Bitcoin Layertree Proposal Aims to Cut Transaction Costs for Millions of Users
Lightning Labs developer Olaoluwa Osuntokun has introduced Layertree, a proposed Bitcoin scaling system designed to let thousands or potentially millions of users share a single blockchain output while retaining the ability to withdraw their funds independently. The 103-page paper was published on October 15, 2026, outlining a model intended to reduce the cost of using Bitcoin without transferring custody of users' assets to a central operator.
The proposal addresses a structural challenge in Bitcoin: recording individual holdings through separate unspent transaction outputs (UTXOs) consumes blockchain space, while transactions require fees. Layertree seeks to reduce that burden by keeping individual balance records outside the blockchain while allowing ownership to be verified mathematically.
How Bitcoin Layertree Uses a Shared Output
Under the proposed design, multiple participants would hold claims on bitcoin stored in a single shared output rather than maintaining a separate output for every user. Individual balances would be tracked through a Merkle-sum tree, a mathematical structure that records balances and supports proofs that can be checked without storing every participant's account separately on the blockchain.
The arrangement resembles an apartment building: residents share the same structure but retain individual possessions. Similarly, Layertree would allow an operator to manage the shared system without owning the bitcoin belonging to its members.
The operator would control admission to the system and approve new participants. However, the design aims to prevent that operator from confiscating members' bitcoin or blocking valid withdrawals.
Layertree Aims to Preserve Independent Bitcoin Withdrawals
Participants seeking to withdraw their bitcoin would submit mathematical proofs establishing their balances. A proposed Bitcoin scripting mechanism known as a covenant would verify the proof, release the appropriate funds and update the remaining balances in the shared output.
According to Osuntokun's paper, withdrawals would not require operator approval. The design also specifies no mandatory waiting period or expiration date for the shared output.
The paper provides transaction-size estimates for a system with 65,536 available positions. An individual withdrawal would require approximately 1,020 virtual bytes (vB), Bitcoin's unit for measuring transaction size and calculating fees.
That is roughly nine times the size of a basic Bitcoin transaction, but below the approximately 2,511 vB estimated for a comparable Ark-style withdrawal. The proposed cost advantage becomes more pronounced during enrollment: under the paper's stated funding assumptions, onboarding around 1,000 members could cost less than 1 vB per person.
Shared Bitcoin Output Creates Potential Congestion Risks
Layertree's shared-output model also introduces limitations. Although operators could not block valid withdrawals under the proposed design, they would retain the ability to reject applicants who wanted to join the system.
More significantly, participants would depend on the transaction capacity available to the shared output. If thousands of users attempted to withdraw simultaneously, their transactions could compete for limited space, potentially creating substantial congestion.
Participants would also carry an important verification responsibility. Before depositing bitcoin, they would need to check the mathematical records establishing their balances. According to the paper, failing to verify those records could leave their funds permanently inaccessible.
Bitcoin Protocol Changes Remain Necessary
Layertree cannot operate under Bitcoin's current scripting rules. The proposal requires additional capabilities, including new instructions that have not been activated on the network.
Osuntokun has developed reference software, tested scripts and mathematically verified portions of the design. Those steps provide progress toward implementation, but they do not establish that the complete system is secure for everyday use.
The proposal presents a potential way to distribute Bitcoin transaction costs across large groups while preserving individual withdrawal rights. However, its practical viability depends on the required protocol changes, the security of its implementation and how effectively the shared output handles periods of heavy withdrawal demand.
source: news.bitcoin
Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.
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