Botanix Labs and the Vision for a Bitcoin-based Layer 2

Introduction to Botanix Labs

Although Bitcoin is, by far, the most popular cryptocurrency, the Ethereum network, created to power smart contracts and DeFi applications via the Ethereum Virtual Network (EVM), has edged it in many practical uses beyond digital payments.

The challenge is enabling similar applications for Bitcoin to unlock its potential further and become more ubiquitous. Botanix Labs and other projects are building a second layer on top of Bitcoin (as the first layer) that can connect with dApps on the EVM to expand the functionalities of Bitcoin.

This article examines the core technology and innovations being introduced by Botanix Labs, the company’s progress over the past several months, and future potential.

Core Technology and Key Innovations

In summary, Botanix aims to enable people to use decentralized apps with Bitcoin by trading, lending, borrowing and even transacting NFTs like Ethereum. This aims to unlock the potential for Bitcoin to scale even higher through integration with the DeFi market.

So, with Bitcoin as the base layer and Botanix EVM as the layer 2 technology, users can bridge their crypto to conduct transactions at the same value as DApps hosted on the EVM. Bitcoins bridged to Botanix are stored using a multi-sig wallet secured by a network of Orchestrator nodes.

These nodes are users who validate the protocol and provide liquidity to both sides (Bitcoin and Botanix). The nodes will lock up some funds to operate on Botanix and be punished upon committing a misdemeanor. Once a user securely completes their transaction, they can withdraw their Bitcoin back to the main chain.

One of the key innovations in this approach is the Spiderchain, which Botanix created for its second-layer blockchain as a series of linked multi-sig wallets connecting all Orchestrator nodes. It enables users to seamlessly bridge their assets from Bitcoin's Unspent Transaction Output (UTXO) model to the EVM’s account-based model.

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Every new Bitcoin block creates a new multi-sig wallet to differentiate Bitcoin, the asset, and the blockchain. As such, the actual crypto is distinct from the EVM, ensuring greater security of users’ assets.

Testnet Launch

In November 2023, Botanix Labs launched a public testnet for the first decentralized EVM-equivalent Layer 2 based on Bitcoin. It took an entire year of research and development to launch the testnet. So far, there are 5,000 projects on the testnet, and participating in the project is a seamless process.

First, the testnet works with MetaMask out of the box; all a user needs to do is set up their account, and if they haven’t, they need to start making transactions. Test Bitcoin for bridging can be requested through the Botanix Faucet. On the testnet, users can also deploy a dApp or launch their token, a process that takes less than half an hour.

During its launch announcement, Botanix also introduced an accelerator program (Botanix Testnet Accelerator) to support 10 startups to enjoy enhanced support and development resources ahead of the mainnet launch this year.

Because the chain is not yet widely recognized, MetaMask estimates high gas fees for transactions via the Botanix EVM testnet, which might discourage some users. However, some users may be OK going through the clumsy process of manually lowering the fees before signing each transaction.

Future Potential

One of the highlights of 2024 has been the growth of different projects attempting to launch EVM-compatible Bitcoin Layer 2 networks, all with the same goals despite slightly different approaches. In this section, we’ll briefly highlight some of the major competitors to Botanix Labs in this space:

1. BEVM: like Botanix, BEVM is a decentralized Layer 2 that utilizes Taproot technology and the proof-of-stake mechanism to securely handle assets and cross-chain transactions between the Bitcoin EVM and the Bitcoin Mainnet, as well as to use BTC as gas for these operations.
2. Conflux Network: In January, the Layer 1 dApps consensus blockchain Conflux Network announced its Layer 2, targeting Feb/March 2024 for its testnet launch and May 2024 for the mainnet. As of the last update at the beginning of March, it had started implementing BTC L2-related modules.
3. Bitfinity: another Bitcoin L2 network that raised $7 million in January, anticipating its mainnet launch. The project operates on the Internet Computer Protocol’s (ICP) proof-of-userful-work consensus model for managing smart contracts.
4. BOB: an acronym for ‘Build on Bitcoin,’ a hybrid L2 that helps users and developers leverage the EVM to create and execute smart contracts. Its public testnet is live and recently raised $10 million in a funding round.

Compared to these other projects, what are the goals outlined by Botanix Labs in its roadmap, and how will they be achieved? Botanix Labs planned to launch a federated EVM sidechain comparable to how Liquid works on Bitcoin and Polygon works on Ethereum by the last quarter of 2023.

However, the latest is that plans are still in progress. Following that, the goal is to integrate a staking mechanism into the permission federation, implementing a verifiable random function (VRF) for Bitcoin. Once this is done and the testnet is sufficiently tested, the mainnet will be launched, and uncooperative federation members will be slashed from the mechanism.

Further, according to its roadmap, the Spiderchain with decentralized multisigs should be fully launched by the end of 2024. By 2025, Botanix hopes to launch permissionless staking and become part of the Lightning Network as a fully decentralized Layer 2 protocol.

Indeed, Botanix Labs has placed high demands on itself, with many pioneering efforts involved. Achieving these goals will boost the utility potential of Bitcoin and see even more players joining the fold. According to CB Insights, doing all these off of a single funding round back in 2023 worth $2.1 million is an impressive effort from Botanix Labs.

Conclusion: Team and Partnerships

Botanix Labs was founded in June 2022 by Willem Schroé, an engineer with an MBA from Harvard. He was a national mathematics medalist in Belgium, and in university, he developed an interest in cryptographic encryption, which was the subject of his master’s thesis in engineering.

Merging this research focus with his interest in macroeconomics, he developed the thesis for the Spiderchain, the foundational infrastructure of Botanix Labs, during his MBA.

His love for Bitcoin led him to cross paths with cofounder Armin Sabouri, a full-stack engineer who took the reins as the Lead Software Engineer and later Chief Technology Officer (CTO) of the young company. Botanix has a small team (twelve people) composed mostly of engineers who have garnered experience working on DeFi, blockchain technologies, and Web3 innovations.

So far, in 2024, Botanix Labs has announced major partnerships with Yala Labs and Palladium Labs. Yala Labs pioneered a native DeFi protocol that enables using Bitcoin as collateral. The partnership allows Yala Labs to use the Botanix EVM to expand its DeFi services. On the other hand, partnering with Palladium Labs will enable both companies to launch a new Bitcoin-native stablecoin on the Botanix EVM.