What’s Mercury Layer? – Bitfinex weblog


What’s Mercury Layer?

A New Type of Bitcoin Layer 2 Protocol

Mercury Layer, created by Commerce Block, represents a big development in Bitcoin’s layer 2 scaling ecosystem, specializing in enhancing privateness and effectivity by means of statechains. Mercury Layer allows the off-chain switch and settlement of Bitcoin Unspent Transaction Outputs (UTXOs) with out sacrificing the custody and safety of the proprietor’s funds. This Layer 2 protocol leverages statechains and blinded co-signing know-how to facilitate instantaneous and cost-free transactions, presenting a novel method to overcoming Bitcoin’s scalability hurdles.

Statechains, as carried out by Mercury Layer, achieves off-chain transfers of UTXOs by means of a mixture of key sharing and blinded signatures, guaranteeing that the possession of UTXOs can change palms securely and privately. The protocol’s design ensures that neither the Statechain Entity (SE) concerned in facilitating these transfers nor any single get together has full management over the personal keys, thereby sustaining the trust-minimised safety and privateness of the transactions.

Mercury Layer’s introduction of “blinding” know-how is a groundbreaking characteristic that ensures the SE can’t establish or censor transactions primarily based on their content material, additional enhancing the privateness of customers on the Bitcoin community. This method prevents the SE from studying about transaction particulars such because the concerned TXIDs, public keys, or the signatures it helps to co-generate. Furthermore, the protocol employs Schnorr signatures by way of Taproot addresses, utilising a blinded variant of the MuSig2 protocol to generate signatures with out revealing delicate data to the SE.

The Mercury Layer protocol additionally contains mechanisms like backup transactions and an orderly closure course of, which give customers with the flexibility to get better their funds autonomously in case the SE fails to cooperate or turns into unresponsive. This ensures a security web for customers, granting them better management over their property.

By addressing Bitcoin’s scalability and privateness issues with instantaneous, zero price, personal off-chain transactions, Mercury Layer paves the way in which for a broader adoption of Bitcoin for numerous purposes requiring instantaneous, safe, and personal transactions. Its integration with the Lightning Community opens up additional prospects for enhancing Bitcoin’s transactional capabilities, making it a pivotal improvement within the quest for a extra scalable and privacy-centric Bitcoin ecosystem.

A Large Enchancment in Scalability and Consumer Privateness

By facilitating the switch of possession of Bitcoin’s UTXOs off-chain, Mercury Layer dramatically reduces the burden on the Bitcoin blockchain. This mechanism permits for a big enhance within the variety of transactions that may be processed with out straight impacting the principle blockchain, thus enhancing Bitcoin’s scalability.

Mercury Layer’s use of statechains is central to its scalability enhancements. Statechains enable for the switch of UTXOs between events with out the necessity for on-chain transactions. That is achieved by sharing management of a UTXO between the unique proprietor and a SE, after which transferring possession by means of key updates. This course of allows a excessive quantity of transactions to happen off the principle blockchain, drastically growing throughput.

A crucial characteristic of Mercury Layer is its implementation of blinded co-signing, guaranteeing that the SE can’t study the transaction IDs, the general public keys concerned, and even the signatures it helps create. This blindness ensures that transactions stay personal and safe, free from censorship or surveillance by the SE.

Utilising a variant of the Schnorr signature scheme, Mercury Layer permits for signatures to be generated over a shared public key with out revealing the total key to the SE. This ensures that transactions may be securely signed whereas sustaining the privateness of the customers’ keys.

The protocol ensures that no single get together, together with the SE, has full management over a person’s funds. The shared management mechanism, mixed with backup transactions and orderly closure processes, not solely enhances safety but in addition preserves person privateness by stopping any unilateral actions by the SE.

Mercury Layer’s statechains present a approach for customers to show the individuality and possession of their funds with out exposing their transaction historical past or balances to the community or the SE, preserving monetary privateness whereas guaranteeing community integrity.

How Does Mercury Layer Examine to Different Bitcoin Layer 2 Protocols? 

Mercury Layer represents a singular method to Layer 2 scaling and privateness options on the Bitcoin community, differing considerably from different outstanding Layer 2 protocols like Chaumian e-cash, sidechains, and the Lightning Community. Every of those options provides distinct mechanisms for transaction scalability and privateness, with their very own benefits and limitations. 

Right here’s a comparability of how Mercury Layer stands towards sidechains, Lightning Community, and Chaumian e-cash:

Mercury Layer vs. Sidechains

Operational Mannequin: Mercury Layer makes use of statechains to facilitate off-chain transactions of Bitcoin UTXOs whereas sustaining their safety and privateness. It achieves scalability and privateness by means of blinded co-signing and key-cycling with out requiring the switch of property between chains.

Sidechains are unbiased blockchains that run parallel to the principle Bitcoin blockchain, permitting for property to be pegged and transferred between the principle chain and the sidechain. This may facilitate a broader vary of purposes and sensible contracts not attainable on the principle chain.

Belief Mannequin: Mercury Layer requires belief within the SE to behave truthfully in facilitating the switch of UTXOs and in sustaining privateness by means of blinded operations. Nonetheless, the protocol is designed to minimise belief by means of cryptographic mechanisms.

