Layer 2 Labs is being launched with the aim of scaling and building transmission chains for the Bitcoin network. The company closed an initial round at launch, raising $3 million in funding.
Layer 2 Labs co-founder and CEO Paul Sztorc said in a statement sent to Bitcoin Magazine that the company seeks to “make everyone in the world a Bitcoin user.” Sztorc is the author of two Bitcoin Improvement Proposals (BIPs), BIP 300 and BIP 301, which detail the technical specifications of transmission chains. Naturally, transmission chains are at the forefront of Layer 2 Labs’ mission.
“Layer 2 Labs believes that transmission chains have the potential to revolutionize the way we use Bitcoin, enabling greater scalability, extensibility, privacy and flexibility on the network,” the company said in a statement. “We believe that drivechains have the potential to kill altcoins, increase Bitcoin adoption and provide the catalyst for hyperbitcoinization.”
Transmission chains define a specific way to create Bitcoin sidechains. Sidechains are blockchains parallel to Bitcoin that allow BTC to “flow” between the two networks over a two-way connection. As bitcoin cannot actually leave the Bitcoin network, sidechains accomplish this task by locking BTC on the Bitcoin blockchain and representing them in different ways on the sidechain. The goal is for the representation of BTC on the sidechain to maintain a 1:1 pair to the actual BTC locked on the Bitcoin network.
Liquid is perhaps the most popular sidechain in the Bitcoin ecosystem today. Blockstream’s model uses a federation to handle on-chain blocks and takedowns, as well as sidechain block creations. Drivechains try to move away from the federated model in favor of something they see as more decentralized – Bitcoin miners themselves.
Under the drivechain model, bitcoin miners also mine sidechain blocks, albeit blindly. That is, the miner does not need to run software for that specific sidechain, while accumulating the value being transacted on that parallel chain. This is because most of the fees paid on the sidechain go to the bitcoin miners. Ultimately, this also contributes to higher fee income in Bitcoin.
Drive chains allow you to create virtually any type of chain and take advantage of the bi-directional pin. This feature could allow functionality present on any altcoin network to be ported indirectly to Bitcoin. Therefore, transmission chains –– and side chains in general –– somehow allow bitcoin to be used on another chain, with different rules and properties. The benefit is that the user would be able to do things with their bitcoin that are not possible on the Bitcoin network. Risk is the pegging mechanism.
Sztorc said the company has three overarching goals. The first, as mentioned, is the desire to further develop and scale transmission chains.
“We already have 6 sidechain projects in development, including two that are exact clones of Ethereum and zCash (but only BTC),” he said in a statement. “They enable immediate global scale, impenetrable, easy-to-use privacy and total freedom (for users and developers alike).”
Second, Layer 2 Labs aims to improve the Bitcoin user experience, especially around activities necessary for truly self-sovereign bitcoin ownership.
“We want REAL bitcoin users –– users who run nodes and have keys,” he added. “It requires a revolution in UX and education…which we aim to bring about. Nodes should be easy to run and do useful things that any layperson can understand and appreciate.”
Finally, Sztorc said the company plans to work on what he calls “high-risk, high-reward problems.”
“That includes prediction markets and a resurrected Namecoin,” Sztorc said. “These services will revolutionize media/telecom just as Bitcoin will revolutionize banking.”
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