23.10.2024
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The Bitcoin sidechain Rootstock (RSK) combines the properties of Bitcoin as a secure store of value and Ethereum’s capability to power decentralized finance to unlock a versatile Bitcoin DeFi ecosystem.
Read on to find out what Rootstock is, how it works, and what it brings to Bitcoin.
Rootstock (RSK) is a Bitcoin sidechain that provides a smart-contract-enabled platform for developing decentralized applications (dapps) to power a Bitcoin DeFi ecosystem that enables you to trade, borrow, and lend bitcoin (BTC).
The Bitcoin layer 2 started development in 2015, but its mainnet went live in 2018.
Rootstock combines Bitcoin’s security with Ethereum’s smart-contract capabilities thanks to its integration with the Ethereum Virtual Machine (EVM).
Rootstock relies on several core features to supply programmability to Bitcoin as well as faster transaction speeds of over 300 TPS. These features include the Rootstock virtual machine, merge mining, a two-way peg using PowPeg, and Fast Relay network.
Based on the Ethereum Virtual Machine (EVM), the Rootstock Virtual Machine (RVM) allows the execution of Ethereum smart contracts on Rootstock.
RVM allows developers to use the same code, tools, and libraries as builders on Ethereum.
The two-way peg is a mechanism that allows the transfer of funds from one blockchain to a second blockchain/protocol (and vice versa) without demanding trust from third parties.
This mechanism locks the required amount of BTC on a multi-sig wallet, releases the equivalent amount of RBTC to the virtual machine, and sends it to your wallet.
To redeem the RBTC for BTC, the peg mechanism releases an amount to your Bitcoin wallet and locks an equivalent amount of RBTC from your wallet into the protocol reserve.
The locking and unlocking take no human intervention, which minimizes the risk of malicious interference. Instead, it’s done by a federation that must constantly audit the proper behavior of the protocol to ensure a secure flow of funds between Bitcoin and Rootstock chains. In exchange, members of the Federation are incentivized with fees generated from transactions happening via the RVM.
Rootstock is based on a fundamental belief that proof of work is the most suitable consensus system for securing blockchains.
As such, Rootstock has implemented merge mining to simultaneously mine on Rootstock using the same infrastructure that mines bitcoin. This means they don’t have to incur extra costs but can still generate additional incentives for BTC miners.
The miners get additional revenue streams in return for securing the Rootstock chain alongside the Bitcoin network. They usually earn around 80% of the fees for every successful block submitted to the network.
Rootstock utilizes the DECOR+ and FastBlock5 protocols, which enable as low as a fifteen-second average block rate without incentivizing selfish-mining, although Rootstock currently operates with a 30-second average block rate target.
DECOR+ allows reward sharing between competing blocks with no need for competing miners to interact with each other, while the last competing blocks get full network propagation.
Here’s how Rootstock compares to other chains.
Source: Rootstock.IO
Bitcoin benefits in three primary ways from Rootstock.
The first is scalability. By taking Bitcoin transactions off-chain, settling them on this sidechain, then bundling them up and sending them back for final settlement, the mainnet is significantly relieved from the pressure growing through an increase in user adoption.
The second is the availability of smart contracts. With its EVM-compatible Rootstock Virtual Machine, Rootstock lets developers write smart contracts in familiar ways, adding a programmability layer to Bitcoin.
The third is settlement speed. Rootstock can create new blocks every 30 seconds on average, processing between 10 and 20 transactions per second.
All of these features combined enable a DeFi-friendly Bitcoin environment.
While Rootstock doesn’t boast the large number of dapps that Ethereum does, a thriving ecosystem has been built on the popular Bitcoin sidechain.
Here’s what you will find on Rootstock today.
Rootstock offers token bridges that allow you to safely move their ERC-20 tokens from Ethereum to Rootstock and vice versa.
The bridge contract is available for each network, locking up the received tokens on one side, while releasing the equivalent number on the other, depending on the course of the transaction.
Rootstock is home to many DeFi services, such as trading, staking, borrowing, lending, and more, which can all be accessed through Sovryn—the leading DeFi protocol on Rootstock.
You’ll also find several stablecoins on Rootstock, including Dollar on Chain (DOC) and its Rootstock equivalent (RDOC), the Brazilian Digital Token (BRZ), DAI on Rootstock (RDAI), and the Sovryn Dollar, DLLR.
Sovryn is a financial ecosystem supporting decentralized governance and Bitcoin-backed financial services.
Built initially on Rootstock, the platform lets you trade, swap, provide liquidity, stake, lend, or borrow funds. All tokens available on Rootstock can also be used to access these solutions.
At the time of writing, Sovryn provides almost 8 BTC (around USD 495,000) worth of 24-hour volume on the Rootstock network.
Sovryn’s utility token SOV is one of the most popular tokens on Rootstock.
As a decentralized trading ecosystem, Sovryn provides trading and swapping layers for different Rootstock-based projects, making it a central part of the sidechain’s operations.
Rootstock’s roadmap for 2024 and 2025 includes plans for a Bitcoin-native asset bridge, an RBTC SuperApp that will include all available pathways for BTC/RBTC transfers, a new BitVMX whitepaper for universal computations on Bitcoin, new scaling developments on Rootstock, and more.
To be among the first to take advantage of new improvements to Rootstock, connect your wallet to Sovryn. From here, you can interact with tokens built on the Bitcoin sidechain, such as buying tokens, lending, borrowing, staking, or providing liquidity.
Connect your wallet to the Sovyrn DEX to trade tokens on Rootstock.
RBTC or Rootstock Bitcoin is a native token on the Rootstock (RSK) Bitcoin sidechain that’s pegged to BTC on a 1:1 ratio with the purpose of allowing users to utilize BTC for decentralized finance (DeFi).
Rootstock pegs Bitcoin to a smart Bitcoin called RBTC and uses it as its token. But it’s not a completely independent cryptocurrency. Instead, RBTC is pegged by a ratio of 1:1 to BTC.
In order for this token to exist, an equivalent amount of BTC must be locked up in a multisig wallet and released to a user wallet when they want to mint RBTC.
Rootstock creates new blocks once in about 30 seconds on average. This lets it handle transactions much more quickly and efficiently than the Bitcoin mainnet. The fast processing speed is beneficial for the Bitcoin network, which can offload some of its workload to the sidechain.
One of Rootstock’s main advantages is that it brings smart-contract functionality to Bitcoin. In addition to this, it ensures greater scalability and faster block times. All of this sets the basis for a thriving DeFi ecosystem that still has Bitcoin at its core.
With Sovryn as its biggest use platform, Rootstock demonstrates how Bitcoin could become a full-fledged DeFi ecosystem.
