price per coin that matters, and then looking into why it sits at the level it does, which explains if its useful or desired or not

bitcoin has alot of resources protecting the blockchain via mining costs which gives bitcoin a nice healthy support value bottom that is roughly $60k right now. meaning the speculative 'bubble' ontop is just 1.5x of value, which is a healthy market price

ethereum however has a stake-to-mint validator combined cost of just $50/eth, meaning it is at a 65-70x premium market bubble, which if you look at the btc:eth rate went from a 1:12 in the change-over time of PoW-PoS to now a 1:29 meaning ethereums losing its grip of the market (comparative desires/demand)

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as for this topic, unlike altcoins and altnetworks that have de-fi/contract bridges to bitcoin, when bitcoins are locked up to offramp users to then play with transactions on sidechains/subnetworks, those other tokens should be pegged and backed by bitcoin and not have a depreciating peg rate, whereby the 'cap' of a sidechain/subnetwork should be of locked/vaulted up bitcoin

It amazes me that people are still screwing around with staking and smart contracts after what happened to Blockfi and Celsius.
Even on ethereum and solana the biggest altcoins, stakers are still getting hacked on a daily basis. The altcoin market is a hackers paradise.

It boggles my mind as to how all these alt cryptos are still worth tens of billions or hundreds of billions of $, just proves that people are stupid AF.


www.youtube.com/watch?v=A5os37wUgbw

not only hacking, but mostly internal collusion and bad practice.. but also as d5000 example of STX shows, someone locking in EG 0.0036btc to play with 100stx (1stx=0.00003600btc) in september, but if you want to convert that 100stx back this week, you would only get 0.0018btc which is half the amount
the stx example is not a fixed peg sidechain, but instead a variable rate peg bridge to an altcoin

I would never touch any sidechain or defi crap, too much risk of hacking and losing your funds to hackers. Leave this crap to the shitcoins. 
Even lightning wallet is designed for only small transactions, so you are only risking small amounts.

I mostly agree with you, @franky1.

It seems also investors are not really happy: looking at the Stacks / BTC evolution, the price of the Stacks "utility token" went only downhill in comparison to BTC since sBTC was enabled. It had pumped a little bit before and after the November 29 announcement of the rollout plan, but this couldn't change the general downtrend. I guess this means that many are feeling Stacks had delivered less than promised.

Of course the unilateral withdrawal problem ("unlock coins out of the 2-way peg without needing approval") is common to most sidechain designs, even more decentralized ones. AFAIK from the designs which already have a mainnet none solves it, and from those with a testnet, Drivechain seems to be the only one with a mechanism allowing an unilateral withdrawal, with only Bitcoin miners being able to prevent a withdrawal to happen, so the withdrawal mechanism basically occurs "inside" Bitcoin's incentive system.

no one should lock funds into a system:
1. that prevents withdrawals:
       a: by having the signers 'collude' to agree not to sign, as its evidence the can do it at anytime thereafter too, meaning
           people dont get decentralised control of choice of when to withdraw, but have to hope the signers are in a happy/willing mood
           emphasis: if there is a way to prevent withdrawals now, they can prevent it later too, heed the warning

       b: requiring a protocol update thats not released/tested, because there might be issues later. meaning the colluding group 'could'
           claim a bug/hack in march, offer 5%(5c of dollar) bankruptcy/liquidation/payout.. then rugpull a sign/unlock to keep 90% as profit

2. that businesses wont want to use yet, because they too cant withdrawal to restock their products
3. that has suggested timeline but shows limp thought about guarantee of implementation
4.where you cant get funds out if the bitcoin price ATH to cash out for a re-buy after correction opportunity. meaning it sounds suspect they want you to lock funds up right in the prime period of an approaching ATH and not allow unlocks/withdrawals during this prime period

id suggest wait until april+ and let others mess with/lose/test it first. dont be a victim based on 'trust of dev' especially not around this period of the market cycle.. there are too many greedy colluding temptations for others to scam users

Stacks has launched its sBTC "sidechain Bitcoin" on December 17. It's currently only available for deposits on the sidechain, withdrawals according to the roadmap will be enabled in March 2025. The rollout plan can be seen here.

Unfortunately, the initial sBTC implementation is quite disappointing. It is currently a static federation of 15 "community-elected" so-called "signers", mainly businesses of the DeFi/altcoin sector. The list is included in the rollout document linked above.

Steps towards the "dynamic federation" they promised will only be taken after the March 2025 upgrade, with no ETA still. Even Liquid seems to be more advanced as of now, as they have implemented already a "replacement voting" system.

