BitVM Upgrade Brings a New Chapter to the Bitcoin Ecosystem

Bitcoin has made significant breakthroughs in scalability and programmability, with BitVM technology being a key milestone. Based on the BitVM protocol, a new project has launched the first version of the Finality Bridge testnet, which is considered an important step in advancing the Bitcoin ecosystem into a new phase.

Unlike traditional Bitcoin bridging solutions that rely on centralized entities or trust assumptions, Finality Bridge innovatively combines BitVM smart contracts, fraud proofs, and zero-knowledge proof technology. This unique combination of technologies not only significantly enhances security but also greatly reduces reliance on third parties. Although it has not yet fully achieved the trustless level of the Lightning Network, Finality Bridge has made significant progress compared to existing Bitcoin layer two sidechain solutions, greatly expanding the possibilities for Bitcoin applications.

The core operating principle of Finality Bridge is to securely lock funds in an address managed by BitVM smart contracts. The design of this system is based on the assumption that as long as there is at least one honest participant in the system, the entire network can function properly. This design philosophy fundamentally reduces the need for external trust while also bringing new challenges and complexities to project management.

When users lock BTC into the BitVM smart contract through the Finality Bridge, they receive a token called YBTC that is strictly 1:1 pegged to Bitcoin. This pegging mechanism is not just a promise, but is enforced by the underlying smart contract logic, ensuring that each YBTC corresponds one-to-one with the BTC on the main chain. This innovative mechanism allows users to participate in various decentralized finance activities in the new ecosystem, such as lending, borrowing, and liquidity mining, while ensuring the security of Bitcoin and settlement guarantees.

Although there are different opinions within the community regarding these new financial activities, this architectural design provides users with unprecedented security guarantees, far surpassing traditional sidechain solutions. It is worth noting that all of this is achieved without making any modifications to the Bitcoin core protocol. Nevertheless, if covenant technology can be introduced in the future, it may further enhance the credibility of the bridging solution, bringing it closer to a "true" Bitcoin Layer 2 network.

Finality Bridge, as a paradigm of BitVM 2.0, demonstrates the immense potential that developers can achieve by transitioning from centralized chains to Bitcoin. Although chains based on BitVM still face many challenges, the development of this technology undoubtedly paves the way for Bitcoin to become the ultimate settlement layer for global economic activities, injecting new vitality into the future development of the Bitcoin ecosystem.