CMC Research releases an in-depth analysis into BitTorrent Chain (BTTC), the EVM-compatible, proof-of-stake layer-2 chain designed to solve existing scalability issues and interoperability.
Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
Overview of Cross-Chain Interoperability Sector
Source: https://coinmarketcap.com/view/interoperability/
In the beginning, there was only Bitcoin. Fifteen years on, the crypto space has seen an enormous increase in the number of chains. From Ethereum’s ecosystem of Layer-2 (and now even Layer-3) chains to the numerous alternative Layer-1 chains, new crypto participants have more than 250 chains to choose from, with each ecosystem home to its own set of decentralized applications (DApps) and users. While the increased competition did indeed encourage teams to develop faster, more secure and cheaper chains, it has also led to the issue of fragmented liquidity across various ecosystems.
To tackle the issue of siloed ecosystems, a new sector was born. The interoperability sector emerged, building towards connecting existing chains and minimizing the friction between transacting across them. Especially with the focus on an improved user experience to increase crypto adoption, such projects became integral for the crypto space as a whole, facilitating the flow of liquidity across ecosystems and protocols.
Trends in Cross-Chain Interoperability Landscape
Early cross-chain bridges commonly relied on a lock-and-unlock model to facilitate transfers between chains. In this system, users first lock up tokens on the source chain into the bridge's liquidity pool. For instance, if Bob wanted to move USDT from Ethereum to BNB Chain, he would lock up his Ethereum USDT tokens. This would in turn enable Bob to unlock an equivalent amount of USDT tokens on the destination BNB Chain, made available via that chain's separate bridge liquidity pool. He could then utilize the bridged BNB Chain USDT within compatible dApps.
While convenient at first, this lock-and-unlock model harbored major security risks - tokens parked in the liquidity pools relied wholly on the bridge's smart contract protections. This design flaw left cross-chain bridges prone to exploits, making up over 50% of DeFi hacks and over $2.5 billion in losses in recent years. Several of the largest DeFi breaches of all time targeted these protocols, including Ronin Network, Poly Network and BNB Bridge.
Centralization around specific bridges also created systemic risk, evidenced by the 2023 Multichain breach. By draining Multichain's liquidity reserves, hackers depegged wrapped assets on Fantom like fUSDT, DAI and USDC by 50-70% almost overnight. Entire ecosystems depended on the security of their sole bridge provider to move assets across chains.
Source: Binance Research Report - Decoding Cross-Chain Interoperability
As such, developers working on cross-chain bridging began to look into more secure solutions to bypass the risks of the early bridge designs. Newer cross-chain bridges eventually settled on using cross-chain messaging to facilitate the movement of funds across ecosystems. Such systems provided a handful of benefits to the crypto space. Firstly, they reduced the need for tokens to be locked in the bridge’s smart contract, thereby removing one of the biggest risks for cross-chain bridges. Secondly, cross-chain messaging protocols do more than just transfer assets across chains. Since they are much more generalized than their lock-and-mint counterparts, this made it trivial for DApps to integrate their infrastructure to provide cross-chain services such as cross-chain lending, bridging, swaps, and perpetual among others, greatly increasing the options for developers and users in the space.
The shift towards messaging-based solutions for cross-chain DApps also significantly lowered total value locked (TVL) in bridging protocols. Key metrics for bridging protocols also shifted away from TVL to transaction or message count.
Source: Binance Research Report - Decoding Cross-Chain Interoperability
While most cross-chain development has progressed toward messaging-based bridges, one protocol still innovates on the original lock-and-mint blueprint - BitTorrent Chain (BTTC).
Created by the TRON Foundation and BitTorrent teams, BTTC puts a fresh spin on earlier bridge concepts that locked and minted token representations across chains.
What Is BitTorrent Chain?
BitTorrent’s Beginnings
BitTorrent was first released in 2001 as a peer-to-peer file-sharing protocol, enabling the distribution of large files over the internet in a decentralized fashion. At its peak, BitTorrent had more than 250 million monthly users on the platform, with the protocol also claiming that it moved 40% of all internet traffic daily. However, with the increasingly accessible legal alternatives such as Netflix and Spotify, BitTorrent usage declined over time. Coupled with a lack of monetization, the company eventually was acquired by TRON founder, Justin Sun, for $140 million.
