BitVM Technology Upgrade Promotes a New Round of Development in the Bitcoin Ecosystem

BitVM, as an important milestone for Bitcoin in terms of scalability and programmability, is driving a new wave of development in the Bitcoin ecosystem. Recently, Bitlayer launched the first version of the Finality Bridge testnet based on the BitVM protocol, marking a significant step forward for the Bitcoin ecosystem.

Finality Bridge utilizes an innovative combination of technologies, including BitVM smart contracts, fraud proofs, and zero-knowledge proofs. This combination not only enhances security but also significantly reduces the reliance on third-party trust. While it has not yet reached the fully trustless level of the Lightning Network, it has achieved significant progress compared to existing Bitcoin layer-2 sidechain solutions, greatly expanding the design space for Bitcoin applications.

The core principle of the Finality Bridge is to securely lock funds in an address managed by the BitVM smart contract. The operation of this system is based on the assumption that at least one participant remains honest. This design essentially reduces the need for trust while also introducing additional complexity for Bitlayer in managing the bridge.

When users lock BTC into the BitVM smart contract through the Finality Bridge, they receive a token called YBTC, which maintains a strict 1:1 peg with Bitcoin. This peg is not just a promise, but is enforced by the underlying smart contract logic, ensuring that each YBTC corresponds one-to-one with the BTC on the main chain. This mechanism allows users to participate in various DeFi activities within the Bitlayer ecosystem, such as lending, borrowing, and liquidity mining, without sacrificing the security and settlement guarantees of Bitcoin.

Despite some controversies within the community, this architectural design provides users with assurances that previous sidechain designs could not achieve. It is worth noting that the implementation of these features does not require any changes to Bitcoin itself. However, if covenant functionality is introduced in the future, it could bring the bridge design to a level of "minimal trust," thereby making it a "true" Bitcoin layer two network.

The Finality Bridge of Bitlayer represents the best practices of the BitVM 2.0 paradigm, showcasing the potential that developers can achieve when transitioning from centralized chains to Bitcoin. Although chains based on BitVM still face many challenges, this technological breakthrough paves the way for Bitcoin to become the ultimate settlement layer for all economic activities, injecting new momentum into the future development of the Bitcoin ecosystem.