Earlier this week, we announced Mezo as the first Bitcoin Economic Layer. As we designed Mezo, we discovered that the labels “Layer 2” and “rollup” didn’t quite fit the bill. When you think of a rollup or an L2, you might consider them networks that process and eventually settle transactions on another blockchain—but the differences are a bit more nuanced, especially when they are on Bitcoin.
Ulterior networks reduce the transactional burden of main networks (such as Bitcoin and Ethereum) by offloading computational volume. These networks operate by borrowing logic from the network to which they resolve data, or by importing their own new governance and security mechanisms. However, an important piece often forgotten is how the networks impact the base layer.
An Economic Layer stands apart from rollups or sidechains as it moves beyond the scaling problem and achieves synergy with the needs of its users, the Bitcoin network, and bitcoin holders.
The architecture of Mezo, from how the network handles fees to its security and incentives structure is fundamentally attuned to this Bitcoin-first alignment.
#What Makes A Side Chain?
Sidechains are sovereign networks that operate parallel to the parent chain, or main chain, to increase efficiency and overall scalability. Sidechains allow assets to flow freely between themselves and the parent chain. Ideally, sidechains would achieve this by way of a completely trustless two-way peg to secure such transfers, however, one has yet to be developed—to function, sidechains use either some form of trusted bridging or rely on inheriting Bitcoin miner security to transfer assets back and forth.
To properly scale, sidechains must introduce security models independent of the main chain. With a bridge and security model in place, a sidechain allows you to send wrapped versions of assets to and from the network, such as BTC or ETH, and transact for a lower cost than the parent chains. Wrapped currencies that are redeemable for their facsimile values on source networks.
A sidechain’s operational independence means that governance, maintenance, and development are handled separately from the main chain. Such independence provides a little wiggle room for innovation, but it also puts the onus of delivering an entirely sound security network on the sidechain. This separation also makes it possible for sidechains to stray from main chains regarding their security models, management, or economic alignment.
For example in the Stacks ecosystem, the Proof of Transfer (PoX) consensus mechanism is closely linked to Bitcoin, although the security model is entirely separate. With PoX miners transfer BTC to represent their computing resources which is distributed as a reward to stackers staking STX whose function is to provide context on the viability of mining blocks. But while Stacks addresses the need to incentivize participants, no value from the Stacks network flows back to Bitcoin and Stacks is wholly reliant on Bitcoin, or any other PoW network, to function.
Rootstock serves as another example of such unilateral incentive flow. It introduces smart contracts to a Bitcoin sidechain using the merged-mining model, where Bitcoin miners secure the network by opting to direct their computational power toward Rootstock. In return, miners receive RSK, the native network token. Although this approach enhances Rootstock’s security via Bitcoin miner participation, it incorporates no mechanism for reciprocating value back to the Bitcoin ecosystem to which it is inherently linked.
#What About A Rollup?
A rollup is a scaling solution from the Ethereum ecosystem that, unlike sidechains, inherits the security model of the parent network and offloads the computational burden from main chains while using the Bitcoin network for data availability. There are two main archetypes for Rollups:
Optimistic Rollups: A system built on incentives and dispute resolutions secures transactions. By default, an assumption is made that transactions are valid unless challenged, at which point fraud proofs are executed. The provisional basis transaction validity on an optimistic rollup model is notably incompatible with Bitcoin’s transaction verification model, which is built on absolute consensus.
Zero-Knowledge Rollups: Cryptographic Zero-Knowledge (ZK) proofs verify the correctness of transactions. The proofs suffice for the main chain to confirm transaction validity without prying into the individual data of each transaction. However, verification of ZK proofs requires computational flexibility currently not supported by Bitcoin’s architecture.
Attempts to deliver Bitcoin-compatible versions of these have been called sovereign optimistic rollups or sovereign ZK-rollups. However, unlike their counterparts on Ethereum, these solutions still require a third party to cooperate to bring assets off the rollup. BitVM, a virtual machine made to execute smart-contract like transactions on Bitcoin, proposes a more complex and improved method than third-party intermediaries that can achieve rollup scalability on Bitcoin. However, it has yet to be deployed in a production environment, and there is much contention about whether BitVM bridges can be considered safe.
Even if operators act honestly and no bugs exist in code, BitVM-based designs currently introduce untenable risks according to Udi Wertheimer and Tyler Whittle.
Some Bitcoin adjacent network initiatives present noteworthy models, each with its unique approach to extending the Bitcoin ecosystem. Yet as these networks aspire to scale Bitcoin, they fall short of aligning with it as Mezo does, which serves as Bitcoin’s Economic Layer.
Scaling Bitcoin is a complex and nuanced process. We’ve seen many attempts, but none work—we need a new approach. Mezo emerges as a network that prioritizes Bitcoin, an Economic Layer that rewards you for holding, sharing, and trading.
#Bitcoin’s Economic Layer
To be like Mezo and fall into the category of Bitcoin’s Economic Layer, a network must prioritize users and enhance Bitcoin’s utility while staying true to its principles. Mezo does so with a focus on extending Bitcoin’s core functionalities and ensuring that value and fees accrue to BTC. Mezo is fast and affordable compared to transacting on Bitcoin, and the more it grows, the more it will continue to strengthen the Bitcoin network.
Mezo is powered by Proof of HODL, where transactions are verified via CometBFT consensus. Proof of HODL is designed to reward the conviction and commitment of long-term BTC holders. Users transacting on Mezo need security; fulfill it by HODLing your BTC, securing the chain, and powering Bitcoin-native applications, and in return earn an honest yield.
Mezo is Bitcoin-strong. As gas fees are paid in BTC, every transaction removes a little bitcoin from circulation, boosting the asset’s scarcity. By reducing the circulating supply of bitcoin, even as the block rewards of Bitcoin diminish to null, more valuable transaction fees will continue to sufficiently incentivize miners to sustain their efforts and keep Bitcoin secure.
Furthermore, as Mezo continues to scale Bitcoin with adoption, so too will scale the beneficial force of this BTC supply reduction. In further alignment with Bitcoin, a portion of network fees will be allocated towards Bitcoin core protocol development. The architecture accounts for the long-term needs of Bitcoin and users alike.
At Thesis, a builder of Bitcoin brands for more than a decade, we get Bitcoin, we love Bitcoin, and we’re not shy about it. That’s why we built Mezo as a Bitcoin-first Economic layer. That means gas fees are paid in BTC, all value on the network accrues in BTC, and BTC supports the network’s security model.
#Get Involved
Ready to embark on the new frontier of commerce in Bitcoin’s Economic Layer? The Proof of HODL Portal is open for deposits now—show your commitment and build a HODL score on Bitcoin’s first Economic Layer.
