A practical look at an alternative scaling method for Bitcoin: transferring ownership, not coins.

In our previous exploration of Bitcoin’s scaling landscape, we looked at Lightning as a network of express couriers, and Ark as a public railway system that efficiently batches users onto a shared train. Lightning focuses on moving value from point A to point B by updating balances, while Ark focuses on concentrating as many users as possible on a single point. But there is a third way to scale Bitcoin, one that involves no routing, no batching, and surprisingly, no movement at all. This is the logic of Statechains: instead of moving the bitcoin to a new owner, we simply move the ownership of the bitcoin.

To understand this, we have to let go of the idea of "sending" money and start thinking about "re-keying" a vault.

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The Trust Trade-OffThe Trust Trade-Off

If this sounds too good to be true, it’s because it comes with a specific catch. We are trading the "trustlessness" of the base layer for a trust-minimized relationship with the Entity.

We don't have to trust the Entity with our funds, they can't steal them because they never have the full key. However, we do have to trust them to be honest about the deletion. If the Entity is malicious, they could theoretically keep a copy of the old key fragment ("10") and collude with Alice to cheat Bob. This is why Statechain implementations rely on reputation and strictly sequential operations. While not perfectly trustless, it is a massive improvement over centralized exchanges.

But what if the Entity disappears? Or what if a previous owner tries to cheat? To protect users, every Statechain transfer includes a pre-signed Exit Transaction that allows the user to withdraw its funds on-chain without the Entity's help. However, this creates a potential problem: previous owners also have old Exit Transactions.

To solve this, Statechains use a Decrementing Time-Lock, think of it like a countdown clock that gets shorter for every new owner.

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...read more at blog.bitbox.swiss