Botanix Protocol

Bitcoin is the largest and most well-known cryptocurrency, known for its decentralized structure and blockchain technology. While decentralization has many benefits, such as increased security and censorship resistance, it also comes with limitations like smaller block sizes and slower transaction times. To fully utilize Bitcoin’s potential as a decentralized global currency, new protocols and solutions may be necessary to address these challenges and enable wider use of Bitcoin for financial products and applications.
Its composability has produced an ecosystem of decentralized applications challenging the scalability of the base layer. The Ethereum Foundation’s vision for solving the scalability problem consists of EVM (Ethereum Virtual Machine) compatible chains layered on top of each other. The Ethereum parent chain will serve as a settlement layer at the bottom. The most secure and decentralized chain is required as a foundational layer in a layered future. Ethereum still faces centralization questions with multiple hard forks on the roadmap, the role of the Ethereum Foundation, the centralizing move to Proof-of-Stake and the OFAC sanctions as the biggest examples. Different technologies for constructing a second-layer on Bitcoin already exist. Examples of these include state channels, drivechains, multisig rollups, and Bitcoin soft-fork proposals which could enable ZK and optimistic rollups.
The Lightning Network (state channels) and Liquid (a multisig federation) are successful second-layers that are already in production. In the following section, we will provide a more in-depth overview of the current Bitcoin second-layer ecosystem and the compromises that come with each. In this paper we propose the Botanix protocol. Botanix is a solution for a decentralized chain built on top of bitcoin that uses the fundamentals of Lightning for decentralization to run an Ethereum Virtual Machine. Botanix is an account-based model (like Ethereum), instead of the UTXO (unspent transaction output) model of Bitcoin. The current state of Botanix is then a list of the account balances and smart contracts. Each Botanix full node will run Bitcoin core and the Botanix protocol. Botanix will use synthetic BTC as the native currency which is 1:1 pegged with Bitcoin, or in other words every synthetic BTC represents one Bitcoin. The consensus protocol consists of a Proof-of-Stake (PoS) model with slashing. While the benefits of Proof-of-Work are indispensable for the base layer of Bitcoin (no ownership centralization over time and during initial coin distribution), for a second-layer built on top that is pegged to BTC, the same argument no longer holds and the speed and performance benefits of PoS outweigh the downsides. Since synthetic BTC, the native currency of Botanix is pegged 1:1 with Bitcoin, the total block reward for stakers does not have a fixed fee. Instead, the reward will consist of multiple items (see section 4.5 Block Reward).