Layer-2 Ecosystem

The Velocity sidechain architecture consists of a set of independent and interconnected nodes that communicate with each other to validate transactions and maintain network consensus. These nodes are responsible for processing and verifying sidechain transactions, executing smart contracts, and maintaining the integrity of the sidechain.

The Velocity sidechain utilizes a consensus mechanism based on a modified version of Proof-of-Stake (PoS). This consensus mechanism ensures the security and stability of the sidechain while providing fast transaction finality. Validators on the Velocity sidechain are selected based on their stake of VLCT tokens, and they take turns producing blocks and validating transactions.

VLCT tokens are issued on the Bitcoin network using the ORC-20 token standard. ORC-20 is a token standard that allows for the creation and management of fungible tokens on the Bitcoin network. VLCT tokens are created on the Bitcoin network and can be transferred to and from the Velocity sidechain using a two-way peg mechanism. This peg allows users to seamlessly move their VLCT tokens between the Bitcoin network and the Velocity sidechain.

To ensure the integrity of the Velocity sidechain, the merkle tree root of the sidechain's state is calculated periodically, typically every hour. This merkle tree root is then written to the Bitcoin network as proof. By anchoring the merkle tree root in Bitcoin, the Velocity sidechain leverages the immutability and security of the Bitcoin network, providing a trustless mechanism for auditing and verifying the state of the sidechain.

The Velocity sidechain offers a scalable and efficient solution to the Bitcoin network's scalability challenges. By issuing the VLCT token on the Bitcoin network and leveraging the security of Bitcoin through the recording of merkle tree roots as proof, Velocity enables faster transactions while ensuring the integrity and trustlessness of the sidechain. This document provides a high-level overview of the Velocity sidechain's architecture, consensus mechanism, token issuance, and the process of recording merkle tree roots on the Bitcoin network.