ChainX

Bitcoin Layer2 will Usher in Big Explosion After Taproot

ChainX CEO Guoguanghua was invited to Bewater community to share ideas of Bitcoin taproot technology and its impacts afterwards. The scrip of the speech is as follow:

1. What is taproot technology?

1)MAST contract and Schnorr signature

Schnorr signature: Satoshi Nakamoto chose secp256k1 over Schnorr signature 13 years ago due to copyright concerns. Schnorr signature is an asymmetric encryption algorithm that can add linearly to signatures.

MAST contract: Merklized Abstract Syntax Trees are trees rooted by hash (it can be any type of tree) with scripts functioning as leaf nodes. Merkel root is used to prove the existence of a script, and the leaf node script is to verify the validity of contract execution.

2)Details and impact of the Schnorr signature

Commonly used signature algorithms come in various forms. Bitcoin and Ethereum both use Secp256k1, while chains released in recent years almost all switched to ed25519 for optimization and greater performance.

The Schnorr signature algorithm surpasses the above-mentioned by excelling in signature aggregation which means that multiple signatures can be linearly added to one, that is to say, on-chain computing resources can be saved, more storage space for rare data, and more privacy for users who seek to hide their public keys of signature.

3)What is MAST contract

In 2016, Johnson Lau, developer of Bitcoin Core, proposed the upgrade plan for the Merkelized Abstract Syntax Trees (MAST), which adopts a new way of embedding and processing scripts and provides more scalability and privacy.

2. The impact of taproot on BTC

1)How to improve the privacy of BTC.

The MAST contract is a data structure that provides the most basic elements of a Merkel proof to allow transactions to be verified.

Two types of privacy are protected: 1. Data privacy is absolutely safeguarded before transactions. 2. Privacy is protected to the largest extent during transactions as only required data is provided. Meanwhile, Schnorr makes sure the aggregated public key is completely hidden.

2)How to improve the performance of BTC.

Aggregating signatures by linearly adding multiple to one can save storage space and reduce verification procedures.

Multiple signatures are aggregated into one, and multiple UTXO can also be inputted to have one output as on-chain verification only requires a small part to proceed, which greatly improves the performance.

3)How to improve the scalability of BTC.

Break the original multi-signature limit of Bitcoin which stands at 15 for greater decentralization, and the MAST contract at the same time incorporates more script programming and combinatorial logic for greater programmability.

3. Taproot to Bitcoin Layer2

1)How to improve the scalability of the Lightning Network

The Lightning Network is a fast payment network enabled by the state channel technology. It can work properly without custodians. Within the network, one-way channels are built with the RSMC protocol, which, to put it simply, enables the intermediary-free offline transfer between Alice and Bob.

There are three types of multi-signature BTC transactions that enjoy this function.

First: Alice and Bob each transfer a certain amount of BTC to the multi-signature address established by both.

Second: Alice and Bob maintain their off-chain ledger respectively, which is composed of transactions that consist of 1 Input (the first multi-signature UTXO), and 2 outputs (one is the transfer to the counterparty, and the other is the multi-signature address for both parties) each.

Third: There is a limit imposed on the multisig UTXO in the second type. Transactions will proceed uninterrupted if both parties conduct proper settlement on the chain. Otherwise, the cheating party’s funds will be fined and the transaction will be restricted from entering the BTC block first.

The Lightning Network allows the second type to reach N (N>=1) transactions without gas fees or custodians, so as to achieve greater scalability.

All the above-mentioned three require multi-signature and simple script programming, and it’s where taproot comes in handy.

2)How to achieve the inter-chain expansion of unrestricted custodial nodes

The current BTC inter-chain technology is basically based on multi-signature and custodianship, represented by WBTC which claims more than 200,000 BTC on Ethereum. But it’s reported that WBTC’s multisig and custodial work is jointly undertaken by three well-known projects

Networks composed of only three nodes are considered very centralized. Increasing the number of nodes to a level that’s deemed adequate paves the way for decentralization. However, there is another obstacle. BTC has a 15-signature limit. This limit can be broken after taproot is upgraded, with computing and storage performance further improved.

3)How to realize the trustless inter-chain expansion of Bitcoin Layer2

State channels of the Lightning Network can enable trustless expansion.

Three improvements have been made by our team to the current Lightning Network.

  • Solve problems like single node failure and inadequate transparency of the off-chain state channel ledger by moving it on chain.
  • Expand its functions to support smart contracts via the EVM contract platform, instead of being limited to payment only.
  • Multi-signature is taken onboard to expand and improve the performance of state channels which were double-signed before the upgrade.

4. Currently Bitcoin Layer2 projects

Liquid, RenBTC,ChainX

Liquid

Development team: Blockstream, the most well-known team which also operates and maintains the core code of BTC.

Product feature: Fast private transfers, issuance of new assets, and safe transactions.

Technical highlight: Side-chain technology under the multi-signature custodial mode, and famous multi-signature groups working as custodians.

Lightning Network

Development team: Blockstream, same as Liquid.

Product features: Micro payment.

Technical highlight: On-chain and off-chain collaboration technology based on state channels.

RenBTC

The distributed private key technology divides one private key to multiple parts, with each party holding one. This model has one problem that the private key recovered from multiple shards requires a reliable and private execution environment, which, in terms of security, is too demanding, especially given the fact that the current technology can’t have the best of two worlds: centralization and privacy.

ChainX

The ChainX team has developed ComingChat which functions as a Web3 entry with digital identity, private communication, encrypted payment, and smart mini-program platform all integrated.

Technology highlight: Side chain technology under the light node + multi-signature custodial mode, EVM contract technology, WASM contract technology, and multi-chain technology.

Key areas to be improved:

1. With taproot technology, further decentralize the custodial mode of ChainX to support adequate custodians as the POS network does.

2. Build a non-custodial decentralized BTC layer2 network, which needs to address the above-mentioned three improvements of the Lightning Network.

3. Attract more ComingChat users after being compatible with the EVM ecosystem.

About ComingChat

ComingChat’s mission is to build a metaverse for the entire ecosystem. On the one hand, with the economic structure of Bitcoin, it aims to reshape the digital economy system for billions of people around the world by building a simple, secure, and private global payment system and financial infrastructure. On the other hand, it further strengthens the interaction between the Internet and the real world by serving as a gateway for users to enter the Web3.0 world where a programmable identity system is established with CID as users’ digital identity, thus achieving unprecedented interoperability.

ComingChat first proposed the new metaverse concept of “global payment + global private communication”, with the current ecosystem able to satisfy the imagination for such a metaverse.

It will be a trustworthy, and user-centered metaverse platform that enhances user interaction services, embraces a decentralized social system through blockchain, uses cutting-edge technologies of the Bitcoin ecosystem to implement BTC wallet, drives its token economy through GameFi, and constructs an NFT ecosystem based on NFT advantages. In the future, artificial intelligence will be taken onboard to augment the immersive experience of users, and it will contribute to the digital transformation of various industries to achieve high-quality innovative development.

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About ChainX

ChainX will become the largest Bitcoin Layer 2 Network in the world. The first Substrate blockchain to go live will provide Polkadot with the most valuable digital assets on the market. Committed to realizing trustless and decentralized bridges for Bitcoin and other assets, it forms an inter-blockchain asset gateway, pathing the way for a truly interoperable network of blockchains.

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ChainX is the largest Layer-2 network of Bitcoin, based on Substrate, and will evolve into the Polkadot Secondary Relay Chain.