Jessy Jinse Finance
There was a huge crowd of people.
In May, Hong Kong gathered many Bitcoin ecosystem developers, from core developers, founders of asset issuance methods, Layer2 project parties, to wallets, cross-chain bridges, mining companies, Bitcoin chain games, and other Bitcoin ecosystems...
At the Bitcoin Asia conference, people talked about Hong Kong's virtual currency spot ETF, the latest asset issuance protocol, and the underlying technological innovation of Bitcoin. Various Bitcoin projects promoted themselves at the exhibition. Attending the conference is undoubtedly a good window to peek into the development process of the Bitcoin ecosystem.
From the market perspective, Bitcoin has increased nearly five times from its lowest point to its current highest point. Most Altcoin, including Ethereum, have failed to outperform Bitcoin, and even continued to bottom out when Bitcoin prices adjusted.
This round of bull market is regarded as a bull market for the Bitcoin ecosystem. This is not only reflected in the price of Bitcoin, but also in the unprecedented prosperity of the Bitcoin ecosystem. Projects and developers are flocking to the Bitcoin ecosystem, just like when DeFi on Ethereum became popular, they flocked to the Ethereum ecosystem.
Projects come one after another, but what kind of ecological projects does Bitcoin need and what are the ones that truly conform to the underlying philosophy of Bitcoin? The conference was held in Hong Kong. Does this indicate that Hong Kong and even China will return to the dominant position in the encryption industry?
Bitcoin's popularity is easy to take advantage of
Two days before the opening of Bitcoin Asia, the side event Bitcoin Devcon was held in the Science Park, more than 20 kilometers away from the main venue. The most difficult thing to ignore during the two-day agenda was what some old public chains were doing or preparing to do in the Bitcoin ecosystem.
Bitcoin Devcon second day agenda, Han Feng, founder of domestic Layer2 project BeL2, speaking on stage (Photo by Jessy from Jinse Finance)
Aisling Connolly, senior research scientist at ICP DFINITY Foundation, described in his speech how the ICP network provides Layer2 support for Bitcoin through Chain Fusion technology. Similarly, Justin, founder of Zeus network, also proposed the idea of using Solana as Bitcoin Layer. David Kim, ecosystem manager at Bitmain, discussed in his speech how ETC can empower the Bitcoin ecosystem.
From a technical perspective, Ethereum-like scaling technology rollup can also be applied to Bitcoin scaling. Some public chain technologies can indeed provide direction and technical support for the development of Bitcoin's Layer 2.
But from another perspective, various projects are actively moving closer to the Bitcoin ecosystem, which is essentially a way of taking advantage of the popularity. This can attract the attention of investors and retail investors for a certain period of time.
Especially, becoming Bitcoin's Layer2 in the form of a sidechain is not a high-tech thing. The so-called sidechain, one of Bitcoin's layer2 solutions, refers to the design of an independent public chain to achieve asset transfer between the Bitcoin network. The sidechain itself has its own unique accounting method, consensus mechanism, smart contract and script support, etc., and is only connected to the Bitcoin mainnet through specific cross-chain technology. For public chains, a relatively simple way to join the Bitcoin ecosystem is to make a sidechain and use cross-chain technology to connect to the Bitcoin mainnet.
Of course, the public chain with a large number of users and a complete ecosystem can make efforts to become a side chain of Bitcoin and develop into Layer 2 of Bitcoin, which can indeed bring benefits to the development of Bitcoin ecology. For example, compared with other Layer 2 projects, they have a large user base and can gain more trust from users.
For many public chains that have been silent for a long time in this bull market, immersing themselves in the Bitcoin ecosystem is also a form of self-rescue, similar to how some public chains decisively changed their concepts and invested in AI in this bull market.
Differences in development direction between the East and the West
Back to the main venue of Bitcoin Asia.
Many projects related to the Bitcoin ecosystem from both the East and the West came. After a rough review of the projects and speeches of the speakers from both the East and the West, it can be found that the innovation of Bitcoin's asset issuance methods on Layer1 is mainly done by Western Bitcoin developers. The founders of the Ordinary and Runes protocols and the proposer of Brc-20 all came to the venue. In addition to the main venue of Bitcoin Asia, conferences on the themes of Ordinary and Runes were also held at the same time. Westerners are keen on upgrading some protocols on Layer1 and making some innovations based on the protocol upgrades.
On the second day of Bitcoin Asia, three Bitcoin core developers including Casey were having a roundtable discussion (Photo by Jessy from Jinse Finance)
Chinese projects are mostly concentrated on Layer 2 and the Bitcoin application layer.
Comparing the differences between the East and the West in the Bitcoin ecosystem, Elaine Yang of Waterdrop Capital said in her speech at Bitcoin Asia that the East prefers to issue some coins and some ecological applications on the second layer of assets; while the West pays more attention to infrastructure innovation.
Dylan LeClair, chief analyst at UTXO Management, also said in an interview with Jinse Finance that the West is more focused on Bitcoin, and the worship of Bitcoin is a bit like religious fanaticism, so experiments are relatively conservative. The East is more tolerant, with many different projects trying, and the pace of various experiments is very fast.
As Dylan LeClair said, the core developers of Bitcoin and the proposers of new protocols are all Westerners, while Easterners focus on various applications related to Bitcoin.
