Fractal Bitcoin: A Deceptive Affinity

Fractal Bitcoin is a recently launched project that bills itself as “the only native scaling solution fully and instantly compatible with Bitcoin. It is essentially a fusion mined system that acts as a second side-layer for Bitcoin, where multiple levels of “sidechain” can be stacked on top of each other. So think of a sidechain of the mainchain, a sidechain of the sidechain, a sidechain of the sidechain of the sidechain, etc. It is not.

Shitcoins are not the second layer

First, the entire system is built around a new native token, Fractal Bitcoin, which is issued completely independently of Bitcoin. It even comes with a massive 50% supply pre-mine, split between an “ecosystem treasury”, a pre-sale, advisors, community and developer grants. This is essentially the equivalent of the entire first Bitcoin halving period, when the block grant was 50 BTC per block. From here, the network jumps to 25 Fractal Bitcoin (FB) per block.

Second, there is no pinning mechanism for moving real bitcoin to the “sidechain”. Yes, you read that right. They fit the bill as a sidechain/layer two, but there is no real mechanism to move your bitcoin back and forth between the mainchain and the Fractal Bitcoin “sidechain”. It is a completely independent system with no real ability to move funds back and forth. One of the essential aspects of a sidechain is the ability to link or “lock” your bitcoin from the mainchain and move it to a sidechain system so that you can use it there, ultimately moving those funds back in the mainchain.

Fractal Bitcoin has no such mechanism, and not only that, the discussion of this topic in their “white paper” is completely incoherent. They discuss Discrete Log Contracts (DLC) as a “put” mechanism between the different levels of Fractal sidechains. DLCs ​​are not a suitable mechanism for a peg at all. DLCs ​​work through PREDEFINED where coins will be sent based on a signature from an oracle or set of oracles expected at a given time. They are used for gambling, financial products such as derivatives, etc. between two parties. DLCs ​​are not designed to allow funds to be sent to any arbitrary place based on the outcome of the contract, they are designed to allocate funds to one of two participants or proportionally to each participant based on the outcome of a contract or event that an oracle signs.

This is not suitable for a sidechain or other pinning system, which is ideally designed to allow any current owner of coins in the sidechain or second-layer system to freely send coins to any destination they choose, as long as while he has valid control over them on another system. So not only is there no working peg mechanism for the live system, but their hand waving about potential designs for one in litepaper is just completely incoherent.

The whole “design” is a clown show designed to pump bags for pre-mine holders.

“Cadence” mining.

Another concerning aspect of the system is its variation on merge mining, Cadence mining. The network uses SHA256 as its hashing algorithm and supports conventional Namecoin-style mining. But there is a catch. Only one-third of the blocks produced in the network are capable of being produced by Bitcoin miners engaged in fusion mining. The other two-thirds must be conventionally mined by miners who exchange their hashrate entirely to Fractal Bitcoin.

This is a poisonous incentive structure. Essentially, it tries to associate itself with the Bitcoin network by calling itself a “merger mining system”, when in reality two-thirds of the block production warrants take the hashrate from securing the Bitcoin network and dedicate it exclusively to securing Fractal Bitcoin . Most of the lag cannot be captured by miners who continue to mine Bitcoin, and the higher the FB value, the greater the incentive for Bitcoin miners to crash and start mining it instead of bitcoin to increases the share of the FB reward it captures.

Essentially, it works as an incentive distortion for Bitcoin miners in proportion to the value of the entire system. It also offers no security advantage. By forcing this choice, it guarantees that most of the network difficulty must remain low enough that whatever small fraction of miners find it profitable to defect from Bitcoin to FB can mine blocks at the 30 second interval. Conventional fusion mining would allow the entire mining network to contribute to security without having to face the opportunity cost of not mining Bitcoin.

What’s the point of this?

The apparent point of the network is to facilitate things like DeFi and Ordinals, which consume large amounts of block space, by giving them a system to use other than the mainchain. The problem with this logic is the reason those systems are built on the mainchain in the first place is that people value the immutability and security it provides. Nothing in Fractal Bitcoin architecture offers the same security guarantees.

Even if they did there is no functional locking mechanism at all to facilitate these assets to be interoperable between the main chain and the Fractal Bitcoin chain. The whole system is a series of handwaves past important technical details to rush something to market to allow insiders to take advantage of the pre-mine involved in the launch.

No pinning mechanism, an incoherent “mining” scheme that not only creates a poisonous distortion of incentives should it continue to rise in value, but actually guarantees a lower level of proof of work security and a bunch of buzzwords. It has CAT active, but so do existing test networks. So even the argument as a testing ground for things built using CAT is just an incoherent and half-assed rationalization for a pre-mined token pump.

Calling this a sidechain, or a layer of Bitcoin, is beyond ridiculous. It’s a symbol scheme, pure and simple.