Metis co-founder's ZKM plans to launch Bitcoin Layer 2 GOAT Network

Interoperability protocol ZKM has unveiled plans to launch a Bitcoin BTC +0.45% Layer 2 solution called GOAT Network later in Q3.

The project claims the solution will become the first decentralized Bitcoin Layer 2 to share network ownership, according to a statement shared with The Block.

“GOAT Network’s launch of a Bitcoin L2 is a powerful first step in ZKM’s quest to unite the fragmented Web3 universe,” GOAT Network Core Contributor, ZKM co-founder and Metis co-founder Kevin Liu said. “We believe strongly in decentralization, and we’re excited to enable a shared-ownership model from day one.”

GOAT Network’s decentralized sequencer model

Unlike some so-called Bitcoin Layer 2s, whose network and revenue are controlled by project teams or foundations, GOAT Network said it will launch with a decentralized sequencer model, with sequencer node operators helping to secure the network while earning a yield on their bitcoin and fees for activities including block production, transaction ordering and maximal extractable value (MEV) opportunities.

“GOAT Network is the first Bitcoin L2 to share network ownership and fees, by decentralizing its sequencer,” the GOAT Network team told The Block. “GOAT is also unique in enabling the entire community (including small holders) to stake their BTC into sequencer nodes and earn sustainable yield.”

On the ZK prover side, GOAT Network is using ZKM’s proving service. “The decentralization of Proof Network will depend on the progress of ZKM’s proving service,” the team said.

In Layer 2 rollup networks, a sequencer is a component that orders and batches multiple off-chain transactions before submitting them to the main blockchain. A prover is a mechanism that generates cryptographic proofs to validate transactions without processing them on the main chain. These currently create single points of failure and potential censorship risks that could have a significant impact on users.

Additionally, contrasting Bitcoin’s existing state channel decentralized Layer 2, the Lightning Network, GOAT Network is also Ethereum Virtual Machine-compatible and enables smart contract functionality. 

Where does the yield come from?

GOAT Network claims it has secured 5,000 BTC ($287.5 million) in commitments from five institutional node operators to date. The network plans to launch with seven node operators, expanding to dozens over time, targeting more pledges to ensure sufficient liquidity to power its bitcoin-yielding and DeFi ecosystems, according to the team.

“The yield will come from several approaches, such as the gas fees in BTC, mining rewards in GOAT token, and also the returns generated by stBTC (staked BTC),” the team told The Block. “stBTC is a receipt token that users will receive after staking their BTC on GOAT Network. That stBTC receipt token can then be used to unlock more yield opportunities within the GOAT Network ecosystem.”

Launch day dapps will include leading DEX, borrowing and lending and perpetual swap platforms, enabling the trading of BRC-20 and other Bitcoin-native assets, the team claimed, without providing further details.

A ‘Universal Layer 2’

GOAT Network is powered by ZKM’s Entangled Rollup technology, enabling native security from Bitcoin’s Layer 1, the project said. ZKM is a zero-knowledge-proof system designed to enable seamless interoperability across different blockchains via a global settlement network.

The GOAT Network also plans to become a “Universal Layer 2,” with Bitcoin being the first ecosystem it intends to integrate, followed by Ethereum, TON, Cosmos and others. “The goal is to solve fragmented liquidity issues in the blockchain world by enabling any L1 to seamlessly connect to any L2, without the vulnerabilities of a traditional third-party bridge. No other L2 can say that,” the team said.

“Entangled rollups are deployed on all blockchain infrastructures (Layer 1 and Layer 2 networks), with their states synced through recursive zero-knowledge (ZK) proofs,” the team explained. “This enables messaging and asset transfers across many different networks, without the use of a third-party bridge or any other cross chain mechanism subject to the kinds of vulnerabilities typically found in bridges.”

“Bridge is the most vulnerable layer of blockchain interoperability,” the team added. “Entangled Rollup is designed to roll up the transaction state, messaging and ZKP of a transaction from one source chain and verified in another chain. In this way, liquidity in different chains can be unified and leveraged by cross-chain applications. Since it is the rollup smart contract that makes the cross-chain transaction happen, no bridge MPC will be needed (which is the most vulnerable part of the bridge).”

GOAT tokenomics and $5 million Series A fundraising plans

GOAT Network also teased its tokenomics on Monday, reserving 42% of the GOAT token supply for sequencer mining and community mining, powering the yield for node operators and stakers who lock bitcoin with the network. 

A further 6% is allocated for airdrop activities and 1% for KOLs (key opinion leaders/influencers), with the remaining 49% reserved for community contributors.

The team told The Block that the GOAT’s total supply would be 1 billion tokens but could not disclose further details at this stage.

Ahead of its mainnet launch, GOAT Network also launched a “GOAT Club” rewards program on Monday, enabling future rewards for bitcoin holders who “whitelist” 0.001 BTC or more, day one dapp launch partners and sequencer node operators who lock bitcoin to secure the network.

The GOAT Network said it also plans to open its Series A round soon, aiming to raise $5 million at a $100 million valuation. In May, ZKM announced it had raised $5 million in a pre-Series A round at a $50 million valuation, which closed in November 2023. OKX Ventures led the round, with participation from Amber, Crypto.com, Metis Foundation and Polygon Ventures, among others.

ZKM was incubated by Metis DAO, which supports the Ethereum scaling solution Metis. In March, Metis launched an alpha version of its decentralized sequencer as part of the Layer 2 network’s plans to fully decentralize its infrastructure.