Crypto News
BitVM 2: Opening Up The Playing Field

Last October Robin Linus from Zerosync dropped a bit of a bomb in the form of BitVM. One of the longest running criticisms of Bitcoin is that it is not possible to make arbitrary programs to control how money is spent or locked. Bitcoin only has a very limited amount of programmability in its scripting language, and the primitives available are extremely constrained. You can check a signature, you can add a timelock to something, you can manipulate data in a few simple ways, but that’s it.
You can program a Bitcoin UTXO to require a signature check, a timelock verification, etc. But you cannot program it to unlock based on any arbitrary conditions. Robin’s insight with BitVM was that one single primitive in the field of computing could be enforced in Bitcoin script: a NAND gate, one of the basic primitives of computing at the physical/electrical level. Every computation that is possible can be constructed out of NAND gates.
Script can actually verify a NAND gate due to a neat trick using OP_BOOLAND and OP_NOT. OP_BOOLAND is an AND operation, the opposite of NAND. OP_NOT takes a binary 1 or 0 value and inverts it. This together allows you to actually enforce a single NAND operation in script directly. In combination with hashlocks, a NAND gate script can be made where each input and output field has two possible hashlocks to “unlock” that spending path, each one pushing a 1 or 0 to the stack to perform the NAND operation. Each script also has a path where if you can reveal both preimages to a single bit value, you can immediately claim the funds. This is so that once someone decides what to input to the NAND gate, they cannot change their mind without losing money.
A massive amount of NAND gate scripts can all be compacted into a taproot tree, and once someone commits to the bit values off-chain to input to that computation, the other party can challenge them on any individual step in the computation to prove it is being executed correctly on chain. Each “challenge” allows the challenged party to prove that the individual gate was computed correctly, otherwise the other party can claim the funds after a timelock. Going back and forth like this if a computation is contested, it is guaranteed that the cheating party will eventually be caught and lose funds.
The limitations
The main limitation of BitVM is that only the people involved in creating a BitVM contract can participate, and the roles are very limited. There is the prover, the person asserting how the computation happened off-chain, and the verifier, the person who can challenge the computation and force it to be proven on-chain if the prover does not complete the computation off-chain or tries to lie about the results.
One of the reasons for designing BitVM was to establish two way pegs to sidechains or other systems. The scheme offers a very powerful primitive in that use case, the ability to actually enforce funds be given to one party or the other based on the correctness of an arbitrary computation, i.e. a validity check on whether a pegout is valid according to a sidechains rules. The problem is, only the people who hold keys to that BitVM UTXO can actually go “Hey, you’re cheating!” when someone is, and engage in the challenge protocol. This ultimately makes the system still trusted.
Another limitation is that the challenge response protocol can be very long. If someone realizes the outcome of the computation is going to result in them losing money and they stop responding, the verifier has to essentially guess where the individual NAND gate is in the computation that the prover would have to lie at and reveal both preimages to a bit that would give the verifier the funds. Until that specific gate is challenged on-chain, the prover can still respond correctly to a challenge and drag it out. This can be very time consuming and inefficient.
Some improvements to this design have been made since the original proposal to allow for multiple verifiers to exist in the system with the prover, to create a 1-of-n trust model where only a single verifier is required to challenge a dishonest prover. However, this requires the instantiation of multiple BitVM instances in parallel to accomplish, and therefore increases the inefficiencies with the original two party design.
BitVM 2
Robin recently proposed a design scheme for BitVM 2. This scheme seeks to make a few trade offs in comparison to the original design for the benefit of mitigating its two major shortcomings. BitVM 2 shortens the challenge/response protocol length from an indeterminate series of transactions that could be upwards of dozens in the worst case scenario, to two rounds in the challenge/response. In addition to this, with the use of connector outputs it allows anyone to act as a verifier. It does not require someone to be a member involved in establishing the BitVM to challenge a dishonest prover.
The fundamental shift here is moving away from directly using script NAND gates to implement the raw computational trace directly, and moving to using them to implement a general SNARK zero knowledge proof verifier (one of the core primitives Robin intended from the start to implement using BitVM). Instead of putting the raw input into the raw computational trace, and running it gate by gate in their own tapleaf scripts, the input of the BitVM 2 instance would simply be a zero knowledge proof input in combination with an asserted output of the computation.
In addition to abstracting away the computation implementation with a ZKP, the tapleaf scripts are being massively expanded from a single NAND gate per leaf to an entire sub-function of the ZKP verifier. Instead of the challenge response protocol being based around the verifier guessing at which NAND gate the prover attempted to cheat at, selectively challenging at a single gate, the verifier can prove an entire sub-function’s output is invalid according to the input.
