Aejkohl on Nostr: Nostr is sorely lacking a Sequentia thread. Let's fix that real quick. This one will ...
Nostr is sorely lacking a Sequentia thread. Let's fix that real quick. This one will be long-format (not sure how well that works on Nostr, let's see), but I'll also prepare some shorter posts in the coming days.
Sequentia is an upcoming Bitcoin sidechain which will marry the UX of on-chain tokenization (swap tokens directly for on-chain or lightning BTC without needing a peg) with the scalability of a sidechain (no need to write inside BTC txs every time you issue an asset or move tokens to the LN).
As you might already be able to guess, our motivation comes from the observation that existing sidechains (and sidechain proposals), being centred on pegged Bitcoin, on one hand imply some counterparty risk (although this has arguably been drastically minimized or even eliminated in some proposals), but even more importantly, untenable user frictions compared to on-chain tokenization. I live in El Salvador, a country that's full like no other of normal, average people who are now suddenly starting to learn everything about Bitcoin, and believe me that the idea of two different Bitcoins (on-chain and lightning) is already confusing enough without also needing a third type of bitcoin to access financial markets. At least Lightning's existence is well justified, and can potentially one day become the only type of BTC that most people will ever use.
Meanwhile, on-chain tokenization has gone a long way since colored coins, counterparty, and OG Mastercoin, and can now be much more scalable thanks to products which move token txs to the Lightning Network (OmniBolt, RGB, Taro) instead of occupying on-chain space. These solutions can enable the creation of LN DEXs, which I believe to be the killer app both for the LN and for Bitcoin itself; the missing breakthrough and last missing piece of the puzzle that is going to lead to mass Hyperbitcoinization. However, the standard implementations of these solutions still rely on writing inside of on-chain BTC transactions for the issuance of new assets and of course their migration to the LN; in this way, they will still compete with purely monetary BTC transactions for increasingly scarce on-chain space. In a world where every single financial right or obligation is represented by a token (with the goal of making it p2p tradeable for BTC), we will ultimately face another scalability bottleneck if we rely only on the standard implementations of OmniBolt, RGB, or Taro.
So, how are we going to build Sequentia, and how will it address the dilemma presented above?
We're planning to build on Elements (the codebase behind Liquid), and make the following key changes compared to Blockstream's implementation:
-Anchor Sequentia's blocks to Bitcoin blocks — every Sequentia block will include a reference to the Block Hash of a Bitcoin block at an equal or higher height than that which was referenced by the previous Sequentia block. This secures cross-chain operations (HTLC such as atomic swaps and yes, also Lightning Swaps) in case of chain re-orgs; when a Bitcoin block is orphaned, all corresponding Sequentia blocks will also be discarded. Sequentia should only ever reorganise if Bitcoin reorganised, and closure of LN channels (e.g. Breach remedy) is therefore always reflected on both chains.
-Remove the native federated peg, create an open fee market. Users may choose to pay tx fees on the sidechain using any token as long as a block creator is willing to take it (and therefore create a block that includes their transaction). Anyone can still issue a peg just like L-BTC, but it won't have any protocol-level privilege over any other. The idea is that in most cases (as long as the token in question has enough DEX liquidity and a relatively stable price, since tokens collected by block creators are subject to a timelock, and block creators will in most cases prefer to be able to reliably estimate the value of the tokens they collect), you don't need a third token other than real (on-chain or lightning) BTC and the sidechain asset you're actually interested in; you'll be able to swap your USDT for BTC without already having BTC or anything else — just pay the sidechain tx fee with USDT. If you're trading NFTs or illiquid tokens that no block creator wants, only then might you need another, more popular sidechain token (such as USDT) to pay the tx fee with, but you are entirely free to choose which. Alternatively, I can also imagine some block creators creating a service where you entrust them with your xpub, pay a monthly fee, and have them process all your transactions with 0 on-chain fees. In any case, we are allowing for a fully market-determined outcome.
-Currently, in order to become a block creator of the Liquid sidechain, you must be invited by existing federation members (who were selected by Blockstream) to join the federation. We want to open up and distribute this function by making it practically permissionless, but still costly. This means switching to a form of proof-of-stake (we call it "open federation"), with a token which anyone will be able to acquire pseudonymously on a BTC DEX (allowing for non-doxxed block creators), but with several key differences to all other implementations of PoS:
1) For starters, stakers (just like Bitcoin miners) can not change consensus rules; full nodes are sovereign and anyone can run a full node even if they're not a staker — we'll have half the blocksize but double the block frequency as Bitcoin, so the hardware requirements will be very similar to Bitcoin nodes, except that Sequentia will also require you to run and connect to your own Bitcoin node in parallel.
2) Sequentia's anchoring, checkpointing, and blocksigner sortition mechanisms rely on Bitcoin's proof-of-work to secure the sidechain and prevent some of the attack vectors that are otherwise possible in proof-of-stake. In this sense, it is more of a PoW-PoS hybrid.
3) We're not funding the development of the protocol through token sales or engaging with the shitcoin playbook, the SEQ token will never be needed by end-users (I.E. Non-block creators) in any way, and there is a permanently fixed supply of the token; therefore its price should accurately reflect the expected value of the transaction fees that can be collected by staking it.
