Fractal Bitcoin: Comprehensive Research Report

Summary

Fractal Bitcoin was launched on September 9, 2024, representing a significant innovation in Bitcoin scaling solutions. Although it already captured a considerable portion of Bitcoin's hash power within a few days of going live, Fractal remains relatively unfamiliar to many in the global crypto community. This study aims to reveal this innovative project that has quickly gained attention in the Bitcoin ecosystem.

Key Points

1. Innovative Mining Method: Fractal introduces a hybrid mining model that combines merged mining and permissionless mining. This model provides a new perspective for PoW, proving that even as the industry shifts towards PoS, PoW remains a robust method for network security.

2. Bitcoin's Pilot Network: Due to its compatibility with the Bitcoin mainnet, Fractal provides developers with a real testing environment, offering valuable user data and activity insights. The activation of OP_CAT on Fractal marks the beginning of numerous anticipated experiments, solidifying Fractal's role as a potential upgrade and innovation testing ground for Bitcoin.

3. A strong user base from day one: Through partnerships with OKX and UniSat, Fractal successfully attracted the most active Bitcoin users right from the start. This early adoption helped Fractal avoid the common "cold start" problem faced by new platforms.

4. Grassroots and Community-Oriented: Fractal maintains a pragmatic community-driven strategy, avoiding excessive hype and institutional influence. This focus on organic growth and participation is at its core.

5. Ecosystem Integration: Fractal has successfully integrated key participants in the Bitcoin ecosystem, including the BRC-20, Ordinals, and Runes communities, which positions Fractal ahead of the current Bitcoin trends.

1. Introduction

Fractal Bitcoin is the only Bitcoin scaling solution that recursively extends infinite levels using the Bitcoin core code itself, built on the world's most secure and widely held blockchain.

To fully understand the innovation of Fractal, it is necessary to understand the historical context of the Bitcoin scaling debate. In 2017, the Segregated Witness ( SegWit ) soft fork aimed to increase Bitcoin's block capacity, followed by the controversial Bitcoin Cash ( Bitcoin Cash ) hard fork as an alternative scaling method. From 2018 onwards, increasing attention has turned to second-layer solutions such as the Lightning Network ( Lightning Network ). In this ongoing exploration of Bitcoin's scalability and functionality enhancement, Fractal has emerged as a new approach, offering a unique perspective on addressing these long-standing challenges.

As an important milestone, the Fractal mainnet officially launched on September 9, 2024, at 00:00 UTC.

The launch has achieved significant success, showcasing the project's strong appeal and technical robustness. Within just 24 hours of the mainnet launch, Fractal's joint mining accounted for over 40% of Bitcoin's total hash rate, while free mining on Fractal accounted for 2% of Bitcoin's hash rate. To better understand these figures, the free mining hash rate on Fractal has surpassed three times the total hash rate of Bitcoin Cash (BCH). This rapid adoption by miners indicates a high level of confidence in Fractal's technology and its potential.

The project has attracted participation from major players in the mining sector. Large mining pools such as F2Pool, Antpool, and Spiderpool have already joined Fractal's mining ecosystem. Additionally, there are other well-known mining pools preparing to participate, indicating that interest in the Fractal mining network is increasing and has the potential for further expansion.

2. Core Concepts and Technologies

2.1 Native Bitcoin Scaling

Fractal, as a native extension of Bitcoin, distinguishes itself from other scaling solutions through its approach. By leveraging the existing Bitcoin codebase and modifying block production parameters, Fractal maintains full compatibility with the Bitcoin mainnet, ensuring seamless integration with existing infrastructure. This approach achieves functionality enhancements without compromising the core security model of Bitcoin, striking a balance between innovation and upholding the fundamental principles of Bitcoin.

2.2 Technical Specifications

Fractal has introduced several key technological innovations:

• Block time: Fractal has achieved a block time of 30 seconds, which is a significant improvement compared to Bitcoin's 10 minutes. This faster block time allows for quicker transaction confirmations, greatly enhancing the user experience. Additionally, it significantly increases the overall throughput of the network, potentially supporting a wider range of complex applications that require high transaction volumes.

• Mining Mechanism: Fractal employs a unique hybrid mining method. In every three blocks, two are permissionless mining, while the other is joint mining with Bitcoin. This innovative mechanism encourages decentralization by allowing individual miners to freely participate in the production of two-thirds of the blocks. At the same time, it enhances security by utilizing Bitcoin's powerful computing power for joint mining in every third block. This balanced approach aims to maintain network security and decentralization, while incentivizing existing Bitcoin miners to support the Fractal network.

• Scalability: The architecture of Fractal theoretically supports infinite layers of improvement. Each Fractal layer offers a 20-fold capacity increase relative to the Bitcoin mainnet. This means that the base layer provides 20 times the capacity of Bitcoin, while the second layer will provide 400 times the capacity. This exponential scalability model allows Fractal to address the throughput limitations of Bitcoin while maintaining the security properties of the base layer.

• Smart Contract Functionality: By implementing the OP_CAT opcode, Fractal has achieved Turing-complete smart contracts on a Bitcoin-based platform. OP_CAT is a simple concatenation operation that, when combined with other opcodes, can realize complex smart contract logic. This functionality opens up possibilities for advanced DeFi protocols, intricate NFT mechanisms, and other decentralized applications that were previously limited to the Ethereum platform.

