OPZ Network

Next-Generation BTC Layer 2 Solution

Note: In pursuing a Bitcoin Layer-2 solution that is production-ready and aligns with our specific needs, we did not find an existing protocol that fully met our criteria. Therefore, we started developing our OPZ Network solution to suit our unique requirements. While OPZ Network is our primary focus, we remain open to collaboration and actively engage in discussions with other Bitcoin Layer-2 protocols to explore potential synergies.

1.1 Background

Bitcoin, the first decentralized digital currency, has encountered scalability and transaction processing efficiency challenges. There is an increasing demand for scaling solutions to increase throughput, as shown by the Bitcoin Ordinals market, which is witnessing a remarkable surge in trading activity.

1.2 Problem Statement

Bitcoin's network faces significant challenges:

• Scalability: Limited transaction throughput due to block size and frequency constraints.

• Performance: Increased transaction fees and confirmation times during network congestion.

• Privacy: Exposure of transaction details on the public ledger.

1.3 Solution

OPZ Network introduces a Bitcoin Layer-2 solution to elevate the Bitcoin network's capabilities with EVM compatibility. This protocol integrates Zero-Knowledge (ZK) Rollups to validate transactions faster while ensuring that gas fees remain minimal and without sharing critical user information. It also alleviates congestion on the base layer and increases scalability.

2. Features:

The OPZ Protocol has several features that make Bitcoin transactions faster, smarter, and more private.

2.1 Enhanced Scalability

Using ZK-Rollup technology, OPZ Protocol can handle more transactions and support complex smart contracts. By circumventing base layer congestion and limitations, ZK-Rollup achieve faster transaction speeds and reduced confirmation times.

2.2 Smart Contract Capability

The zkEVM brings the ability to create and use smart contracts on the Bitcoin network, opening up a world of possibilities for decentralized applications and services. A ZK-Rollup consists of three primary components: an Ethereum smart contract, a prover, and a set of verifiers. The smart contract manages the interactions between chains. A third-party prover creates cryptographic proofs of transaction validity on the layer-2 chain, while verifiers are a group of nodes that confirm these proofs and submit them to the smart contract.

2.3 Privacy and Security

Zk-Rollups improve transaction privacy by utilizing zero-knowledge proofs to verify them on-chain without revealing any information. This means that little data is posted on-chain and no information about the transactions is leaked. Zk-rollups also include privacy features like concealing transaction amounts or recipients.

3. OPZ Protocol Architecture

3.1 Processing Layer

The Processing Layer is the operational heart of the OPZ Protocol, where user transactions undergo processing, aggregation, and finalization on the Bitcoin network. Employing ZK-Rollup technology, this layer compiles groups of transactions into singular, verifiable proofs. This process significantly reduces the data footprint on the main chain, enhancing transaction speed and cost-efficiency and aligning with the protocol's commitment to security, scalability, and practicality.

3.1.1 zkEVM (Zero-Knowledge Ethereum Virtual Machine)

At the core of the Processing Layer is the zkEVM. This element introduces Ethereum's smart contract functionalities into Bitcoin's robust and secure framework. This innovative integration allows for the execution of smart contracts and decentralized applications (DApps) within a scalable, privacy-preserving environment, making the OPZ Protocol a bridge between Bitcoin, the most battle-tested decentralized network in the world, and the adaptable smart contract capabilities of Ethereum.

3.2 Consensus and Data Integrity Layer

This layer forms the backbone of the OPZ Protocol's security and reliability, ensuring transaction data's secure storage and perpetual availability.

3.2.1 Decentralized Data Storage

To fortify the protocol's security and resilience, OPZ Protocol incorporates decentralized data storage solutions. This approach distributes and securely maintains transaction data across a network of nodes, significantly enhancing data security and eliminating the risks associated with centralized data repositories.

