Fraud Proofs on Bitcoin Rollups: The Hardest Problem

Bitcoin's consensus is binary—it validates its own rules, not external claims. A naive fraud proof is just data; the L1 has no process to adjudicate it. This creates a coordination gap between the rollup's state and Bitcoin's finality.

Embed a light client and a fraud proof verification game directly into the Bitcoin transaction chain. Leverages Bitcoin as a data and ordering layer, while dispute resolution logic lives in the client software.

• Relies on Social Consensus: Validators must run the correct client.
• Minimal L1 Footprint: Uses OP_RETURN or taproot trees for data commitment.
• Inherits L1 Liveness: Challenges are timestamped via Bitcoin blocks.

Encode the entire fraud proof verification logic into a Bitcoin script via Taproot trees and N-of-N multisigs. Creates a two-party challenge game on-chain.

• Trust-Minimized: Logic is enforced by Bitcoin's script, not client software.
• Complex & Costly: Setup is heavy; challenges require multiple round trips to L1.
• Theoretical Breakthrough: Proves Bitcoin can verify arbitrary computation, but pragmatically limited.

The pragmatic trade-off favors embedded consensus (Rollkit's model) for now. BitVM is a fascinating research artifact but is currently too complex for production. The winning stack will treat Bitcoin as a bulletin board, not a court, pushing verification complexity to the client layer—similar to Celestia's data availability model.

• Faster Iteration: Protocol upgrades don't require new Bitcoin opcodes.
• Clear Abstraction: Separates data publication from state validation.

Bitcoin Script lacks loops and state, making it impossible to directly verify a zk-SNARK or an interactive fraud proof game. This creates a security gap between the rollup and the base layer, forcing reliance on honest majority assumptions or multi-sigs.

• No On-Chain Verification: Can't run proof verification in a script.
• Trusted Bridge Required: Security often falls back to a federated model.
• Data Availability Reliance: Security is only as good as the data posted to Bitcoin.

Projects like BitVM and Rollkit propose using Bitcoin as a commitment layer and an adjudicator for off-chain fraud proofs. A Turing-complete program is represented as a binary circuit, whose execution can be challenged in a multi-round game settled on-chain.

• Off-Chain Computation: The heavy verification happens off-chain.
• On-Chain Arbitration: Bitcoin Script enforces the rules of the challenge game, penalizing provably false claims.
• 1-of-N Honesty: Security requires only one honest participant to challenge invalid state.

Protocols like Citrea and Babylon sidestep the fraud proof verification problem for now. They use Bitcoin primarily for data availability and timestamping, pushing settlement and dispute resolution to the rollup's own validator set or social layer.

• Sovereign Enforcement: Fraud proofs are verified by the rollup's own nodes.
• Bitcoin for Security: Leverages Bitcoin's immutable ledger for data ordering and censorship resistance.
• EVM Compatibility: Enables full smart contracts without modifying Bitcoin consensus.

The long-term goal is direct verification of zero-knowledge proofs. This depends on Bitcoin adopting new opcodes like OP_CAT or OP_CHECKSIGFROMSTACK. Projects are building in anticipation, as this would enable non-interactive, one-shot fraud proofs with L1 finality.

• Future-Dependent: Requires a successful Bitcoin soft fork.
• Ultimate Security: Would enable Ethereum-level trust assumptions for rollups.
• Protocols Waiting: Chainway and others have designed architectures pending opcode activation.

Bitcoin Script lacks loops and state, making it impossible to directly verify complex fraud proofs like on Ethereum. This forces a fundamental architectural pivot away from interactive fraud games.

• Core Limitation: No on-chain execution of adversarial logic.
• Result: Security must be anchored in Bitcoin's native capabilities, primarily multi-signature covenants and timelocks.

Projects like Citrea and BitVM use Bitcoin's existing opcodes (like OP_CAT and OP_CHECKSIGFROMSTACK) to create a challenge-response protocol. Fraud is proven by showing a single invalid state transition in a massively truncated form.

• Key Insight: Encode fraud as a Bitcoin transaction that only validates if the state transition was incorrect.
• Trade-off: Requires extensive off-chain computation and coordination between a defined set of participants.

Most production systems (e.g., Stacks, Liquid Network) use a federated multi-signature model as the practical security layer. A committee of known entities can veto fraudulent withdrawals, with Bitcoin Script as a slow, costly last resort.

• Reality Check: This is a bridged security model, not a pure rollup.
• Benefit: Enables sub-2 minute finality and complex dApps today, while the pure fraud-proof tech matures.

BitVM2 moves the entire fraud proof verification logic off-chain. The on-chain contract only needs to verify a single digital signature from an off-chain challenge game, drastically reducing Bitcoin footprint.

• Architecture: Leverages Lamport signatures and off-chain fraud proof aggregators.
• Implication: Enables a trust-minimized model without requiring every verifier to be online, moving closer to Ethereum's optimistic rollup security.