Re-examining the design logic of Bitcoin Lightning Network from the perspective of Thunderbolt Network

Original author: YBB Capital Researcher Ac-Core

1. Why can’t Bitcoin be used to buy coffee?

When it comes to Bitcoin, most people first think of its decentralized and immutable properties. But when you really want to use it to buy a cup of coffee, you will soon encounter an embarrassing problem: waiting for transaction confirmation takes longer than waiting for coffee, and sometimes the handling fee is even more expensive than coffee. Assets on Bitcoin have remained unmoved to this day – mainly relying on HODL, and cannot be loaned, combined, or interoperable.

The script structure of Bitcoin Script is extremely conservative, which limits most off-chain interaction scenarios. It was not originally designed to process tens of thousands of payments per second. But the real demand is there – everyone just wants Bitcoin to be usable, even if its just to buy a game skin or watch a video and give a reward, and they dont want to wait ten minutes.

2. Lightning Network: A Double-edged Sword

Image source: Cointelegraph

The Bitcoin main chain is like a highway, while the Lightning Network is like a toll expressway built next to it. Its core concept stems from the compromise of the efficiency of the main chain transaction: since there is a speed bottleneck in the on-chain transaction, it is no longer obsessed with recording every transaction on the chain, but by establishing a dedicated payment channel between users to achieve high-frequency accounting, and finally only synchronize the fund status when the channel is closed to the blockchain. This model is similar to the settlement method of friends taking turns to treat each other every week – people will not transfer money to the bank immediately after each meal, but settle the account once after accumulating ten consumptions. The Lightning Network is essentially a transaction network woven by tens of thousands of such payment channels.

However, this seemingly sophisticated system has exposed multiple difficulties in actual application. The first is the high threshold for channel construction. Users need to lock funds in advance to establish a transaction channel, which means that if you want to trade with any object, you must establish a dedicated channel connection in advance. The second is the complex routing problem. When users A and B lack a direct channel, even if there is an indirect path of ACB, if the intermediate channel is insufficiently funded or the path node is unavailable, the transaction will still fail. Even more serious is the security risk. The system requires users to stay online to prevent the counterparty from submitting expired transactions for fraud when the channel is closed, which constitutes an unrealistic requirement for the equipment operation and maintenance capabilities of ordinary users.

Although the Lightning Network has been online for many years, these structural defects have made it difficult for its actual application to break through the bottleneck. Public data shows that the current amount of funds locked in the entire Lightning Network is only maintained at about 100 million US dollars. Compared with the trillion-level market value of the Bitcoin system, its ecological status is almost marginalized. This cant help but cause the industry to think deeply: Can we build a more perfect off-chain payment protocol to break through the current dilemma?

According to Chain Catcher on April 15, HSBC disclosed in an official press release that Bitcoin Thunderbolt is the most milestone technology upgrade of Bitcoin in the past decade. The overall observation of Thunderbolt is more like Lightning Network 2.0, but it is not just an upgrade, but more like a reconstruction of the off-chain Bitcoin interaction paradigm.

3. What is the Thunderbolt protocol

Image source: Nubit | Bitcoin Thunderbolt

Bitcoin Thunderbolt is a soft fork upgrade method based on the Bitcoin base layer. It does not rely on the compromise of a second-layer network or a cross-chain bridge, but directly makes changes at the protocol level of the Bitcoin main chain, fundamentally improving Bitcoins scalability, transaction performance and programmability.

From a performance perspective, Nubit has significantly optimized Bitcoins traditional transaction processing model with the help of UTXO (unspent transaction output) Bundling technology. The traditional Bitcoin network uses a single UTXO model, which significantly limits transaction speed and throughput. UTXO Bundling allows multiple UTXOs to be aggregated together for processing, which is equivalent to compressing the amount of transaction data, thereby increasing transaction speed by about 10 times without sacrificing security.

In terms of programmability, Bitcoin Thunderbolt reintroduces and expands the OP_CAT opcode (which originally existed in early versions of Bitcoin and was later removed). OP_CAT allows data to be linked, allowing developers to build more complex script logic, thereby implementing smart contracts directly on the Bitcoin main chain. The most direct benefit of this upgrade is that developers can deploy decentralized applications (dApps) on the native Bitcoin network without relying on sidechains, Rollups, or cross-chain bridges.

