How it works?

Overview

Our IPC-BTC scaling solution is designed to achieve unparalleled scalability while maintaining Bitcoin’s foundational principles of decentralization and security. This is accomplished by creating independent blockchain extensions tailored to specific workloads. These extensions, managed by the Layer 2 protocol, form a highly flexible, efficient, and secure ecosystem for building advanced applications.

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Horizontal Scaling and Fendermint Consensus

This solution's core is the Fendermint consensus mechanism, specifically adapted to provide lightweight, modular, and highly performant consensus for the Layer 2 extensions. Fendermint leverages Tendermint's proven framework while incorporating custom optimizations to meet Bitcoin’s stringent security and performance requirements. This consensus enables low-latency transaction finality, robust fault tolerance, and high throughput, making it ideal for handling diverse workloads across a growing network of Layer 2 extensions.

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Initialization and Operation of Extensions

Each extension is initialized through a decentralized governance mechanism configuring its validator set, stakes, and operating parameters on the Bitcoin mainchain. These extensions function as independent, permissionless chains directly linked to Bitcoin’s security guarantees. Validators must operate nodes connected to the Bitcoin mainchain and the Layer 2 protocol, ensuring continuous synchronization and security validation.

Extensions are designed to be lightweight, allowing them to spin up rapidly to meet temporary or permanent demand spikes. Their modular design ensures they can be tailored to specific applications or even shard single applications to optimize cost and performance. Developers can also deploy smart contracts on extensions to manage application-specific logic and operations.

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Communication Between Chains

Seamless communication between Bitcoin’s network and its extensions is critical. This interaction occurs bidirectionally:

• Top-down Communication: Includes commands or updates from Bitcoin’s network to the "Layer 2" extensions, such as validator set updates or state checkpoints.

• Bottom-up Communication: Extensions report aggregated data, finalized state changes, or periodic checkpoints back to the Bitcoin mainchain.

A relayer system facilitates these interactions, ensuring high reliability and minimal latency. Validators on the extensions run quorums to validate and agree on messages, ensuring state consistency across the network.

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Data Handling and Security

The solution leverages advanced data handling systems inspired by cutting-edge frameworks. Instead of transferring raw data, the protocol uses linked data references that can be resolved through secure storage mechanisms. This ensures that the system remains lightweight, safe, and efficient, even under high throughput conditions.

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Architecture

The architecture combines the robustness of Bitcoin’s base layer with the flexibility of modular Layer 2 extensions. Extensions inherit Bitcoin’s security properties through cryptographic guarantees, while their independent consensus (powered by Fendermint) allows them to operate autonomously. This design allows for seamless scaling, efficient resource utilization, and an unmatched developer experience.

Refer to the Architecture section for a deep dive into the technical implementation, including the consensus and operational guidelines.