So for now, Nomic and tBTC seem to be still the only projects I know where a truly dynamic federation was implemented.

I looked a bit into Botanix Labs' Spiderchain project, as I recently heard news about its adoption by a major DeFi player (Aave). Spiderchain is still a testnet, but gets regularly mentioned, also on more seriously/academic-looking websites, so it might be worth a look. It is EVM-compatible.

On their documents on the website, Botanix describes their project as a "distributed network of decentralized multisigs safeguarded by a randomized subset of participants". Another claim: "Anyone will be able to stake their bitcoin on Bitcoin."

Spiderchain nodes are called Orchestrators. Orchestrators need to deposit a certain amounts of coins, which will be slashed when the orchestrator misbehaves. Orchestrators hold Bitcoin multisig wallets. Every Bitcoin block a new multisig wallet is created and assigned to a random number of orchestrators.

So far the design resembles Nomic and tBTC, but with a difference: on the sidechain, there seems to be no native token. This means, the deposits and also the PoS staking are all done in "sidechainBTCs". This raises questions about potential risks if the sidechain's supply changes drastically, however this problem should be similar in other concepts like Drivechain.

The deposit/withdraw process of the first version is described here, although not in the detail I'd liked (incentives, risks). There is also a centralized server, the SideCar, involved, which "helps" users with peg-ins and peg-outs. According to the docs however this is an early version and would be decentralized further over time.

So far this concept seems interesting above all because no pre-mined token is involved and thus it seems to combine the advantages of Liquid and Nomic/tBTC. Once its mainnet gets launched I will probably investigate it more deeply.

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Sorry to respond late to this. According to BitcoinLayers, Fractal's bridge is managed by a single, centralized custodian (Bool Network) and the code of the bridge is not even open source. So basically it's not better than Liquid.

There is no new development for Gelios, I think people find out already and that's part of the reasons why the volume keeps going down, the team are not reachable anymore too, I believe they abandon the project already.

One provides seemless integration and infinite scalability with Bitcoin, and this one uses the Bitcoin core code outta box for unlimited layer scaling, still pretty new and the reason why I find this one better is the fact that it gained attention.

Since its launch now many Bitcoin miners have moved over 30% of mining power to this L2 project, because it is a PoW coin just like Bitcoin too, I don't think that many people are aware of this new kid on the block yet.

The name is Fractal Bitcoin.

I don't know much about Bitcoin Layer-2s and will dedicate time in the coming days to absorb as much knowledge on Bitcoin Layer-2s as much as I can. I'm really hoping that Bitcoin doesn't following the same path that Ethereum took when they made Layer-2s, the focus of their roadmap, neglecting Ethereum itself and that is beginning to hurt their community. I do not wish for such for Bitcoin but I'm very happy that builders are building on Bitcoin now more than ever.

Thanks, I've watched the video. Basically he's saying that the team disappeared, there were suspicious transactions, and that there are connections to other projects like Xally which could indicate they were created by the same "team". If I interpret correct even BVM could also be implied - this is another project I consider very doubtful, and as I wrote in my review it's interesting that in the whitepaper there are sections which look very similar to the Biop whitepaper. Perhaps another candidate?

Edit: The video is about a month old, so maybe there are new developments now. The Gelios price on Coingecko meanwhile is lowering every day  

So I've added Gelios to the "possible scams" list, with the video linked as the accusation.

I want to clarify here however (have added that "disclaimer" to the OP too) that I'm more interested in the technical side of the projects here in this thread. It's not a scam busting (or L2 promoting) thread. But anyway I'm thankful for all links and other material about possible scam accusations as, as I wrote in the OP, a lot of those "L2" projects listed on l2.watch for example are looking very, very shady. And they don't exactly contribute to sidechains becoming more interesting for the average Bitcoiner.

It is more than you could have imagined, Gelios team are responsible for building few other scam projects too, if you don't mind looking into it then here you go..

https://youtu.be/pml2X7vL76U?si=JiwdKbxQn1lYZG44

Also, someone on the forum already created something similar in the altcoin discussion section weeks ago, I think this accusation are too clear to doubt, although many people fell victim already.

Thanks for your opinion, can you link to the YouTube video? I've not found it, but there seem to be still some promotional videos about them.

