Is BitVM Better or Worse than then Lightning Network?

By Michael @ CryptoEQ | CryptoEQ | 18 Jun 2024

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BitVM to the Rescue?

While the LN undoubtedly made strides toward scaling Bitcoin, its path has been fraught with challenges that compromise its viability as a universal solution. Amidst these challenges, a potential new solution has emerged: BitVM.

BitVM, a whitepaper and L2 design conceived by Robin Linus in 2023, outlines a new approach to executing logic within the limited functionality of Bitcoin’s scripting language. According to the whitepaper,  “BitVM is a computing paradigm to express Turing-complete Bitcoin contracts…. Rather than executing computations on Bitcoin, they are merely verified, similar to optimistic rollups… Using this mechanism, any computable function can be verified on Bitcoin.”

BitVM distinguishes itself from other blockchain scaling solutions such as the Lightning Network, Rootstock, or Stacks, which more closely resemble sidechains than rollups. Sidechains are independent blockchains with their own block producers and smart contract environments, often compromising either security or decentralization for scalability. In contrast, rollups, including BitVM, process transactions off the main chain in batches, which are then submitted back to the main chain for verification, maintaining security and decentralization.

Bitcoin's scripting language intentionally lacks Turing completeness. This deliberate constraint prevents the direct execution of complex smart contracts on the Bitcoin blockchain, setting it apart from virtual machine-based blockchains like Ethereum. In a post-BitVM world, Bitcoin could theoretically serve as the base layer for (nearly) endless Layer 2s and rollups, just as Etheruem does today. 

Historically, expanding Bitcoin's scripting capabilities to support Turing-complete contracts demanded a soft fork to introduce new operational codes (OP_CODES). However, BitVM was designed as a strategic solution to the challenges associated with adding new OP_CODES through conventional proposals within the Bitcoin community. Its design ingeniously leverages existing OP_CODES to introduce new functionalities and circumvents the need for a soft fork. This approach placates the conservative, “don’t touch the base layer” Bitcoin crowd while eliminating the extremely arduous and slow-moving soft fork process entirely. 

With the release of this whitepaper, the Bitcoin community seemingly has a path toward L2 Optimistic Rollups (ORs) built atop Bitcoin, which could theoretically accomplish many of the same scalability goals the LN set out to achieve. Even better, this innovative approach can be implemented without any changes to the Bitcoin base layer. Instead, the system, much like an Ethereum OR, handles more sophisticated computations off-chain between a prover and verifier, all while maintaining Bitcoin's original consensus rules and security guarantees. 

Key Features and Capabilities of BitVM

  1. Enabling Complex Interactions: Prior to BitVM, executing and verifying complex interactions, like most DeFi transactions, directly on Bitcoin was impossible. BitVM could make it possible to host complex applications like decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and gaming directly within Bitcoin's ecosystem.
  2. Expanding the Design Space: The introduction of BitVM opens up limitless possibilities for application development directly on Bitcoin. With the capability to perform complex computations and verify them trustlessly on Bitcoin, an explosion of fully on-chain applications is likely. This advancement broadens the scope of Bitcoin's applicability and strengthens its position as a versatile and robust platform for future blockchain innovations.
  3. Potential for Trust-Minimized Bridges and ZK Proofs: One of BitVM's most promising aspects is its potential to enable trust-minimized bridges and verify zero-knowledge proofs, a prerequisite for unlocking even greater scalability via zero-knowledge/validity rollups.

How Does BitVM Work?

“Rather than executing computations on Bitcoin, they are merely verified, similar to optimistic rollups. A prover makes a claim that a given function evaluates for some particular inputs to some specific output. If that claim is false, then the verifier can perform a succinct fraud proof and punish the prover.”

Source: BitVM Whitepaper – Abstract

As the whitepaper mentions, BitVM operates in a similar fashion to Optimistic Rollups (ORs) on Ethereum. 

This innovative approach has caught the attention of the Bitcoin community because it is designed to execute Bitcoin contracts without altering the core principles of the Bitcoin blockchain. By verifying computations rather than executing them directly on the blockchain, BitVM employs a methodology analogous to that of optimistic rollups. This system enables more sophisticated off-chain computations while ensuring scalability and maintaining the original consensus rules of Bitcoin. 

BitVM adheres to the structure of a traditional optimistic rollup, with distinct roles assigned to provers and verifiers. At the core of BitVM's methodology lies the utilization of off-chain computation by a prover, who commits an economic stake to guarantee the accuracy of their work. This prover conducts computations off-chain and submits the results within a Bitcoin transaction, reducing the on-chain processing load and utilizing Bitcoin's transaction capabilities without direct smart contract support. 

If the verifier computes a different result, they are empowered to submit a fraud proof to the blockchain, which can lead to financial penalties for the prover. This mechanism ensures accountability and integrity within the system despite existing incentive challenges that might require future structural adjustments.


The verification process involves parties challenging the computation's correctness and submitting fraud proofs if discrepancies arise. This transparent dispute resolution mechanism incentivizes accuracy and honesty, with dishonest provers risking forfeiture of their staked economic resources. BitVM's strategy bypasses Bitcoin's limitations regarding smart contracts and ensures computational integrity and verifiability.