At the level of asset protocol integration, Nubit advocates and implements a unified standard called Goldinals. Goldinals provides an asset issuance framework based on zero-knowledge proof and state commitment. Simply put, this is a set of Bitcoin native token standards that can verify the existence and status of each token on the chain without relying on external trust institutions or complex cross-chain bridges. BitMMs on-chain automated market maker running on Bitcoin integrates scattered BRC-20, Runes and Ordinals and other protocol assets. Nubit has also made important breakthroughs in trustless transactions. Its BitMM (Bitcoin Message Market) system supports users to conduct trustless transaction matching and information verification on the Bitcoin chain.

Unlike traditional expansion ideas (such as using sidechains, Plasma, Rollup or bridge-wrapped tokens), Nubit takes a main chain native expansion path. BitVisa provides a decentralized identity and credential system. Whether it is transaction compression, smart contract support, or asset standard integration and on-chain transaction matching – all run directly on the Bitcoin main chain. Native BTC is used instead of cross-chain mapping tokens.

3.1 Analysis of the core mechanism

The content of this section is explained in the article Stateless and Verifiable Execution Layer for Meta-Protocols on Bitcoin (see reference link 1). According to my personal understanding, Bitcoin Thunderbolt and Bitcoin Lightning are similar. They are both expansion solutions proposed to solve the problem of slow transaction confirmation on the Bitcoin main chain. The core goal is to improve efficiency and reduce costs. The difference between the two is:

• The design of Lightning Network is more like a payment channel – it can only be used for transfer payments, does not support smart contracts or complex logic, and has a high threshold for construction and maintenance, which is not conducive to large-scale popularization.

• Thunderbolt was launched by Nubit, which is committed to providing an off-chain protocol with programmability, supporting Turing-complete operations, and being able to build more complex state assets, liquidity protocols, and financial applications.

Flexible and adjustable multi-party signature

Imagine splitting a Bitcoin signature into two halves: one half is in Alices hands, and the other half is in the hands of the committee. Each time it is transferred to a new user, Alice and the committee each add a little secret to their own half of the signature – only the new user who receives it knows this secret. The recipient can piece together the two halves with the little secret he knows, and get the complete signature, without Alice having to talk to the committee online.

Asynchronous Fault-Tolerant Committee Ledger

A service group consisting of several nodes (such as 4 n+ 1) is responsible for bookkeeping, and everyone confirms who is the current owner. Even if a few nodes are broken, as long as the majority are still online, the ledger can be kept running normally. These nodes are only responsible for helping to sign and bookkeeping and cannot use funds at will, ensuring security and decentralization.

Atomic Swap Finalization

When the money is actually spent on the chain, it first goes through three steps of atomic swap: 1. Alice + the committee spends the original locked output and temporarily gives the money to the committee; 2. The committee locks the same amount in a safe that can only be used by Zenni and the committee; 3. Finally, Zenni uses two signatures to take the money out of the safe. In this way, neither Zenni nor the committee can sneak away, ensuring that the off-chain reconstruction and on-chain redemption are done in one go.

3.2 Thunderbolt Protocol Design and Key Innovations

• The non-interactive, recursive signature delegation has designed a set of tweakable threshold Schnorr signature structures. Traditional payment channels often require several messages to go back and forth, while Thunderbolt only needs to send a signature with a small secret each time, and even the online requirements are greatly reduced.

• Use a new lock for each transfer
  At each hop transfer, Alice and the committee update the signature with a new small secret, and the old lock is completely invalidated. In this way, no one before can get the new signature, preventing the old signature from being reused.

• Only one trace is left on the chain, and the money is “locked” on the chain at the beginning. All subsequent changes are completed off-chain, and the money is spent on the chain at the end. Compared with the Lightning Network, which has to constantly open and close channels, Thunderbolt has fewer on-chain operations and better privacy.

• Even if Alice or Zenni is offline, as long as the majority of the committee is online, the transfer or redemption can be completed at any time without worrying about the time lock expiring or the opponent maliciously closing the channel.

• All key steps in the true machine-proven security protocol are formally verified using Tamarin Prover, which means that these security guarantees are not just paper talk, but have been tested over and over again by automated tools.