Sidechains might require belief within the entities securing the sidechain, relying on the consensus mechanism used. Federated sidechains, as an example, rely on a bunch of validators to safe the community and approve cross-chain transfers.

Scalability and Privateness: Mercury Layer straight addresses scalability by permitting for quite a few off-chain transactions with out impacting the Bitcoin blockchain’s throughput. It enhances privateness by guaranteeing the SE can’t study particulars in regards to the transactions it facilitates.

Sidechains can doubtlessly supply increased scalability and totally different privateness options relying on their design, however privateness and scalability are depending on the particular structure of the sidechain and the mechanisms it employs.

Mercury Layer vs. Lightning Community

Operational Mannequin: The Lightning Community allows off-chain transactions by means of fee channels between two events. These channels enable for almost limitless transactions which can be settled on the Bitcoin blockchain solely when the channel is opened or closed.

Mercury Layer’s use of statechains differs because it facilitates the off-chain switch of UTXO possession. In contrast to the Lightning Community, which requires channels to be funded prematurely, Mercury Layer allows the switch of current UTXOs.

Scalability: Each the Lightning Community and Mercury Layer supply options to Bitcoin’s scalability concern. Lightning achieves this by means of a community of fee channels facilitating microtransactions, whereas Mercury Layer does so by means of off-chain UTXO transfers.

Mercury Layer doubtlessly provides a extra easy mechanism for transferring worth off-chain with out the necessity for channel administration and routing, however it’s centered on UTXO transfers moderately than facilitating a excessive quantity of small transactions.

Privateness: The Lightning Community offers privateness advantages by not broadcasting transactions to the general public blockchain till a channel is closed. Nonetheless, routing data may doubtlessly leak privacy-sensitive data.

Mercury Layer enhances privateness by means of blinded co-signing, making it unattainable for the SE to study any particulars in regards to the transactions it helps facilitate, offering a robust privateness assure.

Use Instances: The Lightning Community is well-suited for small, frequent funds, making it splendid for micropayments and on a regular basis transactions.

Mercury Layer is especially advantageous for privacy-sensitive transfers and doubtlessly for bigger transactions, given its give attention to sustaining possession, privateness, and safety of UTXOs.

Mercury Layer vs. Chaumian eCash

Operational Mannequin: Mercury Layer is a Layer 2 scaling resolution primarily based on statechains, facilitating the off-chain switch of Bitcoin UTXOs with full custody maintained by the proprietor. It makes use of blinded signatures and key-cycling know-how to make sure privateness and safety.

Chaumian eCash operates as a privacy-focused digital money system utilizing blind signatures to supply anonymity for customers. It permits for the creation of mints or banks the place customers can deposit and withdraw funds, transacting anonymously inside the mint.

Belief and Custodial Dangers: Mercury Layer minimises belief by guaranteeing neither the SE nor the customers have full management over the personal keys, thus requiring cooperation for transactions. It introduces a novel methodology of transferring Bitcoin possession with out an on-chain transaction.

Chaumian eCash introduces a belief mannequin the place customers should belief the mint operators to a level. Nonetheless, federated mints distribute belief throughout a number of events to mitigate threat. The privateness and safety of transactions inside a mint depend on the integrity of those operators.

Privateness: Mercury Layer’s use of blinding strategies ensures that the SE can’t study any transaction particulars, offering a excessive diploma of privateness for customers. It protects towards each inner and exterior privateness leaks by design.

Chaumian eCash provides robust privateness options by design, utilizing blind signatures to stop mint operators from linking customers to transactions or balances. It successfully addresses inner privateness leaks however have to be fastidiously designed to guard towards exterior evaluation and surveillance.

Scalability and Usability: Mercury Layer addresses Bitcoin’s scalability straight by enabling off-chain UTXO transfers, doubtlessly supporting the next quantity of transactions with out burdening the Bitcoin community. Its method simplifies the person expertise by abstracting advanced channel administration seen in different Layer 2 options.

Chaumian eCash additionally provides scalability advantages by enabling off-chain transactions inside mints. It simplifies the person expertise, permitting for straightforward transactions with out the necessity for direct blockchain interplay. Nonetheless, the scalability is proscribed to the mint’s ecosystem and is determined by the mint’s potential to deal with giant volumes of transactions.

Integration with Present Networks: Whereas Mercury Layer is a standalone Layer 2 resolution specializing in UTXO transfers, its ideas may theoretically be built-in with different networks for enhanced performance.

Chaumian eCash mints may be designed to interoperate with the Lightning Community, providing a bridge between privacy-centric eCash programs and Lightning’s environment friendly micropayment channels. This interoperability may enrich the Bitcoin ecosystem with numerous transaction choices catering to totally different person wants.

In abstract, whereas sidechains, Chaumian e-cash, and the Lightning Community lengthen Bitcoin’s capabilities in numerous instructions, Mercury Layer provides a novel method centered on privateness and the safe switch of possession of UTXOs. Every of those Layer 2 options performs a vital function in enhancing Bitcoin’s scalability, privateness, and utility, catering to numerous use circumstances inside the ecosystem.



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