There are other intricacies which you will be able to find in our documentation here: docs.sequentia.io — but this just about sums it up. What do you think?
Sequentia is an upcoming Bitcoin sidechain which will marry the UX of on-chain tokenization (swap tokens directly for on-chain or lightning BTC without needing a peg) with the scalability of a sidechain (no need to write inside BTC txs every time you issue an asset or move tokens to the LN).
As you might already be able to guess, our motivation comes from the observation that existing sidechains (and sidechain proposals), being centred on pegged Bitcoin, on one hand imply some counterparty risk (although this has arguably been drastically minimized or even eliminated in some proposals), but even more importantly, untenable user frictions compared to on-chain tokenization. I live in El Salvador, a country that's full like no other of normal, average people who are now suddenly starting to learn everything about Bitcoin, and believe me that the idea of two different Bitcoins (on-chain and lightning) is already confusing enough without also needing a third type of bitcoin to access financial markets. At least Lightning's existence is well justified, and can potentially one day become the only type of BTC that most people will ever use.
Meanwhile, on-chain tokenization has gone a long way since colored coins, counterparty, and OG Mastercoin, and can now be much more scalable thanks to products which move token txs to the Lightning Network (OmniBolt, RGB, Taro) instead of occupying on-chain space. These solutions can enable the creation of LN DEXs, which I believe to be the killer app both for the LN and for Bitcoin itself; the missing breakthrough and last missing piece of the puzzle that is going to lead to mass Hyperbitcoinization. However, the standard implementations of these solutions still rely on writing inside of on-chain BTC transactions for the issuance of new assets and of course their migration to the LN; in this way, they will still compete with purely monetary BTC transactions for increasingly scarce on-chain space. In a world where every single financial right or obligation is represented by a token (with the goal of making it p2p tradeable for BTC), we will ultimately face another scalability bottleneck if we rely only on the standard implementations of OmniBolt, RGB, or Taro.
So, how are we going to build Sequentia, and how will it address the dilemma presented above?
We're planning to build on Elements (the codebase behind Liquid), and make the following key changes compared to Blockstream's implementation:
-Anchor Sequentia's blocks to Bitcoin blocks — every Sequentia block will include a reference to the Block Hash of a Bitcoin block at an equal or higher height than that which was referenced by the previous Sequentia block. This secures cross-chain operations (HTLC such as atomic swaps and yes, also Lightning Swaps) in case of chain re-orgs; when a Bitcoin block is orphaned, all corresponding Sequentia blocks will also be discarded. Sequentia should only ever reorganise if Bitcoin reorganised, and closure of LN channels (e.g. Breach remedy) is therefore always reflected on both chains.
-Remove the native federated peg, create an open fee market. Users may choose to pay tx fees on the sidechain using any token as long as a block creator is willing to take it (and therefore create a block that includes their transaction). Anyone can still issue a peg just like L-BTC, but it won't have any protocol-level privilege over any other. The idea is that in most cases (as long as the token in question has enough DEX liquidity and a relatively stable price, since tokens collected by block creators are subject to a timelock, and block creators will in most cases prefer to be able to reliably estimate the value of the tokens they collect), you don't need a third token other than real (on-chain or lightning) BTC and the sidechain asset you're actually interested in; you'll be able to swap your USDT for BTC without already having BTC or anything else — just pay the sidechain tx fee with USDT. If you're trading NFTs or illiquid tokens that no block creator wants, only then might you need another, more popular sidechain token (such as USDT) to pay the tx fee with, but you are entirely free to choose which. Alternatively, I can also imagine some block creators creating a service where you entrust them with your xpub, pay a monthly fee, and have them process all your transactions with 0 on-chain fees. In any case, we are allowing for a fully market-determined outcome.
-Currently, in order to become a block creator of the Liquid sidechain, you must be invited by existing federation members (who were selected by Blockstream) to join the federation. We want to open up and distribute this function by making it practically permissionless, but still costly. This means switching to a form of proof-of-stake (we call it "open federation"), with a token which anyone will be able to acquire pseudonymously on a BTC DEX (allowing for non-doxxed block creators), but with several key differences to all other implementations of PoS:
1) For starters, stakers (just like Bitcoin miners) can not change consensus rules; full nodes are sovereign and anyone can run a full node even if they're not a staker — we'll have half the blocksize but double the block frequency as Bitcoin, so the hardware requirements will be very similar to Bitcoin nodes, except that Sequentia will also require you to run and connect to your own Bitcoin node in parallel.
2) Sequentia's anchoring, checkpointing, and blocksigner sortition mechanisms rely on Bitcoin's proof-of-work to secure the sidechain and prevent some of the attack vectors that are otherwise possible in proof-of-stake. In this sense, it is more of a PoW-PoS hybrid.
3) We're not funding the development of the protocol through token sales or engaging with the shitcoin playbook, the SEQ token will never be needed by end-users (I.E. Non-block creators) in any way, and there is a permanently fixed supply of the token; therefore its price should accurately reflect the expected value of the transaction fees that can be collected by staking it.
There are other intricacies which you will be able to find in our documentation here: docs.sequentia.io — but this just about sums it up. What do you think?