Bitcoin has proven it’s the only real innovation in the blockchain space, while altcoins have made for interesting experiments with real money, real lives and real crimes, no other chain has come close to Bitcoin.
With each 4-year (bull & bear) cycle that goes by, Bitcoin continues to lap these other ecosystems, draining liquidity, users, interest, and development away from these projects.
While its decentralisation, security, and immutability remain unmatched, Bitcoin has faced persistent challenges with scalability. So the altcoiners aren’t wrong about that criticism; they were just wrong about how to solve it using another base layer chain.
As adoption grows, the network has shown glimpses of what happens with its limited throughput, which is becoming increasingly apparent, with high fees and slow confirmation times during periods of congestion.
Granted we haven’t seen it in a while, but running up 150 sat per vybte transaction fees and 3-day waiting times to clear the mempool is not the future of money, sorry!
So what do we do? We’ve got to scale! We need more layer twos, bro!
Those smaller-sized, frequent coffee payments, zaps, and eCommerce purchases get that nonsense off-chain, base chains for the big boys, who want to stack teasuries and hodl long-term.
I get that, I am with you! I am a Lightning user!
There is no shortage of projects claiming I’ve just heard about Bitcoin, and I am here to scale it! Spin up an EVM chain, and have a bridge node monitor a multi-sig; boom, you’re a self-proclaimed layer two Harry!
So, forgive my lack of enthusiasm, every time I hear we’re going to put an EVM on Bitcoin, somehow or somehow, by hook or crook.
What Is Citrea?
Citrea, developed by Chainway Labs, is a zero-knowledge (ZK) rollup built specifically for Bitcoin. Launched in 2024, it represents one of the most technically sophisticated approaches to scaling Bitcoin to date.
As a rollup solution, Citrea processes transactions off the main Bitcoin blockchain (Layer 1) and periodically submits cryptographic proofs to the main chain, leveraging Bitcoin’s security while dramatically increasing throughput and reducing fees.
Citrea, which raised $2.7 million in seed funding in a Galaxy-led round in February of 2024, uses the BitVM as its peg-in-out mechanism to allow Ethereum-style smart contracts on Bitcoin and later raised a further $14 million in Series A funding led by Peter Thiel’s Founders Fund.
How Citrea Works: The Technical Foundation
Citrea’s architecture combines several advanced cryptographic techniques to create a secure and efficient scaling solution for Bitcoin:
1. The Rollup Mechanism
At its core, Citrea works by moving transaction processing off-chain while anchoring security to the Bitcoin blockchain. Here’s how the process flows:
- Transaction Collection: Users submit transactions to the Citrea network instead of directly to the Bitcoin blockchain.
- Batch Processing: These transactions are bundled together into large batches within the Citrea environment.
- State Computation: All transactions are executed, and a new state is computed off-chain.
- Zero-Knowledge Proof Generation: A cryptographic proof is created that verifies the correctness of all transactions in the batch without revealing the specific details.
- Proof Submission: This compact proof is then submitted to the Bitcoin blockchain, along with state transition data.
The beauty of this approach is that instead of requiring Bitcoin to process every single transaction, it only needs to verify a single cryptographic proof that represents potentially thousands of transactions.
2. Zero-Knowledge Proofs
Citrea employs advanced zero-knowledge proof systems to cryptographically verify the validity of all transactions without revealing their details.
This approach:
- Ensures computational integrity
- Preserves user privacy
- Dramatically reduces the data footprint on the main chain
The specific type of zero-knowledge proofs used by Citrea are SNARKs (Succinct Non-interactive Arguments of Knowledge), which allow for extremely compact proofs regardless of the complexity of the underlying computation.
3. Bitcoin Integration
One of the most technically challenging aspects of building a rollup for Bitcoin is integrating with a blockchain that wasn’t originally designed for such solutions. Bitcoin lacks the sophisticated smart contract functionality found in platforms like Ethereum.
