Layer 2 Labs was launched with the goal of scaling and building a drivechain for the Bitcoin Network. The company has closed a seed round at launch, raising $3 million in funding.
Layer 2 Labs co-founder and CEO Paul Sztorc said in a statement sent to Bitcoin Magazine that the firm seeks to “make everyone in the world a user of Bitcoin.” Sztorc is the author of two Bitcoin Improvement Proposals (BIP), BIP 300 and BIP 301, which detail the technical specifications of drivechains. Of course, drivechains are at the forefront of Layer 2 Labs’ mission.
“Layer 2 Labs believes that drivechains have the potential to revolutionize the way we use Bitcoin by enabling greater scalability, extensibility, privacy, and flexibility in the network,” the company said in a statement. “We believe that drivechain has the potential to disrupt altcoins, increase Bitcoin adoption, and provide a catalyst for hyperbitcoinization.”
Drivechains defines a specific way to create Bitcoin sidechains. Sidechains are parallel blockchains to Bitcoin that allow BTC to “choose” between the two networks with two-way pegs. Since bitcoin cannot leave the Bitcoin network, sidechains accomplish this task by locking BTC in the Bitcoin blockchain and representing it in different ways on the sidechain. The goal is that the BTC representation on the sidechain maintains a 1:1 peg to the real BTC locked in the Bitcoin network.
Liquid is perhaps the most popular sidechain in the Bitcoin ecosystem today. The Blockstream model uses federation to handle chain locks and withdrawals, as well as sidechain block creation. Drivechains are trying to move away from the federated model in favor of something that is considered more decentralized — the Bitcoin miners themselves.
In the drivechain model, bitcoin miners also mine sidechain blocks, albeit blindly. That is, miners do not need to open the software for that particular sidechain, while getting the value transacted on that parallel chain. This is because most of the fees paid on the sidechain go to bitcoin miners. Ultimately, this also contributes to more fee revenue in Bitcoin.
Drivechains allow almost any type of chain to be made and take advantage of two-way pegs. This characteristic can allow functions existing in the altcoin network to be indirectly transferred to Bitcoin. Therefore, drivechains — and sidechains at large — in some ways allow bitcoin to be used in other chains, with different rules and properties. The benefit is that users can do things with bitcoins that cannot be done on the Bitcoin network. Risk is a pegging mechanism.
Sztorc said the company has three overarching goals. The first, as already mentioned, is the desire to further develop and scale drivechains.
“We have 6 sidechain-designs under development, including two which are exact clones of Ethereum and zCash (but BTC-only),” he said in a statement. “It allows for immediate global scale, impenetrable ease-of-use privacy, and complete freedom (for users and developers).”
Second, Layer 2 Labs aims to improve the user experience in Bitcoin, especially around the activities necessary for truly independent bitcoin ownership.
“We want REAL bitcoin users – users who run nodes, and hold keys,” he said. “This calls for a revolution in UX and education… which we are aiming for.
Finally, Sztorc said the company plans to work on what he calls “high-risk, high-reward problems.”
“This includes the prediction market and the resurrected Namecoin,” Sztorc said. “This service will revolutionize media/telecommunications, just like Bitcoin will revolutionize Banking.”