The TRON Acquisition
Under Justin Sun’s leadership, BitTorrent later released its own TRC-20 token, BTT, on the TRON blockchain in early 2019 via a Binance-led token sale.
In torrent networks, users must upload or "seed" pieces of files so others can download them. However, without rewards, seeders typically quit sharing once their download finishes. BTT provides incentives for seeding by compensating users in BTT, earned and stored in an integrated BitTorrent wallet.
Beyond file sharing, BTT is designed as a utility token to power future BitTorrent products as well. For example, BitTorrent File System (BTFS), a decentralized storage network, accepts BTT payments.
The BTT token also plays a key role in the BitTorrent Chain (BTTC), a collaborative project between TRON and BitTorrent. It is an EVM-compatible, proof-of-stake layer-2 chain designed to solve existing scalability issues while leveraging the Ethereum developer community. The chain boasts a high throughput of 7,000 transactions per second, with low block times of two to three seconds and average gas fees sitting under $0.01. It seeks to support interoperability across various blockchains via the BTTC Bridge. Initially beginning with TRON and Ethereum, BTTC has expanded to include the BNB Smart Chain as well.
How Does BitTorrent Chain Work?
BitTorrent Chain Infrastructure
BTTC operates on a three-tier architecture, namely: Root Contracts Layer, the Delivery Layer, and the BTTC Layer.
Source: BTTC Whitepaper
The Root Contracts Layer consists of smart contracts deployed on the chains supported by BTTC such as TRON and Ethereum. These contracts use a mechanism known as token mapping to distinguish between tokens on the respective chains and map them to BTTC via deposits. This enables BTTC to support more than 100 different mapped tokens via the BTTC Bridge.
The Delivery Layer is designed based on a modified version of Cosmos’ Tendermint and contains the BTTC validators which are responsible for verifying blocks on the BTTC block-producing layer. These validators stake BTT on the TRON network, using the chain’s PoS consensus model and aggregate blocks produced on the block-producing layer into a Merkle tree.
The Merkle root is periodically sent to the Root Contracts Layer, in the form of checkpoints. These checkpoints are essential in providing finality on each of the Root chains and also serve as proof of burn in the event of a withdrawal of assets. In addition to the transaction fees paid on BTTC, validators also earn checkpoint rewards for their service. Like other PoS validators, they are also subjected to slashing penalties in the event of misbehavior or prolonged downtime.
Source: BTTC Staking
Finally, the BTTC is the block-producing layer and it supports all of the mapped assets from the Root Contracts Layer. This layer is responsible for aggregating transactions and arranging them into blocks for the Delivery Layer to verify. This layer is 100% EVM-compatible.
In a standard deposit transaction, a user, Alice, deposits a chosen asset into the BTTC contract on the Root Contracts Layer. In this case, Alice deposits ETH on the Ethereum blockchain. Once this deposit is completed, a deposit event is generated and will be broadcast to the validators on the Delivery Layer. Once consensus is achieved, the event is treated as a consensus event. Once this event is registered as consensus, the block-producing layer receives this event and mints the respective amount of ETH on BTTC for the user. In a withdrawal from BTTC, this transaction will work the same way but in the opposite direction, with the token on BTTC being burnt before the deposited token is released on the original chain.
To further improve the user experience across chains, BTTC also has an innovative Fast Mode, which is a relayer service that helps users receive bridged assets on their destination networks. This service not only makes bridging a much more seamless process, but it also removes the risk of a user having assets stuck on a destination chain without the gas tokens to claim them. Moreover, this service is entirely isolated, meaning the relayers can never have access to your assets, keeping the entire process secure.
BitTorrent Chain Ecosystem
BitTorrent Bridge
The BTTC Bridge is the cornerstone of the chain, serving its main function of facilitating liquidity movement across EVM chains. Currently, it supports three main chains: TRON, Ethereum and the BNB Smart Chain, but the team has plans to expand this to more chains in the near future.