I have already stated that Gelios didn't leave a good impression on me, if it's an outright scam it would be not surprising for me. I've added a warning to the post where I reviewed them but more context would be nice


My opinion about Merlin Chain is not that positive, although certainly a bit better than Gelios, and on BitcoinLayers.org they also have not really stood out among other semi-centralized projects. Thus it would be interesting why you think that they're worth mentioning, perhaps because of their proposed future ZK rollup mechanism?

I didn't know about Tectum, so thanks for mentioning it, I'll probably look into it.

I just want to correct a few people mentioning Gelios in this thread, that project is a proven scam project, go on YouTube and see for yourself, some smart members have exposed the project, and the team blocked them, as you can see the project volume is almost dead, there is a reason why.

The only real BTC layer2 projects that's worth mentioning are Merlin Chain and Tectum, these two are far from scam or any shady acts so far, there are many more but most are scams. Becareful where you put your hard earned money.

The majority of them won't survive, I will still choose most old BTC L2 projects over new projects, like Rootstock and Lightning.

While some in the "sidechain community" for sure are waiting for Stacks to rollout their sBTC bridge based on a dynamic federation (this should happen in October or November), I looked a bit deeper into tBTC, a "relatively" decentralized bridge. It is active on several chains, among them Ethereum, Solana, and the ETH L2s Arbitrum, Optimism and Polygon. An overview is here and the security model is described here.

Basically, tBTC (not to be confused with testnet Bitcoin) converts Ethereum, Solana and the other altchains it resides into a Bitcoin PoS sidechain.

The second version of the tBTC bridge, which I will describe here, was launched in early 2023, the first one (already launched in 2020) relied on overcollateralization and was thus a bit similar to algorithmic stablecoins like Dai.

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tBTC is a bit similar to Nomic (see this post) in that the stakers of a certain token, the T token (the "subnetwork" of this token on each participating chain is called Threshold Network), manage the so-called "wallets", which hold the Bitcoin funds which back the tBTC token.

Each wallet is managed by 100 so-called "signers", which are selected among the T token stakers with an algorithm looking a bit similar to the "Follow-the-satoshi" principle, i.e. each staker's chance to become a "signer" is determined by the amount they stake. 51 of these 100 signers have to collaborate (using Threshold Elliptic Curve Digital Signature Algorithm, an alternative multisig-like scheme) to move the Bitcoins in the "wallet".

Like in Nomic periodically (each 12 hours) the deposits on the Bitcoin chain are consolidated into a single UTXO, and once this occurs, tBTC are created on the altcoin chain (ETH, SOL ...). This process is called "Deposit Sweep". Due to it being slow, there's an additional mechanism called Optimistic Mint, where tokens can created already after 3 hours if an user group called "Guardians" doesn't prove the deposit was created fraudulently. It's very similar to an optimistic rollup.

To redeem BTC, the user notifies (via a smart contract called the Bank) the signers of a Bitcoin wallet (see above). This request starts a timer, and the signers now have to prove the tBTC user got the tBTC according to the protocol, and pay him out the equivalent amount of BTC on the Bitcoin chain. If the signers become unresponsive and somebody notifies the smart contract on this failure, the signers' stake deposits are slashed and the tBTC are returned to the user, who can (afaik) then start the process again. The user who notified the contract gets a part of the slashed reward, again a bit like in an Optimistic rollup.

The redeem process is slightly different than in Nomic, but in general the system is quite similar. In both systems, if you deposit a BTC, you basically trade Bitcoin's PoW security to a PoS system. I believe also Thorchain works with a similar model.

i think we have already had this discussion many times and you simply forget the basics

VALUE (economic number) is not PRICE
values(sentiment/desire) is not VALUE

bitcoins VALUE is not measured on the market. VALUE is a number that sits below the market price. much like retailers do not show the cost to the farmer of milk/butter. retail market price just shows the going rate to customers which is affected by values and other market effects
but underlying that is the wholesale, the value. which if the retail market comes down to near the value amount then the price is not at premium but near value

farmers cant/wont sell their milk/butter below cost and if the most efficient farm on planet can only make milk/butter at X, the retailers cant even get milk/butter for less so wont sell their retail market product below that value either.. hense it forms a support line no one wants to cross below

however if people can self produce for pennies, then it can sell for pennies and still break even.. so if the current price is exceptionally high premium compared to its self production cost. the only reason its held up high in the markets is due to the market affects of manipulation and thus has more chance to crash

..
when you mention looking at stats of how much coin is on market orderbooks waiting to be converted or is being converted today.. thats the stuff of the market effects of the swings values(sentiment) of the short term PRICE drama of whats ABOVE VALUE.

dont confuse value with price