Bitcoin-IPC: Scaling Bitcoin with a Network of Proof-of-Stake Subnets

Abstract

This paper introduces Bitcoin-IPC, a protocol that scales Bitcoin through a network of permissionless, interconnected, programmable Proof-of-Stake (PoS) Layer-2 chains, called subnets, whose stake is denominated in L1 BTC. These subnets rely on Bitcoin L1 for the communication of critical information, settlement, and security. Subnets can communicate with each other and with Bitcoin: users deposit BTC from Bitcoin to a subnet and withdraw it back, and transfer wBTC directly between subnets. We provide formal definitions of these bridge protocols, incorporating a firewall property that limits the impact of malicious subnets on the security of the broader network. Our design, inspired by SWIFT messaging and embedded within Bitcoin's SegWit mechanism, enables seamless value transfer across L2 subnets. Uniquely, this mechanism reduces the virtual-byte cost per transaction (vB/tx) by up to 23x, compared to transacting natively on Bitcoin L1, effectively increasing monetary-transaction throughput from 7 tps to over 160 tps, without requiring any modifications to Bitcoin L1.