Bridging the Gap between Bitcoin and Ethereum Ecosystem with Cycle Network Trustless Interoperability

In the current cryptocurrency landscape, Bitcoin continues to maintain its core position. While Bitcoin’s value as digital gold is widely recognized, the Bitcoin network also faces some challenges. Particularly in the DeFi, participation in the Bitcoin network is limited due to its native design. However, this situation is gradually changing. Since the explosion of Ordinals in December last year, there has been a surge of interest in the Bitcoin ecosystem. This surge has attracted many developers to explore new solutions such as L2 and sidechains to to address the lack of native smart contract capabilities in Bitcoin. By leveraging these technologies, Bitcoin network can enable more complex financial functions while maintaining its core security features.

With the development of these technologies, there’s a growing demand for cross-chain interoperability between Bitcoin and other blockchain systems, especially the Ethereum ecosystem, which has become a recent popular topic.

Challenges and Solutions of Cross-Chain Interoperability

Implementing cross-chain interoperability between EVM chains is relatively easy due to their similar smart contract functionality and programming models. There are typically three methods to achieve this:

1. Wrapped Tokens: This involves wrapping specific assets (usually native assets) within a blockchain network into another token format, enabling their utilization across different blockchain networks. For example, native Bitcoin, which is not natively compatible with ERC-20 standards, can be used on Ethereum through Wrapped Bitcoin (WBTC). Users can obtain WBTC by depositing Bitcoin into a custodial service, which then issues WBTC tokens. These tokens can be used in Ethereum smart contracts or traded on decentralized exchanges.
2. Atomic Swaps: Atomic swaps is a technology in the cryptocurrency field that allows users to directly exchange tokens between different blockchains without intermediaries. They rely on smart contracts or multi-signature scripts to ensure that exchanges either succeed or fail without intermediate states. The basic process involves participants locking their assets on their respective chains and generating a hash value before the exchange. This hash value is shared with the other party, who then locks the corresponding assets on their chain, creating a transaction with the unlock condition tied to the provided hash value. Completing the hash value allows the other party to unlock the assets, thereby completing the exchange.
3. Cross-Chain Bridges on Layer 2 Solutions: Building cross-chain bridges on Layer 2 solutions can leverage the high performance and low cost advantages of Layer 2 to achieve faster and more convenient cross-chain operations between different EVM chains.

However, achieving cross-chain interoperability between non-EVM chains (like Bitcoin) and EVM chains is more challenging due to differences in their programming models, technical architectures, and design principles. This necessitates the design and implementation of specialized cross-chain communication protocols, data formats, and validation mechanisms suitable for different chains to ensure the reliability and security of cross-chain transactions. Thus, there are specialized solutions:

1. Cross-chain interoperability protocols specifically built for EVM and non-EVM chains: Some projects focus on building interoperability protocols specifically for Ethereum’s base network and other blockchain platforms, such as Wormhole, which has recently gained attention due to its airdrop, uses a sophisticated messaging protocol that allows for the secure and verifiable transfer of data and tokens across multiple platforms.
2. Ethereum ecosystem extension projects: Some blockchain ecosystem extension projects, such as Cosmos and Polkadot, focus on building their own blockchain networks and strive to create interoperable ecosystems. While their main focus may be on building features and tools related to their custom blockchains, these projects also provide interoperability support for EVM chains to expand the influence and scope of their ecosystems.
3. Cross-chain bridging projects introduced by non-EVM chains: For example, the TON blockchain has implemented decentralized cross-chain bridges that allow users to transfer assets to and from other blockchains including Ethereum, Polygon, and BSC. These bridges are often managed by decentralized oracles, which are responsible for monitoring locked assets or transaction events on the target blockchain and submitting this information to smart contracts on the source blockchain after verification to trigger asset unlocking or transfer.

Cross-Chain Solutions of Cycle Network

Cycle Network, as an Omni Distributed Ledger (ODL) under Chain Abstraction infrastructure, utilizes its innovative technical architecture to support seamless, trustless interoperability with both EVM and non-EVM chains at a user-transparent level. In other words, once a dApp integrates with the Cycle Network, users no longer need to seek out specialized cross-chain protocols/bridges to achieve asset communication between the Bitcoin and Ethereum ecosystems.