Just like BitVM 1, the contract is pre-negotiated using pre-signed transactions and branching scripts. Funds pegged into the BitVM are sent to an n-of-n multisig which signs two possible execution transactions, one in which no challenge occurs, and one in which a challenge occurs. To start the process of executing the contract, the prover initiates a kick off transaction. This kick off transaction commits to the output value ‘y’ they claim the computation produces, and includes three outputs: a timelocked output that is included in the no challenge execution transaction, a connector output A, and a connector output B, both of which also are spent in the no challenge transaction.
Here is where the design allows for anyone to participate as a verifier. Connector output A has a second pre-signed transaction that can spend it, the challenge transaction. This is a pre-signed transaction that pays the prover a bond in bitcoin, but the connector output A is not enough to fund it. Literally anyone can add their own inputs to fund the transaction and spend connector output A, which invalidates the no challenge withdrawal transaction for the prover (one of the inputs it needs no challenge exists).
This forces the challenge path. Connector output B is also spendable using a pre-signed transaction, the assert transaction, to the output of every sub-function in the entire BitVM 2 contract. This requires a large transaction with a lot of data, but remember, the ultimate output ‘y’ the prover is claiming the computation produced was already committed to in the kick off transaction. This creates two outputs. One is a timelocked output, the other is a connector output C. Both of these outputs, in addition to the original pegged in funds, are all spent in the second successful withdrawal transaction for the prover after the timelock.
Connector output C is also spendable by anyone who can prove that any sub-function output in the BitVM 2 contract produces an invalid output. This requires a very large transaction, because the script necessary to prove an entire section of the BitVM computation is incorrect is massive, but in this single transaction a verifier can claim the coins in the connector output with a valid proof. This invalidates the second withdrawal transaction for the prover and effectively burns the coins. The only way to recover them at this point is if the prover and all of the verifiers in the original n-of-n funding multisig all cooperate to recover them. Connector output B in the kick off transaction can also be spent after a much longer timeout than no challenge withdrawal to invalidate both the no challenge and the assert transaction, burning the pegged coins.
This reduces what could be a ridiculous chain of transactions in the original BitVM proposal to enforce the correct contract outcome, to at most four transactions (although admittedly very massive ones), while in the process making the set of verifiers for the BitVM 2 instance literally anyone with bitcoin who will fund the challenge transaction.
BitVM 2 could wind up being a significant breakthrough in regards to the wave of rollups and other layer 2s aiming to use BitVM as a two way peg. The operator of a rollup (the prover in the BitVM) can use their own funds to cover withdrawals of users who have pegged into the system, and periodically withdraw those funds from the BitVM to compensate themselves. Any user or interested party would then be able to penalize them by burning their funds if they could produce proof the operator was not processing all withdrawals correctly.
It is important to note that ultimately the security of a BitVM 2 instance is backstopped by the n-of-n keyholder, even though people not participating in it can still challenge the prover as a verifier. But because the prover has an efficient exit in the case of no challengers, and anyone can fund the challenge transaction to act as a verifier, the n-of-n funding multisig could follow a setup and key deletion ceremony similar to the Zcash launch to improve its security.
BitVM 2 will probably wind up being a significant breakthrough in terms of improving the flexibility and trust model of two way pegs that make use of BitVM. Once again, Robin has proven himself a real wizard.
Robin Linus has recently released a proposal for BitVM 2, offering significant improvements from the original BitVM proposal.
Crypto News
El Salvador Is Still Bitcoin Country

El Salvador is still Bitcoin country, despite the fact that bitcoin is no longer legal tender in the country — at least from where I’m sitting.
Let’s start with some background on the matter.
On January 29, 2025, the Legislative Assembly in El Salvador voted to remove bitcoin’s status as legal tender.
This means that businesses in the country no longer have to accept bitcoin (not that this rule was ever strictly enforced while bitcoin was classified as legal currency, as far as I know; however, I have been told that big businesses that operate in the country (e.g., McDonalds, Walmart) may stop accepting bitcoin as payment now, which could have a detrimental effect on adoption).
This change occurred approximately one month after the International Monetary Fund (IMF) struck a deal with authorities in El Salvador that stipulated the following:
- El Salvador would receive a $1.4 billion loan to support the government’s “reform agenda”
- Bitcoin-related risks be mitigated; bitcoin acceptance in the private sector must be voluntary, while the public sector’s participation in Bitcoin-related activities would be “confined” (bitcoin can no longer be used to settle government debts or pay taxes)
- Operations for the government-created Bitcoin wallet, Chivo, would be “unwound”
While the news of the Salvadoran government’s reversing its policy on bitcoin as legal tender as a result of influence from the IMF feels like a gut punch even to me, someone who isn’t Salvadoran and doesn’t live in the country, I can’t help but believe that El Salvador is still Bitcoin country.