When bridging from L1 to L2, a user sends BTC to the bridge operator, who holds the funds in a BitVM smart contract. The verifier then signs the peg-in transaction to approve the BTC deposit.
The user is then required to submit a Simplified Payment Verification (SPV) proof of the transaction to a smart contract on Citrea.
Once the smart contract receives the SPV proof, it mints an equivalent amount of cBTC, Citrea’s two-way peg token and away you go, ready to spend your funds in the Citrea network
When pegging out (moving from L2 to L1), a user submits a withdrawal transaction to the Citrea full node and sends their Bitcoin address and cBTC to a smart contract.
This triggers the Citrea transaction life cycle, which results in the production of a light client ZK proof with a withdrawal root.
- If the proof is incorrect, the BitVM verifier challenges it using a fraud-proof.
- BitVM uses fraud proofs similar to optimistic rollups to identify invalid transactions.
If the proof is valid, it is inscribed on Bitcoin, verified using BitVM, and then finalised with the cBTC tokens burned and the BTC returned to the user.
The bridge operator funds the withdrawal and takes the risk of waiting to claim back BTC from BitVM later using an SPV proof.
The Benefits of Citrea?
Citrea offers several significant advantages for Bitcoin users and the broader ecosystem:
1. Massive Scalability Improvements
While Bitcoin processes approximately 7 transactions per second on its base layer, Citrea can potentially handle thousands of transactions per second. This dramatic throughput increase means:
- Lower fees even during periods of high demand
- Faster confirmation times (often near-instant)
- Support for more complex transaction types
- Ability to handle micro-transactions economically
2. Enhanced Privacy
The zero-knowledge technology that powers Citrea’s security model also provides enhanced privacy benefits. Transaction details are processed off-chain, with only cryptographic proofs submitted to the public blockchain, reducing the amount of sensitive information exposed on-chain.
3. Smart Contract Functionality
Perhaps most exciting is that Citrea enables more sophisticated smart contract capabilities for Bitcoin. While Bitcoin’s base layer has intentionally limited scripting capabilities, Citrea creates an environment where more complex programmatic logic can be executed while still being secured by Bitcoin’s underlying blockchain.
This opens the door to decentralised applications built on Bitcoin’s security foundation—something that was previously only practical on chains like Ethereum or Solana.
Citera network requirements
- Full nodes: Citrea’s full nodes host the complete transaction record on the Layer 2 network. They also verify zero-knowledge proofs and receive transactions from users bridging from L1 to L2.
- Sequencers: Sequencers receive bridging transactions from the full nodes, which they soft confirm to speed up the user transaction process. They are also responsible for producing blocks.
- Provers: Provers get the soft confirmed transactions from the sequencer and “roll them up” into batches. They then generate a ZK proof for the batch, enabling anyone to check its accuracy. Provers also produce state differences, the variance between the original and latest network status.
- Light nodes: These are nodes that can validate full-node responses with minimal storage and bandwidth requirements. They do this by using the state root accessed from the light client proof (a ZK proof generated during the peg-out process). Anyone running a Bitcoin light node (SPV) or a Bitcoin full node can act as a Citrea light node. The state root contains information about the transactions in a batch.
How Citrea Differs from Other Bitcoin Scaling Solutions
To fully appreciate Citrea’s approach, it’s important to understand how it compares to other Bitcoin scaling solutions:
The Lightning Network
The Lightning Network was Bitcoin’s first major scaling solution, creating payment channels between users for instant, low-fee transactions.
While Lightning has been successful for certain use cases, it differs from Citrea in several important ways:
- Settlement Model: Lightning requires channels to be opened and closed on the main chain, creating on-chain transactions and fees. Citrea batches thousands of transactions into a single proof.
- Liquidity Requirements: Lightning requires pre-committed funds in payment channels. Citrea has no such requirement.
- Functionality: Lightning is primarily designed for payments. Citrea supports more complex transaction types and smart contracts.
- User Experience: Lightning often requires active management of channels. Citrea provides a more traditional transaction experience.
