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Renowned as the gold standard of digital Store of Value, Bitcoin maintains its position as the foundational digital asset since its birth despite the emergence of Ethereum, Solana, and other blockchain system that might be perceived as more robust and feature-rich. With a market capitalization exceeding one trillion dollars and its leading status not only in historical position but also in terms of decentralization, institutional interest, Bitcoin serves as a guiding force for the entire cryptocurrency sector. However, it faces challenges in scalability and programmability, which have constrained its full potential.
Scaling: Bitcoin can only process 3-7 new transactors per second, with fees reaching $10 during peak volume. This often makes transactions impossible or impractical.
Recent technological advancements, particularly Ordinals and Runes, have substantially expanded the realm of activities in Bitcoin network beyond just holding the native Bitcoins in the Store-of-Value manner. Ordinals, introduced in January 2023, facilitate the creation of immutable on-chain digital artifacts by inscribing data directly onto individual satoshis. This innovation has generated over $458 million in network fees for Bitcoin miners within its first year, opening new avenues for NFTs and digital asset creation on the Bitcoin blockchain.
Building upon this foundation, Runes, developed by the creator of Ordinals, presents a more efficient tokenization solution for the Bitcoin network. Leveraging Bitcoin's UTXO model and the OP_RETURN opcode, Runes offers an alternative to the BRC20 standard for token minting on Bitcoin. Its first week of launch saw over $135 million in fees generated, indicating substantial demand for enhanced functionality within the Bitcoin ecosystem.
The success of Ordinals and Runes underscores the latent demand for enhanced programmability and versatility within the Bitcoin network. It signals a broader market trend seeking improved functionality, scalability, and Bitcoin-specific features—all without compromising Bitcoin's core attributes. This trend has sparked a growing need for Layer 2 solutions that can keep pace with rapid cryptocurrency innovations while leveraging Bitcoin's robust security and network effects.
Additionally, in the wider blockchain landscape, we're witnessing a significant shift towards "appchains"—application-specific blockchains. This approach aims to optimize performance, scalability, and user experience by tailoring blockchain infrastructure to specific use cases, such as high-frequency trading, gaming, or consume apps. However, despite the emergence of Bitcoin Layer 2s, it's still a wild west scene with no uniform standard or unified vision of how a Layer 2 on Bitcoin should look like. The actual cost and other hassles to maintain an app-specific Layer 2 for app developers that wanna build upon the foundation might proved to be too much considering an app builder should, well, focus on the app and not too much on the infrastructure side of thing.
Andre Cronje wrote an excellent article here about the challenges app developers might face when going down the appchain routes:
A critical question emerges: How can we effectively bridge the gap between these specialized, high-performance appchains and Bitcoin's formidable security infrastructure, and how to make it seamless and cost-effective enough so that the app don't spend too much time and resources on operating and maintaining the infrastructure required? Surge (https://surge.build) addresses this challenge by introducing a Metalayer that rollups can be built upon, along with a flexible DevKit to accelerate rollup's development.
By combining Bitcoin's inherent strength with a modular core architecture, Surge transcends typical Layer 2 solutions and empowers developers to build high-performance, customizable rollups that directly harness Bitcoin's unmatched security and liquidity whilst adaptable to various different architectural choices and use cases. Surge's foundation rests on several key technological design.
At the core of Surge's architecture is their Metalayer, designed to enhance programmability and scalability on Bitcoin while maintaining its fundamental security. Metalayer also solve fragmentation across rollups by incorporating Inter-Blockchain Communication (IBC), ensuring appchains and general-purpose rollups are still connected with the rest of the ecosystem. Surge's Metalayer can be broken down onto these components:
The Verifiers, which is part of the Metalayer, aggregate multiple zk proofs from different rollups into one single proof. The proof is then, together with the Merkle root of the transaction hashes for state commitment, are embedded onto an UTXO on Bitcoin.
This approach serves several purposes:
Proof aggregation allows the proofs to be verified on-chain once, massively reducing verification cost and increase the number of transactions that can be proceeded in a period of time. This also allow Surge to scale with the number of rollups, therefore helping Surge on delivering its vision.
The state commitment inscribed to Bitcoin UTXO allows a Surge's state snapshot to be linked with a specific Bitcoin block. This makes reversal probability diminished exponentially with each block confirmation. Bitcoin's native timestamping also allows verifiable timestamp of Surge's state commitment.
Consensus among verifier nodes are enabled with CometBFT (the next generation of Tendermint consensus), allows network integrity up to one-third of malicious nodes presented in the network.
