With its initial launch, Layer 2 Labs hopes to scale and develop drivechains for the Bitcoin Network. Upon its debut, the company was able to successfully raise $3 million in funding.
Layer 2 Labs co-founder and CEO Paul Sztorc stated that the company’s mission is to “make everyone in the world a Bitcoin user.”
BIP 300 and BIP 301, which describe the technical specifications of drivechains, are two Bitcoin improvement proposals (BIPs) written by Sztorc. The primary focus of Layer 2 Labs’ mission is drivechains.
The company stated that “Layer 2 Labs believes that drivechains have the potential to revolutionize the way we use Bitcoin by enabling greater scalability, extensibility, privacy, and flexibility on the network.”
Layer 2 Labs also believes that drivechains may eliminate altcoins, boost Bitcoin acceptance, and act as a catalyst for hyperbitcoinization.
A drivechain allows Bitcoin to send, receive, create, and delete from layer-2’s (sidechains).
Drivechains define a particular procedure for building Bitcoin sidechains. Bitcoin has the ability to “move” between blockchains to the main Bitcoin network seamlessly in a two-way peg through sidechains. While Bitcoin cannot actually leave the Bitcoin network, sidechains provide this function by locking up BTC on the Bitcoin blockchain and representing them differently on the sidechain.
The aim is to maintain a 1:1 peg between the sidechain’s representation of BTC and the actual BTC held on the Bitcoin network.
For example, the Liquid Network enables fast and confidential settlement and is run by the Liquid Federation. Financial institutions, wallet providers, leading exchanges, trading desks, payment processing services, and other Bitcoin-focused companies within the federation perform functionary operations, network governance, and peg-out services.
Drivechains make an effort to abandon the federated model in favor of what it views as being more decentralized by utilizing Bitcoin miners.
The drivechain model allows Bitcoin miners to “blindly” mine sidechain blocks through merged-mining where hashrate is reused. This is where a separate sidechain user runs their node and constructs the block while paying themselves the transaction fee. They will then use an equivalent amount of funds to “buy” the right to find the block from the conventional layer-1 Sha256d miners.
Sztorc states that the sidechains that Layer 2 Labs are currently developing “allow for immediate global scale, impenetrable easy-to-use privacy, and complete freedom (for users and developers).”