3.2.2 OPZ Nodes

OPZ Nodes are multifunctional entities within the protocol, entrusted with critical responsibilities, including the validation of ZK Proofs: These nodes are instrumental in validating the correctness of zero-knowledge proofs, ensuring the integrity and accuracy of the transactional data processed in the ZK-Rollup Layer.

• Decentralized Sequencing Services: OPZ Nodes manage the sequencing of transactions, maintaining decentralization of the network and ensuring that transaction processing is impartial and secure.

• Integration with Bitcoin State Data: By incorporating state data from the Bitcoin network, OPZ Nodes improve the synchronicity and cohesiveness between the Layer-1 and Layer-2 solutions, ensuring that the OPZ Protocol runs smoothly on top of the underlying Bitcoin infrastructure.

In essence, OPZ Nodes are the guardians of the protocol's decentralized structure, playing an important role in upholding the network's transparency, security, and operational integrity.

4. Integrating Hybrid DEX

OPZ Network Synergy

The synergy between OPZ-DEX and OPZ Network leverages zkEVM at the Processing Layer core to bridge Bitcoin and Ethereum functionalities, offering a blend of speed, efficiency, and security. This structure addresses high-frequency trading requirements without compromising decentralization principles.

4.1 Architecture Overview

The architecture consists off two main components:

• On-Chain Settlement Layer: Utilizes the OPZ Network's zkEVM for executing smart contracts for trade settlements, leveraging zero-knowledge proofs to ensure privacy and security.

• Off-Chain Order Book and Matching Engine (Chronicle Matching Engine): Handles order matching and trade execution off-chain for high speed and low costs, while final settlements are registered on-chain.

4.2 Process Flow and Formulas

1. Order Placement and Matching:

Users place orders via the OPZ-DEX interface, which are then encrypted and sent to the Chronicle Matching Engine. Every order can be represented as $(O)$,

where: $(O = {userID, assetID, price, volume, direction, nonce}).$

1. Order Aggregation:

The matching engine aggregates these orders into batches for processing. The aggregation process can use a time-based or size-based strategy to compile orders into a batch$(B)$,

where: $(B = {O_1, O_2, ..., O_n})$

1. Trade Execution:

Once a match is found for orders within a batch, the Chronicle Matching Engine executes the trade off-chain and generates a proof of execution $(Proof_{exec})$

1. Off-Chain to On-Chain Transition:

Post trade execution, a summary of the batch $(S_B)$ and $(Proof_{exec})$are submitted to the zkEVM on-chain for settlement. The summary $(S_B)$ contains aggregated information of asset transfers without revealing individual order details to maintain privacy.

$[S_B = f(B) = {totalIn, totalOut, assetID, Proof_{exec}}]$

1. On-Chain Settlement:

The zkEVM checks $(Proof_{exec})$ for its validity. If valid, it updates the on-chain state based on $(S_B)$ The zkEVM uses zero-knowledge proofs to ensure that this transition maintains user privacy and transaction integrity.

1. Confirmation and Finality:

Once the on-chain settlement is complete, the OPZ Network confirms the transaction and updates the users' account balances. This finality in state is immutable and verifiable by any participant of the network.

4.3 zk-SNARKs

For the trade execution proof$(Proof_{exec})$, we can consider the use of a zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), formulated as follows:

$[Verify(Proof_{exec}, PublicInputs) \rightarrow {0, 1}]$

Where $(Verify)$ is the verification function, $(Proof_{exec})$ is the proof of batch execution, and $(PublicInputs)$ include aggregated trade details. The function returns 1 for a valid proof, signifying a successful trade execution and subsequent on-chain settlement.

4.4 Security and Efficiency

OPZ-DEX through OPZ Network Synergy ensures:

• Security: By leveraging zk-SNARKs, user transactions remain private and secure, while the integrity of trade executions is publicly verifiable.

• Efficiency: Off-chain order matching coupled with on-chain settlement leverages the strengths of both systems – speed and immutability, respectively.