A secured, flexible decentralized signing operation design that mitigates key compromise risks by eliminating the need for any single party to possess a full private key, as well as maintaining efficiency as participant numbers increase, resulting in compact transaction sizes and reduced costs. Surge's signing operation leverage the DKLs23 EdDSA/ECDSA scheme, optimized for scalability and security.
Signers use Threshold Signature Scheme (TSS) to distribute keys across nodes, preventing centralized control and enhancing security. DKLs23 with TSS maintains security even with malicious nodes. Signers manage BTC Vault and Bridge operations, enabling secure cross-chain transfers with threshold-based transactions. Other mechanisms are also incorporated into the TSS network to enhance the security and resilience:
Proactive Key Refresh: Regular key rotation to mitigate key exposure risks.
Weighted Node Participation: Nodes weighted by stake, reputation, and performance for increased accountability and also allows faster consensus and reduced latency.
Malicious Node Detection: various mechanisms are incorporated onto the DKLs23 protocol to detect and penalize improper behavior. Validators are required to stake Surge tokens, to be slashed upon malicious activities flagged or downtime passed a certain threshold.
TSS approach, therefore, offers superior decentralization and robustness compared to Bitcoin's usual multisig.
Surge's Metalayer also incorporates an UTXO Indexer, whose job is to scan the Bitcoin transactions, filter out those Surge-relevant UTXOs and verify the data integrity accordingly to ensure data isn't mutable from the state transition signed by the Signers. These UTXOs are maintained in a dedicated efficient database for storing and retrieval.
Surge's DevKit Adapters provide seamless integration for rollups and dApps with the Surge MetaLayer. The Surge Dev Kit comes with pre-configured commands and language-flexible options for quick integration, abstracting away the infrastructure and offering flexibility at the same time.
With the Surge Metalayer's ability verifies and combines proofs, submitting only the final aggregated proof to Bitcoin, rollups developed and deployed using Surge's DevKit would also enjoy low cost and high scalability.
Surge's DevKit enables the deployment of various rollup types, each optimized for different use cases:
General-purpose smart contract rollups.
Specialized application rollups (aka. appchains).
Custom-feature rollups (for example FHE-enabled).
Designed with flexibility in mind, Surge's DevKit are compatible with popular rollup frameworks like Rollkit and Sovereign SDK, allows rollups and apps developer to stay within their comfort zone with their familiar frameworks.
Starting with EVM, Surge's platform will accommodate multiple virtual machines, including EVM, MoveVM, Wasm. This multi-VM approach significantly reduces entry barriers for developers from various blockchain ecosystems, makes the migration from other chains seamless, and potentially catalyzing the growth of Bitcoin's dApp ecosystem.
Surge token serves as the native gas token on the rollups, with support for BTC as gas token through a native swapping mechanism.
Beyond Bitcoin ecosystem, Surge positions itself as a bridge to the broader blockchain ecosystem with its Inter-Blockchain Communication (IBC) compatibility enabled from the Metalayer. Interoperability of assets is also a focus, with bridges for Runes and Ordinals enabling seamless asset transfers between Bitcoin and rollups and among rollups.
To further enhance interoperability, Surge plans to introduce out-of-the-box stablecoin support to rollups by integrating with protocols like Union and Nobel. This initiative aims to mitigate liquidity fragmentation issues common in Layer 2 ecosystems and provide crucial building blocks for DeFi and other use cases on the Surge rollups.
By enabling a diverse set of applications and values to be built upon the foundation of Bitcoin, Surge could significantly enhance Bitcoin's utility and value proposition. This expanded functionality could drive increased demand for both Bitcoin and Surge's native ecosystem, potentially leading to substantial value accrual.
Surge's vision of expanding Bitcoin's capabilities while maintaining its fundamental principles aligns well with where the crypto market is heading to. As Bitcoin continues to solidify its position as a premier store of value, Surge has the potential to unlock its capabilities as a robust platform for decentralized applications and financial services on top of Bitcoin.
The combination of a large addressable market of Bitcoin ecosystem, along with robust and flexible technology stack makes Surge a compelling name to keep an eyes on. As one of their first backers, we at Vamient believe Surge, albeit in a very early stage, is well-positioned to play a pivotal role in shaping the future of Bitcoin and the broader blockchain landscape. We have our high hopes on Yash, Punith and the team to realise their vision.
Disclaimer: This article represents personal analysis and merely serves informational purpose. It should not be considered as financial advice. All investments carry risk, and thorough due diligence is advised before making any investment decisions.
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