Fractal Bitcoin: Comprehensive Research Report

Summary

Fractal Bitcoin was launched on September 9, 2024, representing an important innovation in the expansion of the Bitcoin domain. Although it captured a significant portion of Bitcoin's computing power within a few days of its launch, Fractal remains relatively unknown in the global crypto community. This study aims to reveal this rapidly emerging innovative project within the Bitcoin ecosystem.

Key Points

1. Innovative Mining Method: Fractal introduces a hybrid mining model that combines merged mining and permissionless mining. This model offers a new perspective on PoW, proving that even as the industry shifts towards PoS, PoW remains a robust method for network security.

2. Bitcoin's Leading Network: Due to its compatibility with the Bitcoin mainnet, Fractal provides developers with a real testing environment, offering valuable user data and activity insights. The activation of OP_CAT on Fractal marks the beginning of numerous anticipated experiments, solidifying Fractal's role as a potential upgrade and innovation testing ground for Bitcoin.

3. A strong user base from day one: By collaborating with certain wallets, Fractal successfully attracted the most active Bitcoin users from the start. This early adoption helped Fractal avoid the common "cold start" problem faced by new platforms.

4. Grassroots and Community-Oriented: Fractal maintains a pragmatic community-driven strategy, avoiding excessive hype and institutional influence. This focus on organic growth and participation is at its core.

5. Ecosystem Integration: Fractal has successfully integrated key participants in the Bitcoin ecosystem, including the BRC-20, Ordinals, and Runes communities, which positions Fractal ahead of current Bitcoin trends.

1. Introduction

Fractal Bitcoin is the only Bitcoin scaling solution that recursively extends infinite levels using the Bitcoin core code itself, built on the world's most secure and widely held blockchain.

To fully understand the innovation of Fractal, it is necessary to understand the historical context of the Bitcoin scaling discussion. In 2017, the Segregated Witness ( SegWit ) soft fork aimed to increase Bitcoin's block capacity, followed by the controversial Bitcoin Cash ( Bitcoin Cash ) hard fork, which emerged as another scaling method. Starting in 2018, increasing attention turned to second-layer solutions such as the Lightning Network ( Lightning Network ). In this ongoing exploration of Bitcoin's scalability and functional enhancement, Fractal stands out as a new approach, offering a unique perspective on addressing these long-standing challenges.

As an important milestone, the Fractal mainnet officially launched on September 9, 2024, at 00:00 UTC.

The launch has achieved significant success, demonstrating the project's strong appeal and technical robustness. Within just 24 hours of the mainnet launch, Fractal's joint mining accounted for over 40% of Bitcoin's total hash rate, while the free mining on Fractal accounted for 2% of Bitcoin's hash rate. To better understand these figures, the free mining hash rate of Fractal has exceeded three times that of Bitcoin Cash (BCH)'s total hash rate. This rapid adoption by miners indicates a high level of confidence in Fractal's technology and its potential.

The project has attracted participation from major players in the mining sector. Large mining pools, such as certain pools, have already joined the Fractal mining ecosystem. Additionally, there are other well-known mining pools preparing to participate, indicating that interest in the Fractal mining network is increasing and has the potential for further expansion.

2. Core Concepts and Technologies

2.1 Native Bitcoin Expansion

Fractal, as a native extension of Bitcoin, distinguishes itself from other scaling solutions through its approach. By leveraging Bitcoin's existing codebase and modifying block production parameters, Fractal maintains full compatibility with the Bitcoin mainnet, ensuring seamless integration with existing infrastructure. This approach achieves functional enhancements without compromising Bitcoin's core security model, striking a balance between innovation and upholding Bitcoin's fundamental principles.

2.2 Technical Specifications

Fractal introduces several key technological innovations:

• Block Time: Fractal has achieved a block time of 30 seconds, which is a significant improvement compared to Bitcoin's 10 minutes block time. This faster block time allows for quicker transaction confirmations, greatly enhancing the user experience. Additionally, it significantly increases the overall throughput of the network, potentially supporting a wider range of complex applications that require high transaction volumes.

• Mining Mechanism: Fractal employs a unique hybrid mining method. In every three blocks, two are permissionless mining, while the other is joint mining with Bitcoin. This innovative mechanism encourages decentralization by allowing individual miners to freely participate in two-thirds of block production. At the same time, it enhances security by joint mining every third block, leveraging Bitcoin's powerful hash rate. This balanced approach aims to maintain network security and decentralization while incentivizing existing Bitcoin miners to support the Fractal network.

• Scalability: The architecture of Fractal theoretically supports infinite layers of improvement. Each Fractal layer offers a 20-fold capacity increase compared to the Bitcoin mainnet. This means the base layer provides 20 times the capacity of Bitcoin, while the second layer will offer 400 times the capacity. This exponential scalability model allows Fractal to address Bitcoin's throughput limitations while maintaining the security properties of the base layer.

