Bitcoin Scalability: Validity Rollups Will Make Transactions 100x Faster Claims Researcher
Validity digests may soon be coming to Bitcoin. Researcher John Light says rollups could significantly improve the functionality of the Bitcoin blockchain. That includes making transactions faster, more private and increasing throughput by a factor of 100.
“Validity digests can enable up to 100x more throughput than layer one (L1) with no need for block size limit increases and no increase (perhaps even a decrease!) in full node verification costs,” Light tweeted.
He produced a lengthy report on the issue as part of the Human Rights Foundation’s ZK-Rollup Research Fellowship. Lys received input from cryptocurrency luminaries such as Ethereum founder Vitalik Buterin, Alex Gladstein, Eric Wall and others.
“We conclude that validity digests have the potential to improve the scalability, privacy, and programmability of Bitcoin without sacrificing Bitcoin’s core values or functionality as a peer-to-peer electronic cash system,” the report said.
“Given the ‘trustless’ nature of validity rolls as cryptographically secured extensions of their parent chain, and given Bitcoin’s status as the most secure settlement layer, one could even say that these protocols are perfectly suited to each other,” it added.
Bitcoin Validity Summary: What is it?
Zero-knowledge (zk) proof is a technique used by blockchain networks or companies to prove the validity of something like a transaction. They do not reveal any other information about the same transaction except that it is valid.
Blending services use this technology to hide crypto transactions to make them harder to trace. ZK evidence first appeared in a 1985 paper by Goldwasser et al. entitled: “The Knowledge Complexity of Interactive Evidence Systems.”
In his whitepaper, Bitcoin founder Satoshi Nakamoto mused about how zk proof could “be used to improve the electronic cash protocol he invented.”
Cryptographer Greg Maxwell later picked up on the idea.
Maxwell’s paper, “zero knowledge contingent payments”, in 2011, became the basis for future zk-proofs development in blockchains. The first crypto-asset to use the technology was Firo (Zerocoin) in 2016, Light said. It was soon followed by Zcash, mainly as a privacy tool.
In “summary”, zero-knowledge proof is built as a layer-two (L2) solution on top of an existing protocol, such as Ethereum or Bitcoin, to improve scalability, efficiency, privacy and security. For example, Optimism and Arbitrum on Ethereum and Bitcoin’s Lightning Network.
The idea is that for blockchain networks to grow as viable alternative payment systems, they must be able to handle a large volume of transactions, data and users. This is often referred to as scalability.
Light believes it is “a misnomer” to define those protocols that implement zk-proofs as “zk-rollups.”
That’s because not all zk rollups use zero-knowledge proofs, “But they all use validity proofs! So, the more accurate term is ‘validity summaries,'” he said.
Scaling the Bitcoin Network via Rollups
There is a long list of problems that have hindered the growth of Bitcoin (BTC) over the years. This includes the inability to attract developers who build more usable protocols and applications on top of the blockchain.
Bitcoin has also had trouble handling increased transaction volumes. In comparison, rival blockchains, such as Ethereum or Solana, have stepped up to fill this gap.
John Light, the crypto researcher, said in his report that validity digests can improve Bitcoin transaction throughput by 100x.
That means increasing the number of transactions processed on the network to more than 700 per second. Currently, Bitcoin processes an average of seven transactions per second, or TPS, at a cost of about $0.68 per transaction.
That compares to 20 TPS for Ethereum at a price of $0.52 and 3000 for Solana (SOL). Solana boasts some of the lowest transaction fees in crypto, costing an average of $0.00025. But Ethereum has second-tier rivals like Arbitrum, which as of press charges $0.04 per transaction.
Functionality improvements
Validity rollups will improve the functionality of smart contracts on Bitcoin. “An L2 validity digest can implement an execution environment that supports a more flexible smart contract language or more advanced privacy, with no other changes required for Bitcoin,” Light said.
According to analysts, Bitcoin’s transparency tends to make “privacy protocols built on the chain inherently fragile and therefore insufficient to preserve privacy in the long term.”
Developers have been looking for ways to improve Bitcoin privacy for years.
“Validity calls enable these new privacy protocols to be implemented on bitcoin while inheriting the full security of ownership of BTC owned at layer-one,” the report said. “This will provide Bitcoin users with state-of-the-art privacy without giving up self-storage of their BTC.”
For example, it says that Zcash-level privacy protocols that leverage zero-knowledge, end-to-end encrypted transaction techniques can be built on top of Bitcoin. This type of technology, also known as “shielded transactions”, makes transactions completely untraceable.
Aztec Network already runs a similar privacy layer on Ethereum, helping users cut costs. “Bitcoin users can similarly achieve both strong privacy and cost savings for private transactions by moving to a zk-zk rollup instead of trading on Bitcoin,” the report said.
Validity summary: “Great fit for Bitcoin”
John Light explained that the digests he proposes “have strong synergies with the Lightning Network,” the payment layer on Bitcoin. They “enable multiple channel open/close/rebalance transactions that require block space.”
“The additional transaction capacity made possible by validity digests can be used to support more Lightning transactions, increasing the potential number of users who can onboard and use Lightning in a self-sustaining manner,” he detailed.
Light lays out a number of benefits that he believes could add value to the Bitcoin network, such as collapsing layers. This may include one specialized in providing data availability and another specialized in high security payments and contracts.
“By enabling more efficient, creative and private use of bitcoin, validity hashes can generate new sources of demand for Bitcoin block space. This will lead to increased revenue fees for Bitcoin miners, thereby also increasing the security of Bitcoin,” he said.
“Given that validity digests are “trustless” by design, and can be implemented without introducing new risks or sacrificing any of bitcoin’s core values or features, I believe that validity digests could be a good fit for Bitcoin.
Regulating reticle
A more privacy-oriented Bitcoin network is likely to run afoul of anti-money laundering (AML) laws that are now increasingly required by regulators from around the world.
Regulators have long targeted the top cryptocurrency. These regulators often consider Bitcoin a tool for criminals.
The US authority Financial Crimes Enforcement Network tracks financial transactions and limits money laundering and terrorist financing. Earlier, in December 2020, the agency revealed specific plans to go after crypto-assets.
It proposed new rules requiring financial intermediaries such as crypto exchanges to report on and verify the identity of users who transact via non-hosted wallets. Regulators in Europe are also tightening legislation around AML, particularly targeting crypto transactions.
John Light agrees that more privacy can be a problem.
“While the very existence of Bitcoin itself is a provocation against authoritarians … validity conversations could add whole new provocative dimensions to Bitcoin,” he admitted. There are other pitfalls of Bitcoin validity summaries.
They may increase the block space from the current 4MB to allow more digest transactions. They would also start “reorganization wars” between competing blockchains, incentivizing miners. Collections impose new costs on L1 full nodes to confirm the validity of transactions.
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