2024 has been a breakthrough year for Bitcoin engineering, driven by the innovative toolsets provided by the Elastos SmartWeb ecosystem. The introduction of BeL2 (Bitcoin-Elastos Layer 2) has redefined what is possible for decentralized finance (DeFi) on Bitcoin. With a vision to make Bitcoin “smart” BeL2 provides a completely decentralized clearing network, enabling Bitcoin to engage with cross-chain smart contracts while remaining on its secure main network. Imagine if Bitcoin could talk with other blockchains, execute complex contracts, and unlock its dormant potential—this is BeL2’s transformative promise.

BeL2 and the New Bretton Woods Vision

Since Bitcoin’s inception in 2009, it has grown to a $1.9 trillion market cap, cementing its role as the most secure and trusted cryptocurrency. However, its programmability and financial utility have remained limited compared to other blockchains. Solutions like wrapped Bitcoin (WBTC) have emerged but rely on centralized custodians to access smart contracts, undermining decentralization and sparking fierce debate over company ownership.

BeL2 disrupts this model by ensuring interoperability without transferring assets. Instead of moving Bitcoin across chains, BeL2 transmits messages, also known as proofs, which allow smart contracts on Turing-complete blockchains to verify and execute complex financial operations based on collateralisation on Bitcoin. This trustless model preserves Bitcoin’s integrity while enabling applications like loans, exchanges, and stablecoin issuance—laying the foundation for a Bitcoin-backed “New Bretton Woods” system. BeL2 integrates four key elements to realize its vision for Native Bitcoin DeFi:

1. Collateralization: Bitcoin is locked in non-custodial, native scripts on its mainnet, ensuring maximum security and decentralization for owners.
2. Verification: Zero-Knowledge Proofs (ZKPs) generate verifiable cryptographic proofs for Bitcoin transactions, providing trustless verification for Layer 2 applications.
3. Communication: The BTC Oracle bridges proofs from Bitcoin into Ethereum Virtual Machine (EVM) smart contracts, enabling cross-chain interactions.
4. Execution: Decentralized Arbiter nodes facilitate time-based execution and dispute resolution, ensuring fairness and trust in financial transactions.

Together, these components create a robust protocol that unlocks the full potential of Bitcoin for DeFi, providing developers with the ability to build smart contract applications which open up Bitcoin Finance while maintaining its security ethos.

ELA Arbiters: The Final Piece of the Puzzle

The Arbiter network is the final layer of BeL2’s V1 protocol, providing execution services for Bitcoin-backed transactions, resolving disputes, and maintaining trust through decentralized and collateralized mechanisms in return for fees. At the heart of this system lies ELA, a Bitcoin-secured BTCFi reserve asset fortified by merge mining. By leveraging Bitcoin’s immense hash power, ELA inherits uncompromised security without extra energy costs. Its fixed supply and transparent emission schedule make ELA an ideal collateral asset, anchoring BTCFi with Bitcoin-level trust. As the “queen” to Bitcoin’s “king,” ELA is used as collateral to Arbiters nodes on a network to provide a secure, reliable Native Bitcoin DeFi environment.

This month, on the 30th of December, BeL2 will be releasing the Beta version of its Arbiter system. Key points to first understand:

• The Beta stage marks the release of a product to an initial group of community users for testing and feedback.
• For security purposes, BeL2 will implement a 3-phase rollout, beginning in December and concluding in April. Phase one, launching this month, introduces the Beta version.
• The BeL2 Arbiter Beta will impose a $100 maximum limit on ELA collateral deposits. Collateral can be provided in ELA or ELA BPOS NFTs.
• Initially, rewards will be issued exclusively in ELA. However, upcoming applications and the scaling of Arbiters over the next few months will introduce utility for BTC rewards.

BTC Lending: A Flagship BeL2 Use Case

The Arbiter network will first be worked into supporting BeL2 BTC lending demo, the revolutionary application developed by the team to support the validation of underlying infrastructure for Native Bitcoin DeFi:

• Secure Lending: Borrowers collateralize BTC without transferring it off the mainnet.
• No Forced Liquidations: Fixed interest rates protect borrowers from short-term price volatility.
• Transparent Dispute Resolution: Arbiter nodes ensure fair outcomes for all parties involved.

Criteria for Joining the Fully Rolled out Arbiter Network

Beyond Beta, once the network has stabilized and all phases of the rollout are complete, users will be required to meet the following criteria to join the finalized Arbiter Network:

• A Dedicated BTC Wallet: Required for secure custody and dispute resolution.
• Exit Flexibility: Arbiters can exit the network if no active arbitration commitments are pending, allowing them to manage their participation.
• Stake ELA or BPoS NFTs: A minimum stake of 1,000–5,000 ELA is recommended to ensure commitment and secure arbitration responsibilities.
• Define Term End Date: Arbiters must set a staking duration, with longer terms increasing their selection chances.
• Purpose of Staking: Staked assets act as collateral, guaranteeing impartiality and commitment in arbitration events.
• Set Your Fee Rate: Arbiters define an annual percentage during registration (e.g., 12%).
• Example Income: A 2-month arbitration task with 10,000 ELA staked at 12% annual interest would yield 200 ELA.
• Aligned Rewards: Fees ensure that Arbiters are compensated for their role in securing transactions.
• Event Monitoring: Promptly submit cryptographic signatures for arbitration events.
• No Judgment Needed: Arbiters verify predefined events without adjudicating disputes, simplifying the process.
• Manual Operations: Tasks can be performed via a web interface, though timeliness is critical to avoid penalties.

Applications requiring arbitration must:

1. Register with the Network: Initially approved by administrators, transitioning to DAO governance over time.
2. Log Transactions: dApps must log all transactions with Arbiter contracts at creation to ensure future arbitration is possible.

Fees for arbitration end when:

• An arbitration request is initiated.
• The transaction is closed or reaches its deadline.

A Vision Realized

The introduction of Arbiters completes BeL2’s foundational layer, enabling trustless, decentralized financial applications on Bitcoin. This 3-phase rollout marks a milestone in Bitcoin’s evolution from a store of value to a programmable asset that underpins a global, decentralized financial system. BeL2 is on track to redefine how Bitcoin interacts with the world, unlocking over $1 trillion in dormant value and empowering its community to embrace a future free from custodial risks and centralized limitations.

Join the BeL2 Movement

As an Arbiter Beta participant, you are not merely engaging with a network—you are actively shaping the future of decentralized finance with Elastos. This is a call to action for the community to support the network by setting up nodes, providing valuable feedback, and driving the BeL2 network toward a successful market launch in 2025. Detailed instructions on how to set up a node will be published before December 30th, supporting the launch of the Arbiter Beta network. Did you enjoy this article? To learn more, follow Infinity for the latest updates here!