Bitcoin-IPC: Scaling Bitcoin with a Network of Proof-of-Stake Subnets

TL;DR

Bitcoin-IPC addresses the scalability gap of Bitcoin by proposing a network of permissionless, PoS L2 subnets anchored to Bitcoin L1, enabling cross-subnet transfers and programmable assets without modifying L1. The approach embeds SWIFT-like IPC messaging into Bitcoin via SegWit, coordinated by a modular stack (Bitcoin Core integration, monitor, provider, Fendermint-based validators, and relayers) and governed by a subnet lifecycle with dynamic participation and checkpointing. Key contributions include a detailed architecture, subnet lifecycle mechanics, data-encoding and scripting methods for on-chain IPC data, and benchmark-backed throughput gains, showing up to 23x increase in L1 throughput (from about 7 tps to ~161 tps) and hundreds of tps within individual subnets. The work promises a programmable, interoperable Bitcoin MoE with strong security guarantees anchored in L1 and a path toward further scaling (L3+ subnets, threshold-signature upgrades, and potential tokenomics), while maintaining non-intrusive L1 compatibility and openness to production deployment.

Abstract

We introduce Bitcoin-IPC, a software stack and protocol that scales Bitcoin towards helping it become the universal Medium of Exchange (MoE) by enabling the permissionless creation of fully programmable Proof-of-Stake (PoS) Layer-2 chains, called subnets, whose stake is denominated in L1 BTC. Bitcoin-IPC subnets rely on Bitcoin L1 for the communication of critical information, settlement, and security. Our design, inspired by SWIFT messaging and embedded within Bitcoin's SegWit mechanism, enables seamless value transfer across L2 subnets, routed through Bitcoin L1. Uniquely, this mechanism reduces the virtual-byte cost per transaction (vB per tx) by up to 23x, compared to transacting natively on Bitcoin L1, effectively increasing monetary transaction throughput from 7 tps to over 160 tps, without requiring any modifications to Bitcoin L1.

Figures (13)

• Figure 1: The components of an IPC-aware node. It runs a Bitcoin full node, and the Bitcoin monitor and Bitcoin provider binaries. Additionally, the IPC-aware node runs the IPC subnet validator code (Fendermint) and a Relayer (relaying information from the subnet to Bitcoin Core) for each subnet it is a validator for. Solid arrows indicate local communication between components, while dashed arrows indicate communication over RPC.
• Figure 2: Subnet-lifecycle state flow diagram.
• Figure 3: Create-subnet example. The output of the commit transaction is a pay-to-taproot (P2TR) script. The reveal transaction spends it by including the full script in the witness. The script contains all parameters required for the new subnet. In the diagram we simplify some logic, for example, we assume that each transaction pays the same fee.
• Figure 4: Example showing the inputs and outputs added to the checkpointTx and batchTransferTx transactions to implement the transfer functionality. In this example, four transfers with two different target subnets are batched together in a pair of Bitcoin transactions. In the diagram we simplify the fee logic, assuming that each transaction pays the same fee.
• Figure 5: Amortized size per transfer vs total number of batched transfers, for varying numbers of target L2 subnets.