• Smart Contract Functionality: By implementing the OP_CAT opcode, Fractal has achieved Turing completeness for smart contracts on a Bitcoin-based platform. OP_CAT is a simple concatenation operation that, combined with other opcodes, enables complex smart contract logic. This functionality opens up possibilities for advanced DeFi protocols, intricate NFT mechanisms, and other decentralized applications that were previously limited to the Ethereum platform.

• Parallel Execution: The architecture of Fractal allows different applications to run their own instances, so specific optimizations do not affect the entire network. For example, gaming platforms can operate on a specially optimized Fractal layer for high-frequency, low-value transactions, while DeFi protocols can utilize independently tuned layers for financial operations.

• Compatibility: Fractal maintains 100% compatibility with Bitcoin standards ( such as BRC-20 and Ordinals ). This ensures that existing Bitcoin tokens and NFTs can operate seamlessly. Moreover, users can use the same address between the Bitcoin mainnet and Fractal, simplifying the user experience and reducing the risk of address management errors.

A core contributor outlined his vision while answering community questions.

2.3 Unique User Experience

Unlike other Bitcoin Layer 2 solutions, the wallet addresses on Fractal are exactly the same as the mainnet addresses. This design offers convenience similar to Ethereum, allowing users to switch networks in certain wallets to access different layers. Unlike other Bitcoin Layer 2 solutions that require separate EVM wallet addresses, Fractal allows users to continue using their Bitcoin mainnet addresses for Layer 2 activities. As of now, certain wallets, such as major wallets serving most active Bitcoin DeFi and collectible users, fully support Fractal Bitcoin.

3. The Position of Fractal in the Bitcoin Ecosystem

Comparison of 3.1 with Other Bitcoin Solutions

Fractal has entered a highly competitive market for Bitcoin scaling solutions. Below is a comparison with some major alternatives:

• EVM-compatible Layer 2: Some projects are attempting to create EVM-based second-layer solutions for Bitcoin. While these solutions are relatively easy to implement and launch, they face significant challenges in terms of acceptance within the Bitcoin community. The Bitcoin ecosystem, especially its core users and developers, often views these EVM-compatible solutions as "Frankensteins." In contrast, Fractal takes a Bitcoin-native approach aimed at expanding Bitcoin's capabilities without introducing external architectures. This approach may align better with the ideals of Bitcoin purists and could achieve better integration and adoption within the existing Bitcoin ecosystem.

• Bitcoin Cash ( BCH ): Bitcoin Cash emerged as a hard fork of Bitcoin, aiming to improve scalability through larger block sizes. This approach led to divisions within the Bitcoin community and forced users to choose between two competing visions of Bitcoin. The fork of BCH sparked many political debates, often overshadowing the technical discussions. In contrast, Fractal takes a fundamentally different approach. It does not create an independent chain or force users to make a choice, but instead embraces Bitcoin as the mainnet and seeks to locally scale it. The architecture of Fractal allows for the creation of multiple instances to scale together, potentially providing unlimited scalability without compromising the security or decentralization of the underlying layer.

• Lightning Network (: The Lightning Network excels in fast, low-cost payments and high privacy, but its smart contract functionality is limited, and it faces channel liquidity issues. In contrast, Fractal offers comprehensive smart contract support without the need for channel management, providing a simpler user experience.

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) 3.2 Market Strategy and Built-in User Base

Fractal stands out in the highly competitive Layer 2 space, not only relying on technological innovation but also gaining an advantage through strategic market approaches and a strong built-in user base. With the support of a certain wallet, which is a leading Bitcoin wallet with approximately 1 million weekly active users, this enables Fractal to reach an already engaged audience.

Many users of this wallet already hold assets such as BRC20 tokens and Runes in their wallets. These users naturally desire a cheaper, faster, and feature-rich trading environment. Fractal is perfectly positioned to directly meet this demand, providing an improved trading experience while maintaining familiarity and compatibility with the Bitcoin ecosystem that these users are accustomed to.

This built-in user base gives Fractal a significant advantage over other Layer 2 solutions and new blockchain platforms, which often face the "cold start" problem, that is, the challenge of attracting an initial user base and establishing network effects from scratch. By leveraging the existing user base of the wallet, Fractal may bypass the barriers to early adoption.

In addition, Fractal's strategy regarding growth metrics also sets it apart from many other blockchain projects. While many Layer 2 solutions and new blockchains consider total locked value ### TVL ( as a core metric, Fractal plans to use transaction volume as its North Star metric. This strategy aligns with its built-in user base, which is likely to generate a large number of transactions naturally as these users interact with existing assets on a more efficient platform.

By focusing on trading volume rather than TVL, Fractal is able to showcase true usage and adoption, which may be more appealing to users and investors in the long run. This strategy also allows Fractal to stand out among many projects that center their competition around TVL figures.

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4. Ecosystem Development

Fractal's ecosystem development strategy is dedicated to decentralized and community-driven growth. This section outlines