Transaction Processing

The operational mechanism of BitVM comprises several stages:

  1. Agreement on Program Execution: Initially, the prover and verifier agree on a specific program that encapsulates the contract's logic. This program, essentially compiling binary texts containing scripts, defines the executable steps.
  2. Pre-signing Transactions: To prepare for potential disputes, both parties pre-sign a series of transactions. These transactions are structured to support a challenge-response game, a strategic interaction designed to manage and resolve disputes.
  3. Off-Chain Execution: Following the setup, the program's execution commences off-chain, minimizing the blockchain transaction load. This stage involves continuous data exchange necessary for executing the agreed-upon program.
  4. On-Chain Modifications and Deposits: Parties may make on-chain modifications to formalize or update the contract’s activation/execution as the off-chain computation progresses.
  5. Dispute Resolution via Challenge-Response Mechanism: This mechanism plays a crucial role in settling disputes by enabling verifiers to challenge the prover’s assertions and requiring the prover to substantiate their claims with appropriate evidence.

The Many Drawbacks of BitVM

While BitVM has the potential to aid in Bitcoin scalability, it's essential to acknowledge its practical challenges. Although the white paper mentions BitVM's ability to unlock scaling solutions “similar” to ORs on Ethereum, there are several very consequential differences. Below are several of the most significant (known) obstacles associated with the BitVM design.

  • Computational and Storage Limitations: Operating BitVM necessitates substantial data exchanges between parties, ranging from hundreds of megabytes to several gigabytes. This data-intensive interaction requires significant local storage and processing capacities, potentially hampering usability and scalability. 
  • P2P/Two-Party Interaction Model: BitVM currently caters to contracts involving only two parties, potentially restricting its applications compared to platforms supporting multi-party contracts. While solutions are actively being developed, this model would make Bitcoin L2s utilizing BitVM far more restrictive than those users are used to in the Ethereum ecosystem. 
  • Costs: Operators in this system must be prepared to manage substantial costs associated with off-chain computations and proofs, handle large data transfers (potentially reaching hundreds of megabytes), and execute numerous Bitcoin transactions as required. 
  • Complexity at the Developer Level: Another significant hurdle is the BitVM system's inherent complexity, including Taptrees, lengthy fraud proof/challenge windows, pre-signed transactions, and more. Developing applications on BitVM demands building from foundational programming levels and integrating numerous components to support higher-level functionalities. This steep learning curve and intricate development process could impede widespread adoption, particularly among individuals with limited technical expertise.
  • Operator Liquidity Issues: Bridging (or “pegging”) funds into BitVM differs from traditional rollups, altering the liquidity dynamics during user withdrawals. In standard bridges, the bridge contract holds funds that are directly used to process withdrawals. However, with a BitVM peg, the operator does not access these funds for withdrawals. Instead, the operator uses their own capital to process withdrawal requests from users.

This last concern around operator liquidity and processing withdrawals is significant enough to warrant even further explanation. Here's how it works: As users submit withdrawal requests, the operator, who also advances the rollup state, personally funds these withdrawals. Following a set period, the system updates its state to confirm all pending withdrawals. Once the operator has covered all these withdrawals, they can then reclaim their fronted capital from the BitVM-secured funds through a claims process. This setup includes a safeguard where the operator’s claim rights can be revoked if they fail to fulfill all pending withdrawals, ensuring accountability. However, this also means that users' funds could be significantly at risk if an operator lacks sufficient liquidity to cover all pending withdrawals. In a worst-case scenario, users may receive only a fraction of their original deposits when reclaiming funds on the main Bitcoin chain.

This design introduces significant risks and economic inefficiencies for operators due to the stringent liquidity requirements and the system's fraud proof mechanism. If an honest operator cannot cover all withdrawals, say in the case of a “bank run” type of scenario, any funds they have already used to process withdrawals become unrecoverable if a verifier challenges them, leading to a potential loss of access to the BitVM contract. To safeguard against this scenario, an operator theoretically would need $1 of idle liquidity for every $1 pegged over to manage a “worst-case scenario.” This means that ~99.9% of the time, a large portion of the idle liquidity is underutilized, leading to economic inefficiencies for potentially billions of dollars. 


A critical look at BitVM’s shortcomings is almost eerily reminiscent of those faced by the Lightning Network. Despite their innovative approaches to off-chain solutions, both systems stumble over key usability and efficiency hurdles. BitVM, with its promise to facilitate more complex logic off-chain, parallels the LN's ambitions to streamline transactions. However, the reality of cumbersome user experiences, liquidity issues, and technical constraints paints a sobering picture of potential underutilization. This reflection within the Bitcoin community sparks vital conversations about such technologies' feasibility and future trajectory. As we continue to assess these platforms, the pressing question remains: can we overcome these pervasive issues, or will the allure of simpler, more user-friendly alternatives like WBTC on Ethereum's sidechains continue to dominate? 

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


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