Bitcoin-IPC Whitepaper: Scaling Bitcoin with a Network of Proof-of-Stake Subnets

TL;DR

Bitcoin-IPC proposes a scalable protocol that enables permissionless creation of Proof-of-Stake subnets linked to Bitcoin, significantly increasing transaction throughput without altering Bitcoin's core protocol.

Contribution

It introduces a novel software stack and protocol for scalable Layer-2 PoS subnets that leverage Bitcoin's security and reduce transaction costs.

Findings

Transaction throughput increases from 7 to over 160 tps.

Reduces virtual-byte cost per transaction by up to 23x.

Enables seamless cross-subnet value transfer routed through Bitcoin L1.

Abstract

We introduce Bitcoin-IPC, a software stack and protocol that scales Bitcoin towards helping it become the universal Medium of Exchange (MoE) by enabling the permissionless creation of fully programmable Proof-of-Stake (PoS) Layer-2 chains, called subnets, whose stake is denominated in L1 BTC. Bitcoin-IPC subnets rely on Bitcoin L1 for the communication of critical information, settlement, and security. Our design, inspired by SWIFT messaging and embedded within Bitcoin's SegWit mechanism, enables seamless value transfer across L2 subnets, routed through Bitcoin L1. Uniquely, this mechanism reduces the virtual-byte cost per transaction (vB per tx) by up to 23x, compared to transacting natively on Bitcoin L1, effectively increasing monetary transaction throughput from 7 tps to over 160 tps, without requiring any modifications to Bitcoin L1.