Project Research | EVM Bitcoin Layer 2 with Smart Contracts: Botanix Protocol

I.Project Introduction

Bitcoin, the largest and most well-known cryptocurrency, is famous for its decentralized structure and blockchain technology. Its high degree of decentralization and security have led it to be viewed as a global reserve cryptocurrency. However, Bitcoin has some limitations in composability and scalability. As solutions evolve, the emergence of Ethereum, with its Turing-complete programming language, challenges the fundamental layer’s scalability with a decentralized application ecosystem. This, combined with the development of Ethereum’s Layer 2, has led to unprecedented growth in the Ethereum ecosystem. Yet, introducing smart contracts to Bitcoin remains an unresolved issue. Given the relative underdevelopment of Bitcoin’s Layer 2 applications and value, there’s significant room for growth in building on Bitcoin’s second layer.

Currently, various technologies exist to build BTC’s Layer 2, including state channels, drivechains, multisig rollups, and potential Bitcoin soft fork proposals for ZK and OP rollups. The Lightning Network and Liquid multisignature are already successful BTC Layer 2 solutions. This article introduces a new concept — the Botanix Protocol.

The Botanix Protocol is a decentralized chain solution built on BTC, using the fundamental principles of lightning to operate the Ethereum Virtual Machine (EVM). Botanix adopts an account-based model similar to Ethereum, replacing Bitcoin’s Unspent Transaction Output (UTXO) model. Each Botanix full node will run both the BTC core protocol and the Botanix Protocol.

II. Project Vision

Botanix Labs proposes building a second layer on top of Bitcoin, featuring complete Ethereum Virtual Machine (EVM) equivalence. Utilizing Bitcoin as the most decentralized and secure base layer, this second layer will unlock new possibilities for the composability, ecosystem, and functionality of Ethereum smart contracts. This initiative introduces Spiderchain—a second-layer design atop Bitcoin, aimed at enhancing decentralization and offering users a broader range of application possibilities.

III. Development Roadmap

IV. Team Background

The team currently consists of over ten core members, many of whom have been involved in the cryptocurrency field for over a decade, including former Blockstream employees. The founder, Willem, is a graduate with dual degrees in Electrical Engineering and Business Economics from Belgium. The team has a background in technology and marketing, but is generally average in its field.

V. Financing Information

Currently not available.

VI. Project Architecture

In the current Bitcoin (BTC) second layer and sidechains, the Lightning Network offers decentralized second-layer technology but is limited by liquidity, ecosystem, and BTC’s UTXO constraints; federated multisignature and Op Rollup provide a combination and flexibility but are limited by centralized characteristics. Botanix protocol, however, is a second-layer Ethereum Virtual Machine (EVM) built on top of Bitcoin. Botanix uses a Proof of Stake (PoS) consensus mechanism, requiring participants to stake actual Bitcoin on the first layer to protect the entire second layer. The protocol operates entirely on Bitcoin, allowing users to natively use Bitcoin in any application built on EVM. The second-layer protocol is optimized to allow anyone to participate and run a full node. Bitcoins on Botanix are locked in Spiderchain and secured with a series of continuous multisignatures controlled by a random subset of Orchestrator nodes, ensuring genuine participation. Thus, moving from the Bitcoin main chain to the second layer requires an additional trust assumption: no single party controls the stakers’ collective. The Botanix protocol can be implemented immediately on Bitcoin without any Bitcoin Improvement Proposals.

The Botanix network, by introducing smart contracts that cannot be executed on Bitcoin, similar to the node operators in the Lightning Network, moves complex parts off-chain to ensure the correct state of the Botanix blockchain. The entire second-layer network operates as a blockchain, allowing other users to create new wallets and deploy smart contracts on this protocol.

The Spidechain

Botanix introduces Spiderchain, a new mechanism for the second-layer blockchain. Spiderchain consists of a series of continuous multisignature wallets created among Botanix Orchestrators. By managing these multisignature wallets in a distributed manner, security is ensured. This continuous chain of multisignatures creates a network to protect Bitcoin assets on the Botanix chain. This “moving” chain of multisignatures acts as a collateral, locked in this decentralized multisignature network, thus named Spiderchain.

