Approach to analyzing risk

We analyze Bitcoin Layers based on five different criteria. If a Bitcoin Layer meets all of these criteria, then it is likely an L2. If it does not, then the opposite is likely true.

Our risk framework is as follows:

1 - What bridging model does the Layer use? And, does the Layer enable unilateral exit?

This is the most important property for the Layer. If users can’t permissionessly exit the layer, then they are trusting another mechanism with the custody of their Bitcoin assets.

2 - Does the data needed to reconstruct the Layer's state live on Bitcoin?

This is an important property at the protocol level. Can node operators (and users) reconstruct the state of the Layer with data that is posted on the Bitcoin Layer 1? Does the protocol need to do this?

3 - Can users self-sequence and propose their own state transitions in the event of a liveness failure in the Layer's block production? Is this even necessary?

Users should be able to exit the Layer in the event of a liveness failure in block production. We analyze the risk associated with block producers accordingly. Another aspect here is if the sidechain is merge-mined, or not, and can a Bitcoin miner produce blocks for the Layer.

4 - Does the Layer ultimately settle on Bitcoin, or does it use an external protocol for settlement?

Users should be able to understand if state transitions of the Layer are verified by Bitcoin, or another protocol. For example, BitVM verifiers are responsible for verifying state transitions for rollups, not Bitcoin miners. In sidechains, sidechain miners/validators would act as the settlement layer.

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A thing we heavily consider in this risk assessment is if and how Bitcoin miners (or full nodes) participate in the security of the network.

Some implementations of scaling solutions see Bitcoin miners (or full nodes) participate in its network security in some capacity. There are a variety of ways that miners can participate in network security, from merge-mining a sidechain protocol, to validating transactions that include a rollup's state transition.