However, although there are differences between Eastern and Western projects, most of the current entrepreneurial projects in the Bitcoin ecosystem focus on building infrastructure. The key to these projects is to increase transaction speed, ensure transaction security, and expand network capacity. There are fewer application-layer projects, such as NFT exchanges and games, which are only a few.
The current situation is also in line with the industry consensus - the current focus of Bitcoin ecosystem construction should be on infrastructure.
At present, Bitcoin's Layer2 can be roughly divided into five categories: side chain, Layer2 built based on UTXO and client verification, Layer2 built based on Rollup, Layer2 built based on Taproot Consensus, Layer2 in multi-signature + EVM mode, and state channel Layer2 represented by Lightning Network, etc.
The Lightning Network, which is not classified into these five categories, is considered by Bitcoin fundamentalists to be the Layer 2 solution that best fits the underlying philosophy of Bitcoin. However, it is designed to only support payments. Basic functions such as lending cannot be implemented on the Lightning Network, and only some payment applications are installed on it. Although it is the most popular among fundamentalists, the Lightning Network can only do so much.
The main differences between the other five types of Bitcoin layer2 are: the UTXO+client verification method and the Layer2 built by Taproot Consensus have the highest nativeness. The other three have low nativeness. Taproot Consensus has a higher degree of decentralization, while the other four have a lower degree. The three modes with the highest degree of implementation are Taproot Consensus, Rollup, and multi-signature + EVM. The side chain solution is easy, but it is difficult to gain recognition. Multi-signature + EVM is the easiest to copy, but it is not decentralized. Rollup borrows Ethereum's expansion solution, but does not solve the fundamental problem of BTClayer2. Overall, the Taproot Consensus solution directly uses Bitcoin native technology to build a decentralized BTC L2 solution. Therefore, whether in terms of Bitcoin nativeness or decentralization, including the current degree of implementation, Taproot Consensus is the most noteworthy BTC L2 solution at the moment.
The representative projects of various types of Layer2 mentioned above all appeared at the Bitcoin Asia conference. These Layer2 projects are basically developed by Chinese teams. For example, Merlin Chain represents multi-signature + EVM, BL2 and B² Network represent Rollup, and BEVM represents Taproot Consensus model.
RGB, represented by UTXO+client verification, was first proposed by Westerners, while RGB++ was proposed by Chinese people, and its representative project CKB is also a Chinese project.
By comparing these Bitcoin Layer2s, we can find that the common problem is that they do not truly implement the underlying philosophy of Bitcoin. Most of the Layer2s that are being practiced cannot be regarded as the true second layer of Bitcoin.
However, Dylan LeClair believes that Bitcoin Layer2 is still in the experimental stage, and it is a good thing to try more in various directions. It is hard to say who will succeed. In these experiments, 99% of the projects may fail in the end, but there will be 1% success.
Short-lived projects and the eternal bull market brought by spot ETFs
At the conference, people will also discuss very serious topics about the development of Bitcoin technology, such as whether to restore "op_cat" in the Bitcoin scripting language. Technology is constantly changing, and hot spots change quickly. The most popular developer at the moment is Casey, the founder of the Runes protocol. After his speech, a bunch of audience members came up to him, asking for Casey's contact information or a photo. On the other hand, Domo, the founder of Brc-20, who is not as popular at the moment, can move around the venue at will, and few people can recognize him.
The hot spots of the industry change rapidly, and the flourishing projects are dazzling. People who are familiar with the development rules of the industry also know that the life of most projects is short. This is also the charm of the industry. Various experiments emerge in an endless stream, and the most suitable path is determined through continuous attempts.
The booths that were most popular with the general public were those that offered applications that the public could quickly accept. For example, several trial machines of a Bitcoin blockchain game were used up by the audience who came to experience the game in just half a day.
Similarly, the approval of the Bitcoin spot ETF in Hong Kong is also an important narrative of this bull market. For Bitcoin, this represents its recognition by traditional finance.
During the conference, a cocktail party hosted by Xinhuo Technology and Hashkey attracted many people from traditional finance (Photo by Jessy from Jinse Finance)
Some people are worried that Bitcoin will be incorporated into traditional finance, which will go against its original intention. The codes that created Bitcoin have not changed because of the emergence of spot ETFs, and Bitcoin is still decentralized. The passage of spot ETFs will allow more money to flow in, which is undoubtedly a lasting benefit. At the meeting, regarding the prediction of Bitcoin prices, everyone pointed out the small goal of 100,000 by the end of the year.
Hot projects in the Bitcoin ecosystem will keep changing, but what is certain is that Bitcoin will not change, and there will be basically no changes in the Bitcoin spot ETF. In fact, as the mining cost of Bitcoin increases after the halving and traditional finance enters the market, the "bottom" of the Bitcoin price will continue to be raised.
At present, the volume of virtual currency spot ETFs in Hong Kong is still very small, and even Hong Kong institutions prefer to choose US spot ETFs. A spot ETF-related practitioner told Jinse Finance reporters that the reason for this is that virtual currency spot ETFs are a global competitive market, and investors will definitely choose products with lower fees and better service experience. In this regard, Hong Kong does not have an advantage.
But this is the first step for China to regain its dominance in the crypto industry. After all, one of the main lines of the industry is compliance. Hong Kong is not late in taking the lead, but the road needs to be taken step by step.
