Bitcoin has a scaling drawback.
It was designed to facilitate funds not depending on trusted third events, and with a purpose to accomplish this the system must be verifiable for all customers to make sure funds are legitimate with out trusting the phrase of a 3rd social gathering.
These two issues are diametrically opposed.
If the system facilitates everybody who desires to transact doing so on the blockchain, then the associated fee for folks to confirm all of those transactions will increase enormously, forcing most individuals to belief a 3rd social gathering who can afford these prices. If the system maintains a low price of verification for members, then everybody who desires to can’t affordably transact on the blockchain.
So we’ll scale Bitcoin with Layer 2s, proper? However what does that imply? I’m certain most individuals studying this hear the phrase scaling and instantly suppose purely by way of transactions per second. The extra transactions we will do with bitcoin the asset per second, the extra we’ve got scaled, proper?
I’d argue no. That may be a big part of it, however that’s not the one factor we are attempting to scale. We are attempting to scale the vital properties of Bitcoin as a censorship resistant system. If we didn’t care about that side of scaling, we might already name it a day. We now have exchanges, banks, and different centralized custodians.
Trustlessness
We would like options we construct for throughput scalability to protect trustlessness. Customers mustn’t need to depend upon the honesty of one other social gathering with a purpose to assure the safety of their funds. Inside some constraints customers should have the flexibility to ensure the possession of their funds whereas relying on the motion of no social gathering aside from themselves.
This doesn’t essentially imply the identical safety mannequin because the blockchain, i.e. ship your funds to an handle after which no different motion is required past retaining your keys secure. Customers may want to remain on-line, or examine in on-line periodically inside some outlined time window, or retailer information that may’t be deterministically regenerated, however they need to be able to unilaterally making certain that their funds stay of their management.
Settlement Finality
Customers must have a excessive diploma of certainty that transactions they’ve carried out are ultimate, and can’t be wound again. That is the complete core operate that the blockchain fulfills within the system, processing a transaction and making certain settlement finality.
Presently no Layer 2 system truly offers settlement finality off-chain. What they supply is a settlement assure backstopped by a 3rd social gathering, resembling a federation, custodian, or system operator, or an possibility to train settlement finality when the consumer desires within the type of pre-signed transactions.
The theoretically best Layer 2 system would offer precise settlement finality itself off-chain. Whereas this won’t truly be attainable, we ought to be looking for stronger settlement ensures supplied by third events, and extra versatile and environment friendly designs for finality “choices” within the type of unilateral exit schemes for Layer 2s.
Price
We should reduce the associated fee for customers to make the most of these methods. This relates very closely to settlement finality effectivity. If the exercising of a settlement finality possibility is simply too costly, customers will go for methods the place they delegate finality ensures to 3rd events.
The price of utilizing a blockchain relies on how a lot information your use of it requires. The extra information, the dearer. As blockspace turns into extra demanded and costs enhance, customers should be capable of afford to train a finality possibility.
Liveness Necessities
All present Layer 2s that really present an possibility for settlement finality have some type of liveness requirement, i.e. the consumer should stay on-line or get on-line periodically with a purpose to assure the trustless nature and settlement properties of that Layer 2.
Techniques like Lightning require you to be on-line on a regular basis, use a 3rd social gathering to be on-line and monitor the blockchain for you, or explicitly belief the folks you’ve channels open with to not attempt to steal your cash with previous states. A system like Ark requires you to examine in on-line and rotate your cash as a result of an Ark batch expires and the operator can sweep all funds.
The one method out of that is to delegate settlement finality and trustless safety of funds to a 3rd social gathering. We must be decreasing the liveness necessities as a lot as attainable for methods that do not delegate management to a 3rd social gathering.
Placing It All Collectively
Solely after we take into consideration these properties that we wish to retain whereas scaling throughput can we truly begin to consider the functionalities wanted within the Bitcoin protocol itself to facilitate that scaling.
For present Layer 2s to be trustless, the customers themselves have to be concerned in authorizing stability updates off-chain. This requires customers to work together with one another to approve updates. Clearly then, any opcode or change to Bitcoin that might enable customers to work together with one another extra effectively and shortly to pre-sign transactions implementing settlement finality could be helpful for sustaining trustlessness whereas scaling.
To go even additional, an opcode that allowed some portion of a UTXO to be freely utilized by one licensed consumer, however the remainder of the stability remained restricted and solely accessible to different customers, might preserve trustlessness whereas eliminating the necessity for customers to all coordinate collectively in any respect, or reduce that must solely the place to begin of a protocol.
Enthusiastic about the tip end result we would like, in particular phrases of the specified properties we would like it to have, is what is important to really scale this protocol in a significant method long run. Solely then can we take a step again and take into consideration the concrete performance that the specified finish end result will want on a technical stage.
To scale Bitcoin is extra than simply growing the variety of transactions it will probably course of per second. We are able to do this proper now with custodians. To scale Bitcoin is to extend the variety of transactions that may happen trustlessly, with censorship resistant finality, with out burdensome necessities of liveness positioned on the consumer, and for a price {that a} bigger set of customers can afford.
If we will’t scale these properties, then Bitcoin hasn’t truly scaled, irrespective of what number of transactions a second are occurring with bitcoin the asset.