Spiderchain’s key role is to separate Bitcoin assets from the Bitcoin blockchain. By protecting Bitcoin on Botanix in a distributed chain of multisignatures, it isolates Bitcoin from the Ethereum Virtual Machine (EVM). This allows the transition from Bitcoin’s UTXO model to the account model used in EVM.

The image below shows a visual representation of Spiderchain. With each Bitcoin block production, a new multisignature is created among different random Orchestrators.

As security relies on incentives and the number of Orchestrators, all Orchestrators must provide a certain amount of collateral before participating. This collateral is used for compensation in case of malicious behavior. Spiderchain’s security follows a proof of stake model, ensuring mathematical security as long as the number of malicious participants is significantly less than other Orchestrators.

Botanix区块

The Botanix blockchain operates normally with three main parts. First, it checks transactions sent by users to Orchestrator from the Bitcoin main chain (this is the process of introducing Bitcoin into the Botanix network). Then, it executes necessary state changes to create a new block. Finally, at the end of each cycle, new Unused Transaction Outputs (UTXO) are created to transfer assets from Spiderchain back to the main chain (this is the process of retrieving Bitcoin from the Botanix network).

Check for assets sent to Botanix Orchestrators. If so, perform asset introduction operations.

Run the consensus and state change process of Botanix. This part is analogous to Ethereum’s block processing.

Check for assets that need to be transferred from Botanix elsewhere. If so, perform asset retrieval operations. It’s important to note that due to the different processing speeds of the Bitcoin blockchain and the Botanix blockchain, in most cases, the first and third parts are just updating the UTXO transaction pool. Bitcoin blocks are produced approximately every 10 minutes, while Botanix will operate at about 12 seconds per block. Between Bitcoin blocks, Botanix will generate its blocks, containing transactions on the EVM. When a new Bitcoin block is received, Botanix will execute the aforementioned steps to ensure that transactions on the EVM chain are ultimately confirmed.

Botanix EVM

Botanix operates a full Ethereum Virtual Machine (EVM) execution client, mirroring the Ethereum network itself, as it is capable of executing all the same smart contracts and decentralized applications (DApps) found on Ethereum. It does not require generating any validity proofs that limit performance, as its security is derived from Spiderchain. The Botanix EVM powers the Ethereum network’s operating environment, allowing the execution of smart contracts written in Solidity and other programming languages. By running a complete EVM client, Botanix supports all functionalities identical to Ethereum.

While functionally equivalent to Ethereum, Botanix remains a distinct network with its unique features and characteristics. For instance, it adopts a different PoS consensus algorithm, leveraging the decentralized and economic structure of Bitcoin.

Orchestrators

Orchestrators play a key role in the Spiderchain protocol, tasked with managing and safeguarding the Botanix protocol.

To enter Spiderchain, new Orchestrators must express their interest to the current block’s Orchestrator and place a certain amount of collateral in a multi-signature setup. This process is completed after confirmation on Bitcoin, making the new Orchestrator a fully participating node.

Upon exiting Spiderchain, an Orchestrator needs to signify their intention to the current block’s Orchestrator and sign an exit message. The exit process then begins, including steps like replacing the multi-signature and returning the collateral.

If an Orchestrator displays improper behavior, such as inactivity, incorrect block proposals, erroneous multi-signature signings, or incorrect validations, they risk having their collateral forfeited. Inactive Orchestrators will lose block rewards and may eventually be removed. These rules ensure the smooth operation and security of Spiderchain.

Security

1.Trade-off Between Multi-Signature Size and Collateral

There are two distinct methods of securing funds locked in Spiderchain:

First, by design, funds are stored on Bitcoin’s layer one and locked in a Spiderchain multi-signature setup. This means that even with malicious Orchestrator nodes, they cannot access the Bitcoins in Spiderchain without the approval of other nodes, as the multi-signature requires multiple nodes to jointly approve any fund operations.

Second, there’s the security guaranteed through incentive mechanisms. Each Orchestrator node must put up a certain amount of collateral, serving as an economic assurance. This means they have a financial incentive to operate correctly, as they could lose part of their collateral if they violate rules or behave improperly. This incentive mechanism helps maintain the network’s smooth operation and security.

