Fractal Bitcoin: Comprehensive Research Report

Abstract

Fractal Bitcoin was launched on September 9, 2024, and may represent a new innovation point in the crypto market. Although Fractal has occupied a considerable portion of Bitcoin's computing power within a few days of its launch, it remains relatively unknown to many in the global crypto community. This study aims to reveal this innovative project that has rapidly 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, demonstrating that PoW remains a robust network security method even as the industry leans towards PoS.

2. Bitcoin's leading network: Due to its compatibility with the Bitcoin mainnet, Fractal provides developers with a realistic 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: By partnering with certain trading platforms and wallets, 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, positioning Fractal ahead of the current Bitcoin trends.

1. Introduction

Fractal Bitcoin is the only Bitcoin scaling solution that recursively expands 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, one must grasp the historical context of the Bitcoin scalability discussions. In 2017, the Segregated Witness (SegWit) soft fork aimed to increase Bitcoin's block capacity, followed by the controversial Bitcoin Cash hard fork as another method of expansion. From 2018 onwards, increasing attention turned towards second-layer solutions such as the Lightning Network. In this ongoing exploration of Bitcoin's scalability and functionality enhancements, Fractal emerges 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, demonstrating 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 made up 2% of Bitcoin's hash rate. To better understand these figures, the free mining hash rate of Fractal has surpassed three times the total hash rate of Bitcoin Cash (BCH). This rapid adoption by miners shows a high level of confidence in Fractal's technology and its potential.

The project has attracted the participation of major players in the mining sector. Large mining pools like F2Pool, Antpool, and Spiderpool have already joined Fractal's mining ecosystem. Additionally, several other well-known mining pools are preparing to participate, indicating that interest in the Fractal mining network is growing 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 Bitcoin's existing codebase and modifying block production parameters, Fractal maintains full compatibility with the Bitcoin mainnet, ensuring seamless integration with the existing infrastructure. This method achieves functional enhancements without compromising the core security model of Bitcoin, striking a balance between innovation and preserving Bitcoin's fundamental principles.

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 block time. This faster block time allows for quicker transaction confirmations, greatly enhancing 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. Out of 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 through joint mining on 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 an infinite number of layers of improvement. Each Fractal layer provides a 20-fold capacity increase compared to the Bitcoin mainnet. This means the base layer offers 20 times the capacity of Bitcoin, while the second layer will provide 400 times the capacity. This exponential scalability model allows Fractal to address Bitcoin's throughput limitation 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, 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: The architecture of Fractal allows different applications to run their own instances, so 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 utilize independently tuned layers for financial operations.

• Compatibility: Fractal maintains 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.

2.3 Unique User Experience

Unlike other Bitcoin Layer 2 solutions, wallet addresses on Fractal are identical to mainnet addresses. This design provides Ethereum-like convenience, allowing users to switch networks within their wallets to access different layers. In contrast to other Bitcoin Layer 2 solutions that require separate EVM wallet addresses, Fractal enables users to continue using their Bitcoin mainnet addresses for Layer 2 activities. As of now, some major wallets serving 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 highly competitive Bitcoin scaling solution market. Here is a comparison with some major alternatives:

• EVM-compatible Layer 2: Some projects attempt 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, aiming to improve 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 numerous 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 instead embraces Bitcoin as the mainnet and seeks to scale it locally. Fractal's architecture allows for the creation of multiple instances that can scale together, potentially providing unlimited scalability without compromising 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 without the need for channel management, providing a simpler user experience.

3.2 Market Strategy and Built-in User Base

Fractal stands out in the highly competitive Layer 2 space, not only relying on technological innovation but also gaining an advantage through strategic market approaches and a strong built-in user base. Supported by a certain wallet, which is a leading Bitcoin wallet with approximately 1 million weekly active users, this enables Fractal to reach an audience that is already actively engaged.

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

This built-in 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 the existing user base, Fractal may bypass the barriers to early adoption.

In addition, Fractal's strategy on growth metrics also sets it apart from many other blockchain projects. While many Layer 2 solutions and new blockchains consider Total Value Locked (TVL) as a core metric, Fractal plans to use transaction volume as its North Star metric. This strategy aligns with its built-in user base, which is likely to naturally generate a large number of transactions when interacting 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 attractive 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 highlight.

4. Ecosystem Construction

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

4.1 Decentralization Concept

The core of building the Fractal ecosystem is to decentralize.