5 Bitcoin scaling ideas you need to know

There are only two disagreements you’ll remember in life: your first breakup and the first time you’re fired from a job. We humbly submit a third issue: how to scale Bitcoin.

Below, we’ve included five scaling ideas every Bitcoiner should know about, even if you disagree with them.

We’ll be borrowing our scaling definition from our friend James Prestwich, who defines it as “validating more transactions on the same hardware.” Alternatively, we also have “throughput” solutions, which “process more transactions across the whole system.”

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Bitcoin Covenants

Okay, when we wrote “you might disagree” a second ago, we were thinking of covenants. Many developers don’t consider covenants—which create future restrictions around how Bitcoins can be spent—a scaling technique. However, several developer groups believe they can introduce ways to improve current scaling projects, like the Lightning Network. If you’re interested, watch this Blockspace podcast on the topic!

The most prominent Bitcoin developer behind the covenant push is Jeremy Rubin, known for the CheckTemplateVerify (CTV) soft fork proposal, which introduces covenants to enhance Bitcoin’s scripting functionality. Recently, Rubin and other developers have publicly supported a combined covenants proposal as the next upgrade to Bitcoin.

Read: Are we close to consensus for Bitcoin’s next upgrade?

Bitcoin Vaults

What if we could protect your Bitcoins from threats beyond a mere signing scheme like a multi-sig setup? That’s the idea behind Vaults, championed by NYDIG engineer and former Bitcoin Core developer James O’Beirne under the moniker “OP_VAULT.”

How does this scale Bitcoin? The short answer is—probably not. Vaults don’t fit into the narrow definition of scaling Bitcoin as we defined above. However, Vaults would make more people more comfortable with Bitcoin, so we’ll let it slide into the conversation.

Watch: OP_VAULT for Custodians

BitVM

Announced in the fall of 2023, BitVM is a new paradigm for computation on the Bitcoin blockchain. In essence, any BitVM system will compute most of its work off-chain and then use a prover sequence on Bitcoin to verify the off-chain work.

For example, if you wanted to verify the sequence of transactions for a decentralized exchange (DEX), you would have the compute performed off Bitcoin but then sent back to Bitcoin to verify the transactions. This meets our scaling definitions well because Bitcoin isn’t asked to do anything more than it does now!

A few examples include Citrea and Alpen, both working on Bitcoin rollups that would host tons of applications like DEXs, lending apps, and more.

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Bitcoin PIPEs

Thought BitVM was complex? Enter Bitcoin PIPEs! This fun acronym stands for Polynomial Inner-Product Encryption Schemes, which can emulate covenants on Bitcoin without a soft fork.

In other words, PIPEs can synthetically manufacture a more complicated Bitcoin transaction than is possible today through a combination of Bitcoin’s pre-existing script and some fancy off-chain math. This also meets our definition of scaling, as Bitcoin doesn’t need any changes to make PIPEs work. Note: we haven’t seen a demonstration of PIPEs in the wild.

Watch: Bitcoin PIPEs: Do Everything On Bitcoin Without a Soft Fork?

Statechains

What if the answer to scaling Bitcoin was staring us in the face all along? Well, that’s probably unlikely—but Statechains give it a good run for the money! Statechains are a way to transfer Bitcoin ownership without moving the actual coins on the blockchain. Think of it like passing a key to a safe: the coins stay locked in the safe, but the key gets handed off to someone else off-chain. While there are theoretical downsides, like custody risk, they’re actually fairly manageable.

Best of all, since we’re validating more transactions on Bitcoin, it’s a solid scaling technique!

Enjoyed the read? You’ll love OPNEXT, the Bitcoin scaling conference hosted by Blockspace at the Strategy (formerly MicroStrategy) headquarters, April 11–12 in Tysons, VA. Use code BITDEVS for 10% off a ticket!