The size of the multi-signature is a balance consideration. If too large, signing it may take a lot of time and could pose coordination issues. Moreover, if a malicious party controls the majority of signing rights, they could gain access to all funds in Spiderchain. Therefore, dividing the collateral into smaller multi-signatures can reduce risk, but if too small, it might lower the security of protecting funds from malicious attacks.

Collateral ensures the proper functioning of Orchestrator nodes. To participate in the Spiderchain network, Orchestrator nodes must provide a certain amount of collateral, ensuring their participation. This helps prevent any single party from running multiple nodes, thus preventing Sybil attacks. If an Orchestrator node behaves improperly, such as downtime, malicious actions, or disappearance, they will lose a portion of their collateral.

Activity refers to maintaining the normal operation of participants in the Botanix chain and the multi-signature. If participants are unresponsive for a long time, they may lose a portion of their rewards and eventually be removed from the multi-signature. Additionally, certain behaviors are considered malicious, such as proposing incorrect blocks or erroneous signings of multi-signatures, leading to the reduction of collateral.

These measures aim to ensure the security and stable operation of the Spiderchain protocol.

2.Private Key Protection

Forward secrecy is a crucial attribute of cryptographic systems, used to protect secret keys from being compromised. In the case of Botanix, forward secrecy means that even if attackers gain 2/3 majority control, they will not own the majority of keys from all previous multi-signatures. Instead, attackers will only have majority ownership of newly generated multi-signatures. This ensures the security of previous multi-signatures remains uncompromised, and the protocol can take appropriate measures to mitigate the attack. Through Spiderchain’s design, Botanix achieves forward secrecy, allowing the protocol to provide a higher level of security and protect the system from potential attacks.

3.Inheriting BTC Security

Botanix’s security depends on Bitcoin’s security, particularly the security features provided by its Proof of Work (PoW) system. If Bitcoin’s security is compromised, it would also negatively impact Botanix’s security. Thus, Botanix relies on the security advantages of Bitcoin’s PoW system to ensure its own network’s security. Specifically, it utilizes Bitcoin to mitigate three risks in the Proof of Stake system: centralization, random validator selection, and finality.

VII. Development Achievements

Twitter: 1,331 followers, average level of fan interaction.

Discord: 459 members, Telegram: 469 members, with an activity rate of less than 20%.

Overall, the project’s community engagement is moderate and still in its early stages.

VIII. Economic Model

Currently unavailable.

IX. Advantages and Risks

Advantages:

1. Security : Botanix’s security relies on Bitcoin’s Proof of Work (PoW) system, offering security comparable to Bitcoin, one of the most secure blockchain networks to date. Hence, Botanix greatly benefits in terms of security.

2. Decentralization : As a second-layer blockchain, Botanix continues Bitcoin’s decentralization ethos, allowing anyone to participate and run a full node. This helps maintain the network’s decentralized nature.

3. EVM Compatibility : Botanix supports Ethereum Virtual Machine (EVM), meaning it can run Ethereum-compatible smart contracts and decentralized applications, offering developers a wide range of application possibilities.

4. Forward Security : Botanix achieves forward security through the design of Spiderchain, ensuring that even if attackers gain control, the security of previously multi-signed transactions is not compromised.

   Disadvantages:

5. Dependence : Botanix’s security is highly dependent on Bitcoin’s PoW system. If Bitcoin’s security is compromised or attacked (which currently seems highly unlikely), Botanix may also be affected, indicating its security is contingent on external factors.

6. Competition : Botanix is in a fierce competition within the cryptocurrency and blockchain sphere. Currently, there are no significant projects in its ecosystem, necessitating competition with others to attract developers and users.

7. Speed : The block generation speed of Bitcoin and Botanix differs, potentially leading to additional wait times for processing cross-chain transactions. Although Botanix generates blocks faster than Bitcoin, it is still slower compared to Ethereum.

In summary, as a second-layer blockchain system built on Bitcoin, Botanix has several advantages but also faces challenges related to dependence and competition. Its security and decentralization make it competitive in some aspects, but it needs to overcome various technical and market obstacles to achieve widespread adoption.

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