The Cycle Network’s approach involves two key components:

TCCP (Trustless Cross-Chain Protocol) serves as a universal cross-chain protocol designed to support cross-chain interoperability between EVM and non-EVM chains, aiming to establish trust and facilitate asset transfer between different chains. It provides two interfaces: Rollin and Rollout, for transferring assets or messages to and from the Cycle Network respectively. When interacting with EVM chains, the bridge module of TCCP is responsible for transferring assets and data. It allows users to lock their assets on one EVM chain and claim the corresponding tokens on another EVM chain. Similar operations can be performed for non-EVM chains. It acts as an intermediary layer by recording cross-chain messages on the Cycle Network and providing existence proofs to manage asset transfers. In EVM chains, the TCCP uses zk proofs to verify the validity of cross-chain transactions. For non-EVM chains, depends on the specific circumstances, as will be illustrated with examples below.

Omni State Channel Indexer is another key module in the Cycle Network, responsible for decentralized indexing and data availability of various Extend Layers within the Cycle Network. It interacts with multiple blockchain networks (including Bitcoin, Ethereum, etc.), tracks assets and messages on different chains, and ensures that the Cycle Network can verify and record data changes on different chains.

However, to better achieve trustless interoperability, the solutions under different non-EVM chains vary slightly. A notable example is the Bitcoin ecosystem. Here’s how we integrate the Bitcoin with other EVM chain:

1. Rollin: Similar with Other Ecosystems : Assets rolling into the Cycle Network from Bitcoin share similar cross-chain mechanisms as those from EVM chain. This involves decentralized sequencer that is connected to an indexer. The indexer is responsible for tracking asset changes, while the sequencer organizes transactions before they enter the Cycle Network.
2. Rollout: Customized Security Protocols for Bitcoin: Rolling assets out from the Cycle Network to the Bitcoin involves specific security verifications. Due to the native design constraints of Bitcoin (limited programming capabilities), it’s challenging to implement zk-proofs directly on the Bitcoin. Therefore, the Cycle Network leverages the consensus of decentralized sequencer nodes to verify withdrawal requests, minimizing the need for trust. When a user initiates a withdrawal request from the Cycle Network to the Bitcoin, this request is sent to decentralized sequencer nodes subscribed to handle such tasks. Upon receiving a task, nodes verify its authenticity and aggregate the signatures of transaction requests to send them to the Bitcoin network.

We are planning to integrate EigenLayer to assist in transaction batching and consensus for non-EVM chain withdrawals within the Cycle Network. This will enhance the security and efficiency of cross-chain transactions involving Bitcoin and other non-EVM chains.

In Omni State Channel Indexer, the component responsible for the Bitcoin ecosystem is referred to as the BTC Indexer, which responsible for handling assets and transaction data on the Bitcoin network. Positioned between the Bitcoin node and the BTC Bridge Contract, the BTC Indexer is tasked with indexing and verifying Bitcoin assets involved in cross-chain operations. It generates Merkle trees and proofs from the data received by the BTC node and updates them to the BTC Bridge Contract. The BTC Indexer is internally divided into the following modules:

• Synchronizer: Retrieves Ordinals/BRC20 full data from BTC nodes and stores it in the database.
• MerkleTree-Generator: Generates Merkle Trees based on transactions sent to the system account.
• Updater: Obtains the latest Merkle Tree Root Hash and writes it into Cycle side contracts. By recording the root hash of the Merkle tree in the smart contract, the Cycle Network can verify the integrity of Bitcoin network data at any time.
• Proof-Generator: Provides an HTTP interface for users to obtain Merkle proofs related to specific transactions or data requests.

By integrating BTC Indexer, Cycle Network ensures the validity and verifiability of cross-chain operations. Currently, we support cross-chain transfers from BTC and BRC20 assets on the Bitcoin network to Ethereum L2, as well as direct cross-chain transfers from Bitcoin L2 assets to Ethereum L2. This means that second-layer assets can communicate directly with each other without the need to return to L1. We will soon be launching support for Runes assets as well.

Summary

The landscape of cross-chain interoperability is rapidly evolving to address the increasing demand for seamless and secure communication across diverse blockchain networks. The Cycle Network, with its innovative cross-chain protocols and robust indexers, provides a strong foundation for the uninterrupted flow of assets and data. This platform enables secure and efficient asset interchange between Bitcoin and other major blockchains, acting as a critical intermediary that bridges networks which otherwise cannot directly interact.

By leveraging decentralized sequencing and zero-knowledge proof technology, the Cycle Network ensures not only the seamless connectivity but also the integrity and security of the transactions across different blockchains. This approach highlights the Cycle Network’s commitment to maintaining decentralization while enhancing the practical usability and reach of blockchain technology. The platform’s sophisticated architecture positions it as a leader in facilitating a truly interoperable digital asset ecosystem.