BitTorrent (BTT) Staking
As a PoS chain, staking is integral to keeping the chain secure and verifying the validity of transfers in and out of the chain. At the moment, the chain has more than 46 billion BTT tokens staked with its 12 active validators, representing about 5% of the total circulating supply.
BitTorrent Chain Converter
Leveraging their architecture, BTTC’s Converter also enables the 1:1 conversion of tokens across their supported chains. Some of the supported tokens across all three chains include BTT, TRX, JST and more.
BitTorrent Wallet
BTTC is EVM-compatible and naturally does not need a specialized wallet to transact on the chain. However, BTTC does support a service known as BitTorrent Wallet to easily allow users to quickly check all of their assets on BTTC without having to add all the individual tokens on their wallet, just like a handy portfolio tracker for the chain.
BitTorrent Token (BTT)
The BTTC ecosystem is powered by none other than its native token, BTT, initially launched as a TRC-10 token on the TRON blockchain. The token later migrated to the TRC-20 token standard, enabling greater use cases for integration with smart contracts as well as compatibility with Ethereum’s ERC-20 token standard.
The BTT token was first launched to incentivize the seeding of files on the BitTorrent peer-to-peer distributed file-sharing network. This program was known as BitTorrent Speed and rewarded users with BTT tokens for seeding files via an integrated wallet in their torrent client. Beyond rewarding seeders, BTT can also be utilized for payment for BitTorrent’s products.
On the decentralized finance (DeFi) front, BTT is the governance token for the BTTC DAO and also serves as the gas token for the chain, powering transactions and validator rewards. Moreover, like many other tokens, it can be used as collateral on platforms such as JustLend on TRON, where users can borrow against their BTT tokens or borrow BTT tokens against other deposited collateral. In fact, more than $9.1 million worth of BTT tokens are currently supplied on JustLend, TRON’s largest DApp and lending protocol.
BTT was also formally accepted as legal tender in the Commonwealth of Dominica, after approval passed in October 2022, which granted the status to all cryptocurrencies on TRON, including JST, NFT, TRX, USDT, USDD and TUSD.
BTT Tokenomics and Distribution
BTT was distributed in a public sale in 2019, in a token sale led by Binance. The public sale formed 6% of the total token supply of 990 billion tokens. The remaining distribution is as follows:
- Private sale tokens: 2% of the total token supply
- Seed sale tokens: 9% of the total token supply
- Tron Airdrop tokens: 10.1% of the total token supply, to be spread out over the next 6 years.
- BitTorrent Protocol Airdrop tokens: 10% of the total token supply.
- Team and the BitTorrent Foundation: 19% of the total supply.
- TRON Foundation: 20% of the total supply.
- BitTorrent Ecosystem: 19.9% of the total supply.
- Partnership tokens: 4% of the total token supply.
Source: Binance (link)
Based on the vesting schedule, most of the token supply was released over multiple years, with the airdrops releasing until 2025 and the partnership tokens unlocking until 2028. This token release schedule reduced the selling pressure from large unlocks on the BTT token throughout the years since then. This would be beneficial for BTT’s use as a mode of payment in BitTorrent services as well as for collateral in DeFi applications where stable collateral could reduce liquidation risk. Moreover, in its use as legal tender, less volatile price action resulting from large sales would be beneficial to its users too.
Source: Binance (link)
Conclusion
In an increasingly fragmented ecosystem of chains, BTTC seeks to connect blockchains together using its unique three-tier architecture and a lock-and-mint model.
Looking forward, the protocol has big plans ahead after recently completing an integration with oracle service, Pyth, on the chain. The TRON team and BitTorrent team are also in collaboration on the upcoming TRON zero-knowledge Ethereum Virtual Machine (zkEVM) chain. The TRON zkEVM is a scaling solution designed for the TRON blockchain to achieve higher throughput and low fees while ensuring compatibility with Ethereum for easy DApp migration.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
