Conflux Network, a layer 1 blockchain protocol based in China, has recently unveiled its groundbreaking EVM-compatible Bitcoin Layer 2 (BTC L2) solution to leverage Bitcoin’s strength to improve its network.
The new development resulted in a significant surge in the network’s native token CFX, which jumped 8% on Thursday, January 18, 2024, trading at $0.2203. Before this announcement, the CFX experienced a downturn, trading around $0.19 over the past few weeks.
Conflux Introduces Bitcoin L2 Solution
According to a medium post, the newly introduced Bitcoin L2 solution is designed to work seamlessly with Bitcoin, marking a significant step forward in blockchain interoperability.
The new L2 network, running atop the main Conflux chain, will facilitate the movement of Bitcoin and inscription-powered assets between Conflux’s blockchain and Bitcoin’s ecosystem.
The new solution will also integrate Bitcoin’s store-of-value properties into Conflux’s Proof-of-Stake (PoS) consensus protocol, where BTC staking contributes to network security and governance.
Conflux said the Bitcoin L2 solution will use BTC for gas fees, opening up possibilities for a more efficient and integrated system. Furthermore, the L2 network will also support Ethereum-based smart contracts through the Ethereum Virtual Machine (EVM) standard.
This paradigm shift not only expands the utility of Bitcoin but also fosters greater innovation in decentralized finance (DeFi) and blockchain-based applications. The integration of Bitcoin’s strength with Conflux’s advanced technology stack creates a unique proposition for users. It enables active network security and governance participation through staking mechanisms while providing access to a broader range of decentralized applications.
BTC L2 Solution to Be Released in March
To enhance security, Conflux employs a robust framework incorporating Verifiable Secret Sharing (VSS)-based key sharing.
The protocol said the strategy aims to prevent single points of failure by distributing BTC asset management responsibilities across over 300 nodes.
The PoS consensus protocol records the latest ledger state onto the Bitcoin network and serves as a reliable Bitcoin Oracle, providing extensive chain-related metadata through internal contracts. This, in turn, allows on-chain contracts to access Bitcoin blockchain events efficiently.
The mainnet for Conflux’s BTC L2 solution is expected to launch by May, with a testnet anticipated by the end of March to attract early users and developer activity.
Conflux, known for its unique integration of proof-of-stake and proof-of-work blockchain models, aims to leverage the design of its BTC L2 solution to offer new decentralized applications and products.
The BTC L2 solution is set to capitalize on the increasing popularity of inscriptions, ordinals, and BRC-20 tokens, introducing decentralized finance to Bitcoin. Despite the controversies surrounding such cryptocurrencies, they have gained traction among participants, growing into a multi-billion dollar market.
Furthermore, the approval of US spot BTC ETFs by the Securities and Exchange Commission (SEC) is expected to attract significant capital to Bitcoin and its expanding ecosystem.
The initial trading days of the new investment products have already recorded substantial trading volumes and inflows in the billions over the past week.
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