2023 has shaped up to be a big year for Bitcoin. First we had Ordinals, now we have rollups.
This week, Rollkit revealed that it had become the first rollup framework to bring sovereign rollups to Bitcoin via a new research integration inspired by Ordinals.
Namely, Rollkit demonstrated that its new research integration could retrieve and store data on-chain. In order to write and read data on the Bitcoin blockchain, Rollkit’s integration made use of Taproot transactions (sound familiar?).
But all the talk about Bitcoin sovereign rollups has led to another conversation: comparisons between sovereign rollups and the Stacks Bitcoin layer.
So, how accurate is the comparison?
Stacks co-creator Muneeb Ali addressed the key similarities and differences between both in a Github post. But first, let's get into how rollups work for faster and cheaper transactions on blockchains.
But first, what are rollups?
Rollups are scaling solutions for layer-1 blockchain networks like Bitcoin and Ethereum.
They basically process transactions off-chain (usually on a layer-2), bundle multiple transactions into one transaction, and that batch of transactions is then sent on-chain. Those bundled transactions are validated by a smart contract that runs on the layer-1 blockchain, which then updates the state of the blockchain accordingly.
Since they make sure blockchains don't need to process thousands of transactions separately, they effectively reduce the overall load on the blockchain network and increase transaction throughput.
Rollups are becoming increasingly popular as they offer a way to increase transaction throughput and reduce the transaction costs on blockchain networks. They are especially useful for decentralized applications (dApps), which require frequent and fast transactions to operate.
Two main types of crypto rollups: Optimistic and Zero-Knowledge Rollups
There are two main types of rollups: optimistic rollups and zero-knowledge rollups.
Optimistic rollups rely on a dispute resolution mechanism where users can challenge any incorrect state updates made by the rollup contract. Such a challenge is known as a fraud proof, which challenges the submitted state of the main chain.
The challenge period allows users to submit proof that the state update is incorrect. If the proof is valid, then the rollup contract will be returned to a previous state.
ZK-rollups, on the other hand, use zero-knowledge proofs (also known as validity proofs) to establish that the state update made by the rollup contract is correct. A ZK-rollup operator basically generates a proof of validity for each batch of off-chain transactions.
That proof is then submitted to the main chain to prove the validity of the state update. This eliminates the need for a dispute resolution mechanism, which has led many to argue that rollups involving ZK are more efficient.
So, what are sovereign rollups?
The biggest difference between a sovereign rollup versus ZK and optimistic rollups is this: they don’t need smart contracts or use a settlement layer.
This means that it preserves the “sovereignty” of the L1 while being scalable and secure.
While the types of rollups that we mentioned utilize trust-minimized protocols that allow the main chain to determine the validity of a rollup, a sovereign rollup actually only uses the underlying L1 for data availability. It is not used for consensus.
In fact, many of the rollups used on, say, Ethereum actually use the ETH layer-1 as both the data availability layer and consensus.
That’s a key distinction that Ali pointed out in his March 6 Github post commenting on more traditional rollups and the newer sovereign rollups.
Rollkit effectively uses the Bitcoin L1 for data availability in its integration. But here’s the catch: ultimately, rollups on Bitcoin involve moving BTC in and out of the layer.
And that’s where some comparisons between sovereign rollups and the Stacks layer have come in.
The similarities and differences between sovereign rollups and Stacks
While there are different interpretations and definitions of what Stacks could be, it is, effectively, a Bitcoin layer. It has various connections to Bitcoin layer-1 that most sidechains typically don’t have to L1s and it has properties that fit some definitions of an L2, but others that don’t.
And some of those properties have looped it into discussions about sovereign rollups.
For instance, one of the most technically challenging parts for both Stacks and SRs is making sure that BTC moves in and out of the layer. That’s why the development of systems like sBTC are important for both. In sBTC’s case, the system would provide a decentralized and trust-minimized two-way peg for BTC to move in and out of the Bitcoin layer 1.
But Ali also lays out a few key differences.
With the upcoming Nakamoto release, Stacks and SRs can also give users Bitcoin-grade reorg resistance. Following the Nakamoto release, Bitcoin finality kicks in after 150 blocks. With SRs, that finality kicks in after one block.
In terms of data availability, Stacks only publishes hashes of data to Bitcoin every Bitcoin block instead of publishing the full data to the Bitcoin layer 1. Sovereign rollups, on the other hand, publish all the data.
While this means that SRs do give Bitcoin-grade data validity and data availability, the amount of rollup data on the Bitcoin L1 could hinder its scalability in the long-run. But, as Ali points out, there is hope that the data can be kept as small as possible.
Sovereign rollups on Stacks? Looking to the future
Ali did confirm that R&D efforts were already underway to integrate rollups with the Stacks layer.
Given the similarities and differences between each, updates like the Nakamoto release and sBTC could also further enable SRs on Stacks.
This would, in turn, expand the capabilities of the Bitcoin blockchain and continue making the case for building on the world’s first and largest blockchain.
In the past few years, we have seen the capabilities of Bitcoin expand beyond that of a token. Bitcoin's security, its immutable nature, and its decentralization by design have given it the potential to rival newer networks -- like the Ethereum blockchain -- in use cases.
Now, we have seen how DeFi protocols, NFT projects, and more are convincing the wider Web3 industry that Bitcoin isn't just a cryptocurrency, but a blockchain that can sustain an entire flywheel economy.
Bitcoin rollups solidify Bitcoin’s role as a base for that flywheel economy by allowing products to scale.
In other words, the potential for products and dApps on Bitcoin is only beginning.