• Parallel Execution: Fractal's architecture allows different applications to run their own instances, so that specific optimizations do not affect the entire network. For example, gaming platforms can operate on a specially optimized Fractal layer for high-frequency, low-value transactions, while DeFi protocols can leverage independently tuned layers for financial operations.

• Compatibility: Fractal has maintained 100% compatibility with Bitcoin standards such as BRC-20 and Ordinals(. This ensures that existing Bitcoin tokens and NFTs can operate seamlessly. Additionally, users can use the same address between the Bitcoin mainnet and Fractal, simplifying the user experience and reducing the risk of address management errors.

Lorenzo, the founder of UniSat and a core contributor to Fractal, outlined his vision while answering questions from the community.

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) 2.3 Unique User Experience

Unlike other Bitcoin Layer 2 solutions, wallet addresses on Fractal are identical to mainnet addresses. This design offers Ethereum-like convenience, allowing users to switch networks in UniSat or OKX wallets to access different layers. Unlike other Bitcoin Layer 2 solutions that require separate EVM wallet addresses, Fractal allows users to continue using their Bitcoin mainnet addresses for Layer 2 activities. As of now, major wallets like OKX Wallet and UniSat Wallet, which serve most active Bitcoin DeFi and collectibles users, fully support Fractal Bitcoin.

3. The Position of Fractal in the Bitcoin Ecosystem

Comparison of 3.1 with Other Bitcoin Solutions

Fractal has entered a competitive market for Bitcoin scaling solutions. Here is a comparison with some major alternatives:

• EVM-compatible Layer 2: Some projects are attempting to create EVM-based second layer solutions for Bitcoin. While these solutions are relatively easy to implement and launch, they face significant challenges in terms of acceptance within the Bitcoin community. The Bitcoin ecosystem, especially its core users and developers, often views these EVM-compatible solutions as "Frankenstein". In contrast, Fractal takes a Bitcoin-native approach aimed at expanding Bitcoin's capabilities without introducing external architectures. This approach may align better with the ideals of Bitcoin purists and could achieve better integration and adoption within the existing Bitcoin ecosystem.

• Bitcoin Cash ### BCH (: Bitcoin Cash emerged as a hard fork of Bitcoin, aimed at improving scalability through larger block sizes. This approach led to divisions within the Bitcoin community and forced users to choose between two competing visions of Bitcoin. The fork of BCH sparked many political debates, often overshadowing the technical discussions. In contrast, Fractal takes a fundamentally different approach. It does not create an independent chain or force users to make a choice, but rather embraces Bitcoin as the mainnet and seeks to scale it locally. Fractal's architecture allows for the creation of multiple instances to scale together, potentially providing infinite scalability without sacrificing the security or decentralization of the underlying layer.

• Lightning Network ): The Lightning Network excels in fast, low-cost payments and high privacy, but its smart contract functionality is limited and it faces channel liquidity issues. In contrast, Fractal offers comprehensive smart contract support, does not require channel management, and provides a simpler user experience.

( 3.2 Market Strategy and Built-in User Base

Fractal stands out in the highly competitive Layer 2 space, leveraging not only technological innovation but also a strategic market approach and a strong built-in user base to gain an advantage. With the support of UniSat, a leading Bitcoin wallet with approximately 1 million weekly active users, Fractal is able to reach an already engaged audience.

Many UniSat users already hold assets such as BRC20 tokens and Runes in their wallets. These users naturally desire a cheaper, faster, and more feature-rich trading environment. Fractal is perfectly positioned to directly meet this demand, providing an improved trading experience while maintaining familiarity and compatibility with the Bitcoin ecosystem that these users are accustomed to.

This inherent user base gives Fractal a significant advantage over other Layer 2 solutions and new blockchain platforms, which often face the "cold start" problem, that is, the challenge of attracting an initial user base and establishing network effects from scratch. By leveraging UniSat's existing user base, Fractal may bypass the barriers to early adoption.

In addition, Fractal's strategy regarding growth metrics also sets it apart from many other blockchain projects. While many Layer 2 solutions and new blockchains view Total Value Locked ) TVL ### as a core metric, Fractal plans to use transaction volume as its North Star metric. This strategy aligns with its inherent user base, which is likely to naturally generate a large number of transactions as these users interact with existing assets on a more efficient platform.

By focusing on trading volume rather than TVL, Fractal is able to showcase real usage and adoption, which may be more appealing to users and investors in the long run. This strategy also allows Fractal to stand out among many projects that focus on TVL figures as their competitive focal point.

4. Ecosystem Development

Fractal's ecosystem development strategy is committed to decentralization and community-driven growth. This section outlines Fractal's strategy for building a strong and diverse ecosystem.

( 4.1 Decentralization Concept

The core of building the Fractal ecosystem is a strong commitment to decentralization. This concept is reflected in several key aspects:

• Diversified cross-chain bridge solutions: Unlike some Layer 2 solutions that rely on a single official bridge, Fractal encourages the use of multiple cross-chain bridging methods between the mainnet and its network. This approach reduces the risk of single points of failure and fosters innovation in cross-chain interactions.

• Open Development Environment: Fractal does not impose specific development frameworks or methods, allowing developers to innovate freely within the ecosystem.

• Social