And this feeling has only grown stronger based on what I’ve seen Bitcoiners in El Salvador posting on X.
Evelyn Lemus, co-founder and Director of Education at Bitcoin Berlin, a Bitcoin circular economy within the country, doesn’t plan to stop teaching everyday Salvadorans about Bitcoin.
Just saying it out loud.
Bitcoiners will not stop teaching about Bitcoin and making the adoption happen just because Bitcoin is not legal tender anymore. This means we need to keep pushing harder and keep doing what we do 🇸🇻
LFG🙌
Bitcoin in the hands of people 🫡 pic.twitter.com/hnMpJmL5c7— Evelyn Lemus (@Evelynlemus2906) February 2, 2025
The team at Bit Driver don’t plan to change their business model — accepting bitcoin as taxi fare — any time soon.
We’re still a Bitcoin a company.
— Bitdriver (@bitdriver_sv) February 2, 2025
While John Dennehy, founder of Mi Primer Bitcoin, expressed concern about the government of El Salvador’s rolling back its policy on bitcoin as legal currency, he and the ever-growing team at Mi Primer Bitcoin plan to double down on the work they’re doing.
Good morning from El Salvador!
We are now in DAY NINE since the government rescinded Bitcoin as legal tender, at the request of the IMF (effective after 90 days)
This means grassroots, independent Bitcoin education is now MORE important than ever
In response, at… pic.twitter.com/iTXdf0gAoL
— John Dennehy (@jdennehy_writes) February 7, 2025
The legendary Max and Stacy haven’t publicly voiced any plans to give up on El Salvador anytime soon.
And El Salvador’s Bitcoin Office, run by Stacy, is still stacking bitcoin and helping to run Bitcoin education programs in the country.
🇸🇻EL SALVADOR STACKS ANOTHER 1 BTC TO STRATEGIC RESERVE
El Salvador is still stacking.
Every day.
➡️Total SBR Holdings: 6,071.18 BTC
➡️Total Added Today: +1 BTC
➡️Total Added Past 7 Days: +22 BTC
➡️Total Added Past 30 Days: +60 BTC… pic.twitter.com/y4kv2693BX— The Bitcoin Office (@bitcoinofficesv) February 7, 2025
The lesson here is that while the law around Bitcoin may have changed in El Salvador, the Bitcoiners on the ground in the country have hardly flinched.
Because we are Bitcoin, what matters most is that everyday Salvadorans and everyone else involved in the Bitcoin movement in El Salvador continues to push forward with the Bitcoin mission.
The IMF may have landed a blow, but Bitcoiners in El Salvador remain steadfast in their efforts to foster broader Bitcoin adoption.
El Salvador is still Bitcoin country.
This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Bitcoin may no longer be legal tender in El Salvador, but Bitcoiners in the country haven’t given up on the mission.
Crypto News
Introducing the Bitcoin Everything Indicator

Wouldn’t it be great if we had one all-encompassing metric to guide our Bitcoin investing decisions? That’s precisely what has been created, the Bitcoin Everything Indicator. Recently added to Bitcoin Magazine Pro, this indicator aims to consolidate multiple metrics into a single framework, making Bitcoin analysis and investment decision-making more streamlined.
For a more in-depth look into this topic, check out a recent YouTube video here: The Official Bitcoin EVERYTHING Indicator
Why We Need a Comprehensive Indicator
Investors and analysts typically rely on various metrics, such as on-chain data, technical analysis, and derivative charts. However, focusing too much on one aspect can lead to an incomplete understanding of Bitcoin’s price movements. The Bitcoin Everything Indicator attempts to solve this by integrating key components into one clear metric.
The Core Components of the Bitcoin Everything Indicator
Bitcoin’s price action is deeply influenced by global liquidity cycles, making macroeconomic conditions a fundamental pillar of this indicator. The correlation between Bitcoin and broader financial markets, especially in terms of Global M2 money supply, is clear. When liquidity expands, Bitcoin typically appreciates.
Fundamental factors like Bitcoin’s halving cycles and miner strength play an essential role in its valuation. While halvings decrease new Bitcoin supply, their impact on price appreciation has diminished as over 94% of Bitcoin’s total supply is already in circulation. However, miner profitability remains crucial. The Puell Multiple, which measures miner revenue relative to historical averages, provides insights into market cycles. Historically, when miner profitability is strong, Bitcoin tends to be in a favorable position.
