Bitlayer V2, an upcoming upgrade to the Bitlayer infrastructure for layer two, represents a pivotal evolution in the Bitcoin ecosystem. Designed to replace the current sidechain architecture, it is expected to become the first native Bitcoin rollup platform, leveraging aggregation technology that is widely considered the optimal solution for scaling layer two systems. By harnessing Bitcoin's unique security, Bitlayer V2 not only achieves significantly higher throughput and lower transaction costs but also offers full Turing programmability, opening up vast new horizons for the Bitcoin ecosystem that far exceed the limitations of the constrained programming language.
As with rollups in the Ethereum system, the Bitlayer rollup aggregates layer two transactions, processes state transitions, and sends the updated state roots with cryptographic proofs to the first layer of Bitcoin for verification. Transactions on the second layer are completed as soon as the first layer of Bitcoin confirms the corresponding state transition. However, the fundamental difference between Ethereum rollups and Bitcoin rollups lies in the proof mechanism. While Ethereum benefits from its complete Turing virtual machine, Bitcoin's programming language is inherently limited in expressiveness. To execute complex programs, such as zero-knowledge proofs, developers must simulate the computations using Bitcoin's current operation codes, which can lead to significant bloat in program size. Although a zero-knowledge verifier can technically be written in Bitcoin's programming language, the limited block space makes the direct implementation of these verifiers impossible within Bitcoin transactions.
To overcome these challenges, the Bitlayer rollup relies on the BitVM model (specifically BitVM2), which combines zero-knowledge validity proofs with optimistic fraud proofs in a hybrid proof system. In this model, the prover generates zero-knowledge proofs for layer two state transitions, but these proofs are not directly verified on-chain. Instead, their validity is assumed unless challenged through a dispute process. This assumption of validity eliminates the need for costly on-chain verification in the typical "happy path," significantly reducing settlement costs and making Bitcoin rollups a practical scaling solution.
Once the rollup operator publishes a new state root, a seven-day challenge window opens, during which any participant can dispute the validity of the published state root and its accompanying proof. If fraud is detected—such as an invalid state root or an incorrect zero-knowledge proof—the challenger can initiate a dispute by depositing an amount. This triggers a challenge game where the challenger must prove the fraud, while the rollup operator must defend the validity of the proof verification (not the state transition itself). The protocol incentivizes integrity by awarding the deposit of the loser to the winner, making rollups risk-adjusted in case the operator is wrong. However, for this hybrid system to function effectively, it relies on at least one honest and active node to monitor and counter fraudulent activity.