4. How is Thunderbolt different from existing Lightning Network solutions?

Lets take a look at the comparison between Thunderbolt and existing solutions (such as BOLT protocol, Breez SDK, Phoenix) to see what improvements it has made.

The difference between Thunderbolt and existing lightning network solutions:

We can see that Thunderbolts main advantages are reflected in security and theoretical completeness. It is one of the few that can:

• The protocol design can be proven to be secure

• Malicious users cannot unilaterally profit under any circumstances

But its disadvantages are also obvious:

• Complex deployment: To use Thunderbolt, you currently have to run the full protocol stack, which is difficult for ordinary wallet users to use

• Main chain compatibility: The scripting language of the Bitcoin main chain is too simple, and Thunderbolt must use clever detours to implement its functions, which increases the difficulty of implementation.

• Ecosystem support is still lacking: Unlike BOLT, which has a large number of wallets and nodes supporting it, Thunderbolt is still in the early research stage

5. The potential impact of Thunderbolt: a catalyst for BTCFi?

Image source: Homemade

So is Thunderbolt the best solution for BTCFi? Let’s make a bold statement:

Thunderbolt is currently the best solution for BTCFi in theory, but in practice it is still in the Alpha stage. In other words, it is like the Ethereum 2.0 White Paper of the Bitcoin world, full of vision but not yet at the engineering system level. Based on current observations, I personally believe that there are three possible development paths for Thunderbolt:

1. Rollup integration: as a DeFi engine on the Bitcoin side

The Bitcoin main chain itself is not scalable enough, and Thunderbolt may eventually become an off-chain module on a Bitcoin L2 (such as BitVM, Nomic, BOB). This is similar to integrating Thunderbolt as a general contract execution layer in Rollup.

for example:

• BOB can integrate Thunderbolt channel layer to realize native BTC transactions

• The RGB ecosystem may also introduce Thunderbolt state management logic

• BitVM itself supports more complex logic, Thunderbolt will become one of the contract standards

• Serving Babylon, Bitlayer and other systems

2. Form an independent standard ecosystem and run in parallel with the main chain

Thunderbolt is most likely to develop its own network ecology, node operation and maintenance system, aggregator, etc., just like the Lightning Network, and even form a Thunderbolt-LSP operator. At the same time, Nubit has joined hands with the protocol layer soft fork upgrade promoted by the miners in the Satoshi era, introducing two major features: UTXO Bundling and OP_CAT. It can also directly undertake BTC protocol assets (BRC20, Runes, Ordinals), which will create a lot of room for imagination. Perhaps in the future it may have:

• Thunderbolt Wallet (similar to Phoenix)

• Thunderbolt Node (Light Node Operation Channel)

• Thunderbolt DEX (off-chain order matching)

• Thunderbolt AMM (liquidity pool)

3. Replaced by a simpler solution

Of course, if a system that can achieve similar functions without state channels, formal languages, or off-chain protocol collaboration appears in the future, then Thunderbolt may only be a phased transition product, such as:

• How to achieve a more efficient contract execution environment with BitVM

• Cross-chain ZK technology allows BTC assets to be fully trusted on other chains

• A native Bitcoin protocol unifies payment + lending + contracts

Finally, from the perspective of ecology, the greatest significance of Thunderbolt is not that it can run payments, but that it makes Bitcoin assets have off-chain contract composability for the first time. This sounds abstract, but the explosion of Ethereums DeFi shows how critical this composability is. Ethereums explosion is due to the full ecosystem of Solidity + Hardhat + Ethers.js + Metamask.

The biggest highlight of Thunderbolt is the introduction of two major features: UTXO Bundling and OP_CAT. OP_CAT introduces native programmability to the Bitcoin network. UTXO Bundling bundles multiple small transactions together for processing, compresses the size of transaction data, and increases on-chain throughput. The logic is similar to Ethereum Rollup. It seems that unifying all Bitcoin ecological protocols and embracing the realization of various assets and BitMM are no longer empty talk, but Thunderbolt is still like writing a strong mathematical paper at this stage, and it may still be a long way from being usable by developers.

Reference Links:

(1) https://eprint.iacr.org/2024/408.pdf

This article is sourced from the internet: Re-examining the design logic of Bitcoin Lightning Network from the perspective of Thunderbolt Network

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