Sidechains (like Liquid)
Sidechains such as Liquid create parallel blockchains with a peg to Bitcoin, allowing assets to move between chains.
Citrea differs from sidechains in crucial ways:
- Security Model: Sidechains typically have their own consensus mechanisms and validator sets, creating a different security profile. Citrea inherits Bitcoin’s security directly.
- Trust Assumptions: Many sidechains rely on federation models with trusted parties. Citrea’s cryptographic proofs eliminate the need for trusted intermediaries.
- Asset Movement: Moving assets between Bitcoin and sidechains often involves waiting periods and counterparty risk. Citrea’s rollup model keeps assets within Bitcoin’s security boundary.
Layer 2 Solutions (like RSK)
RSK (Rootstock) is a smart contract platform secured through merge-mining with Bitcoin. While similar in some goals to Citrea and offering a similar front-end experience with EVM, they differ significantly:
- Consensus Mechanism: RSK uses a different consensus mechanism from Bitcoin. Citrea relies directly on Bitcoin’s consensus.
- Security Guarantees: RSK’s security depends on miner participation in merge-mining. Citrea’s security is cryptographically tied to Bitcoin.
- Proof System: RSK doesn’t use zero-knowledge proofs. Citrea’s ZK-rollup approach provides stronger guarantees with less data.
The Future of Citrea and Bitcoin Scaling
As Citrea continues to develop, we can expect several important developments:
- Ecosystem Growth: As transaction costs decrease and capabilities expand, new applications will emerge in the Bitcoin ecosystem.
- Interoperability: Citrea may establish connections with other Bitcoin scaling solutions, creating a more interconnected ecosystem. Research is being conducted into trustless atomic swaps between Citrea and the Lightning Network. This will allow Citrea users to pay Lightning invoices directly from the Citrea network or its entry and exit points without relying on the Bitcoin base layer.
- Technical Advancements: The zero-knowledge proof technology underpinning Citrea will continue to improve, further enhancing scalability and reducing costs.
- Institutional Adoption: The combination of Bitcoin’s established security and Citrea’s scalability may attract institutional users who previously avoided Bitcoin due to practical limitations.
- Atomic Swaps: Once there is liquidity on both the base chain and L2, Citera claims they’ll be able to offer trustless atomic swaps between Citera’s cBTC and Bitcoin. These swaps will allow users to enter and exit Citrea without using the peg mechanism.
Citera Drama with OP_RETURN
Let me get you up to speed if you missed the latest instalment of the Bitcoin soap opera. Bitcoin Core’s announcement to remove the 80-byte OP_RETURN limit in their next release has sparked contentious debates, and podcasters are loving it.
The cap was added to prevent blockchain bloat while enabling legitimate use cases like timestamping; this limit has become increasingly controversial as users have found ways to bypass it through Taproot-based inscriptions.
Arbitrary data in Bitcoin is lumped in with spammy meta protocols like BRC-20 tokens and it’s various versions as well as block space hogging JPEGS like Ordinals.
Citera has found itself on the side of the arbitrary data enjoyers, as removing the cap will make it easier for their protocol to publish certain data to the chain.
Is the juice worth the squeeze?
Will I use Citrea? Probably not, but I might not be the target market, and that’s okay; there’s a Bitcoin ecosystem for everyone’s use cases and trade-offs.
If Citrea can capture some volume and carve out a user base, more power to them, as it all acquires value to the underlying asset and chain, BTC. And if it can fulfil on its white paper and offer another scaling layer without compromising its foundational security guarantees, that’s a major win for layer two.
Bringing zero-knowledge cryptography and clever integration with Bitcoin’s existing protocol, Citrea offers a vision of Bitcoin that might grab some market share from users who weren’t keen on Lightning’s requirements, and didn’t like Rootstock or Liquid’s trade-offs.
How large that market will be is anyone’s guess.
Do your own research.
If you want to learn more about Citrea, use this article as a starting point. Don’t trust what we say as the final word. Take the time to research other sources, and you can start by checking out the resources below.
