What Exiting a Bitcoin Rollup Requires

Inherited from optimistic rollups on Ethereum, this model forces users to wait for a 1-2 week dispute period before withdrawing to the base layer. This creates massive liquidity lockup and a poor UX for Bitcoin's ~$1T+ asset base.

• Capital Inefficiency: Billions in TVL sit idle.
• User Friction: Unacceptable for DeFi or trading use cases.

Validity proofs (ZK-SNARKs/STARKs) provide cryptographic certainty that a state transition is correct, enabling instant, trust-minimized exits. This is the gold standard but requires complex ZK-circuits for Bitcoin's unique scripting language.

• Instant Withdrawals: No challenge period, exit in ~10 minutes (Bitcoin block time).
• Base Layer Trust: Security inherits from Bitcoin's ~600 EH/s hash power.

Protocols like Across and Hop solve the delay problem by introducing a marketplace of Liquidity Providers (LPs). Users get instant liquidity on the destination chain, while LPs assume the withdrawal risk and claim the funds after the challenge window.

• UX Win: User exits in seconds, not weeks.
• New Risk Vector: Introduces LP solvency and censorship risk.

Instead of exiting directly to Bitcoin L1, users bridge to a high-liquidity Ethereum L2 like Arbitrum or Optimism. This uses the L2's established, fast bridge infrastructure, treating the Bitcoin rollup as an app-chain.

• Pragmatic Path: Leverages $20B+ of existing L2 liquidity.
• Added Complexity: Adds another bridging hop and trust assumption.

Bitcoin Script is not Turing-complete, making it impossible to verify a ZK proof or complex fraud proof directly on-chain. This forces rollups to use creative, often trust-augmented, mechanisms for their exit contracts.

• Verification Gap: Can't natively verify SNARKs or fraud proofs.
• Innovation Constraint: Drives designs towards federations or sidechains.

BitVM introduces a model for expressive off-chain computation, with disputes settled on Bitcoin L1 via a Nash-equilibrium challenge game. It enables optimistic-style exits without a long, fixed delay, as honest parties can force a fast resolution.

• Trust-Minimized Optimism: Exit delays measured in hours, not weeks.
• High Setup Cost: Requires pre-signed transaction trees and significant L1 footprint.

A 'fast' withdrawal is a loan from a third-party liquidity provider (LP). You receive funds off-chain immediately, but your on-chain exit still takes the rollup's finality period.\n- You are exposed to the LP's solvency risk until the on-chain settlement completes.\n- This model is identical to fast withdrawals on Ethereum L2s or bridges like Across.

Bitcoin's scripting limitations make optimistic rollup fraud proofs complex. If a fast withdrawal is processed before the challenge period ends, you assume the state is correct.\n- A successful fraud proof after your exit could invalidate the assets you received.\n- The LP may be left holding a worthless claim, creating a cascading default risk.

Your withdrawal's validity depends on transaction data being posted to Bitcoin. If the rollup sequencer censors or fails, you rely on a separate data availability committee or force-bridge.\n- No data on-chain = no ability to prove ownership and complete the exit.\n- This systemic risk is shared by all users, potentially collapsing the LP's model.

When the LP submits your batched exit transaction to Bitcoin, they compete for block space. During congestion, they may delay submission to avoid high fees.\n- Your 'instant' withdrawal's finality is gated by Bitcoin's mempool dynamics and the LP's fee strategy.\n- This creates hidden latency and potential for exit queue stalling.

Zero-knowledge proofs offer instant finality, but Bitcoin cannot verify them natively. A ZK Bitcoin rollup still needs a trusted prover or an Ethereum bridge for verification.\n- 'Fast' still means trusting a prover's liveness and correctness.\n- The security ultimately reverts to the security of the verification layer, not Bitcoin.

By acting as a temporary custodian of your Bitcoin, the liquidity provider may trigger money transmitter or securities laws.\n- If the LP is shut down mid-process, your funds could be frozen in legal proceedings.\n- This off-chain legal risk is absent in a slow, trust-minimized on-chain exit.

Exits require proving you own funds on the rollup. If the rollup's data isn't posted to Bitcoin, you can't generate that proof. This is the core risk of validiums vs. optimistic rollups.\n- Key Risk: Data withholding by the sequencer makes funds permanently inaccessible.\n- Key Metric: Relies on a Data Availability Committee (DAC) or Bitcoin L1 for data.

Exits are enforced by Bitcoin script, not a multisig. For optimistic rollups (like BitVM-inspired designs), this means a fraud proof challenge period (e.g., 7 days) where anyone can dispute invalid state transitions.\n- Key Benefit: Inherits Bitcoin's censorship resistance for the exit process.\n- Key Constraint: Slow exit times and complex, expensive challenge logic.

Native exits are slow. In practice, users rely on liquidity providers and third-party bridges (e.g., Multichain, Chainlink CCIP models) for instant liquidity, creating a new trust vector.\n- Key Risk: Bridges become centralized choke points and attack targets.\n- Key Metric: Exit liquidity pools require $10M+ TVL per asset to be viable.

A secure exit is a two-step process: 1) Initiate (post claim to L1), 2) Finalize (after challenge window). This mirrors Ethereum's design but is constrained by Bitcoin's limited opcodes, leading to creative taproot/tapscript constructions.\n- Key Benefit: Clear, programmable security guarantees.\n- Key Constraint: High on-chain L1 gas costs for the initiation step.