Off-chain parallel and on-chain settlement, understand Bitcoin native virtual execution layer Arkade | CryptoSeed

Author: Daisy, ChainCatcher

Editor: Fairy, ChainCatcher

Arkade is a virtual execution environment running on the Bitcoin network, designed to provide programmable financial infrastructure without trusting third parties and without modifying protocols.

It implements the architecture of off-chain execution and on-chain settlement, so that Bitcoin has smart contract capabilities and supports application scenarios such as lending, trading, and smart wallets.

The system is designed based on the "Virtual Transaction Output" (VTXO) and "Virtual Memory Pool" model.

VTXO is an abstract extension of the Bitcoin UTXO model, used to represent transaction status off-chain; users can conduct real-time transactions in a virtual memory pool, and then batch anchor the results to the Bitcoin main chain through a pre-signature path. There is no need to introduce new consensus mechanisms or tokens in the execution process, and all funds are always managed by the user.
Arkade does not generate new chains, does not rely on bridging mechanisms or encapsulated assets, and completely retains the trust boundary of Bitcoin as the settlement layer.

Mechanism advantages and system characteristics

Compared with solutions that rely on sidechains, soft forks or fraud proofs, Arkade's technical architecture is closer to the native concept of Bitcoin.

First of all, all its operations are based on Bitcoin UTXO logic, processed in parallel at the virtual layer and settled in one go on the main chain, avoiding the problems of state inflation and transaction congestion. Off-chain processing can be performed in real time, while on-chain anchoring is determined by the user independently to achieve a flexible balance of cost, speed and security.

Secondly, all transactions of Arkade are composed of pre-signatures, and users always retain a unilateral exit path to ensure that funds will not be intercepted or abused by third parties during system operations. Trusted Execution Environment (TEE) is used to perform signature operations and ensure that the key is not tampered with through remote verification.

Compared with BitVM, rollup, encapsulated assets or sidechain solutions, Arkade does not rely on external verification networks and does not use fraud proof mechanisms. The overall architecture is simpler and transparent, and the operating cost is lower.

Arkade Script in the system expands the capabilities of Bitcoin scripting, supports state-based contract logic, and provides compilation toolchains to lower development thresholds. It is suitable for developers who want to deploy complex logic on Bitcoin.

Project progress and financing situation

Arkade was developed by the Ark Labs team, which completed a $2.5 million pre-seed financing in August 2024. The leading investor is Draper Associates, and the participating investors include Fulgur Ventures, Axiom Capital and crypto investor Stephen Cole. The relevant funds will be mainly used for product research and development and developer ecosystem construction.

Since the beginning of 2025, Arkade has launched a grayscale testing phase and is currently conducting integrated cooperation with Tether, Boltz, Breez, Mempool.space, etc. According to official disclosure, the platform is expected to be officially launched in the third quarter of 2025, and initially supports on-chain lending, automated agency, transactions and mortgages.

Ark Labs' core members come from the Bitcoin development community. Co-founder Marco Argentieri said the project aims to introduce dynamic financial capabilities to Bitcoin without sacrificing security and neutrality.

At present, Arkade's core components such as execution engine, signature module, scripting language, and virtual memory pool have entered a stable operation stage. It is planned to gradually introduce decentralized liquidity access, connector bond mechanism and other modules to further diversify operation dependencies and expand the incentive model.