On-chain indicators help assess Bitcoin’s supply and demand dynamics. The MVRV Z-Score, for example, compares Bitcoin’s market cap to its realized cap (average purchase price of all coins). This metric identifies accumulation and distribution zones, highlighting when Bitcoin is overvalued or undervalued.
Another critical on-chain metric is the Spent Output Profit Ratio (SOPR), which examines the profitability of coins being spent. When Bitcoin holders realize massive profits, it often signals a market peak, whereas high losses indicate a market bottom.
The Bitcoin Crosby Ratio is a technical metric that assesses Bitcoin’s overextended or discounted conditions purely based on price action. This ensures that market sentiment and momentum are also accounted for in the Bitcoin Everything Indicator.
Network usage can offer vital clues about Bitcoin’s strength. The Active Address Sentiment Indicator measures the percentage change in active addresses over 28 days. A rise in active addresses generally confirms a bullish trend, while stagnation or decline may signal price weakness.
How the Bitcoin Everything Indicator Works
By blending these various metrics, the Bitcoin Everything Indicator ensures that no single factor is given undue weight. Unlike models that rely too heavily on specific signals, such as the MVRV Z-Score or the Pi Cycle Top, this indicator distributes influence equally across multiple categories. This prevents overfitting and allows the model to adapt to changing market conditions.
Historical Performance vs. Buy-and-Hold Strategy
One of the most striking findings is that the Bitcoin Everything Indicator has outperformed a simple buy-and-hold strategy since Bitcoin was valued at under $6. Using a strategy of accumulating Bitcoin during oversold conditions and gradually selling in overbought zones, investors using this model would have significantly increased their portfolio’s performance with lower drawdowns.
For instance, this model maintains a 20% drawdown compared to the 60-90% declines typically seen in Bitcoin’s history. This suggests that a well-balanced, data-driven approach can help investors make more informed decisions with reduced downside risk.
Conclusion
The Bitcoin Everything Indicator simplifies investing by merging the most critical aspects influencing Bitcoin’s price action into a single metric. It has historically outperformed buy-and-hold strategies while mitigating risk, making it a valuable tool for both retail and institutional investors.
For more detailed Bitcoin analysis and to access advanced features like live charts, personalized indicator alerts, and in-depth industry reports, check out Bitcoin Magazine Pro.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions.
A Single Metric to Rule Them All – The Bitcoin Everything Indicator combines multiple key metrics into one comprehensive tool for better investment decisions.
Crypto News
Here’s The Secret To Investing In Bitcoin

Over the course of the last week, we’ve seen reports of massive bitcoin liquidations.
For those unfamiliar with the term “liquidation” as it applies to finance, it refers to when a trader is forced to close a leveraged trade because the margin for the trade has been depleted.
In everyday pleb terms, it’s when someone borrows money to bet on the direction of the price of bitcoin and they get it wrong, resulting in their losing the money they put up for the trade (or more, in some cases).
When it comes to trading bitcoin with leverage, I keep in mind the first line from the post below:
A fool and his leveraged #bitcoin are soon parted.
To quote one of my teachers, “up 6% today, down 100% tomorrow.”—@aantonop
To quote another, “#notyourkeysnotyourcoins”
Be careful out there. @michaeljburry is right—there’s a lot of hidden leverage in #bitcoin. Caveat emptor.
— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) June 20, 2021
So, lesson number one in investing in bitcoin is don’t do so with leverage. (Not financial advice.)
Even now that bitcoin has about a $2 trillion market cap, it’s still a highly volatile asset. Its price fluctuates notably in response to news. Because of this, it’s much safer to just buy some bitcoin on the spot market and hold it for the long run (at least four years).
What is more, when and if you choose to buy some bitcoin in the spot market, consider remaining underexposed to bitcoin instead of overexposed to it (those terms are subjective; interpret them as you will).
When you’re overexposed to bitcoin, or if you’re new to the market and you’ve gone all in on bitcoin, it’s more likely that you’ll panic sell if its price tanks in the short term.
How will you know if you’re overexposed? You’ll likely begin losing sleep over it and/or being investing emotional energy in hoping that bitcoin’s price moves in a certain direction (up only).
I share this based on experience. I was overexposed to bitcoin in 2021-2022, and I often felt sick because of it. Once I lessened my exposure, I felt better and was able to think more clearly.
Find an investment threshold with which you’re comfortable, and, again, plan to hold for the long haul.
Aiming to get rich quick with bitcoin is nearly a sure fire recipe for getting yourself rekt.
Take it slow, and heed the very wise advice of legendary Bitcoiner Matt Odell: stay humble, stack sats.
(The inverse of such sage advice would be: be irrational, bet on bitcoin irresponsibly.)
Be careful out there.
This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Don’t use leverage, and don’t overexpose yourself to it.
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