Author: Faust Source: Geek Web3
Geek Web3 invited guests from Bitlayer, CKB, and Bool Network to discuss technology, values, views on capital markets and well-known projects such as Lightning Network and RGB, trustlessness of cross-chain bridges, and breakthroughs in the Bitcoin ecosystem.
Host & Guests: Jomosis, Geek Web3; Kevin He, Co-Founder of Bitlayer; Baiyu, CKB Eco Fund Partner; Kai, Research of Bool Network
1. Jomosis: Could you please briefly introduce yourselves?
Kevin: I am Kevin, the co-founder of Bitlayer. I have been mainly engaged in work related to public chains and Layer2. I have launched a total of 4 public chains, and have also worked on Ethereum ZK-Rollup and MPC asset management platforms. As for Bitlayer, we are committed to turning BitVM from a concept into a physical object, solving the problem of Bitcoin's second layer status verification on Layer1, and building a Trustless two-way cross-chain bridge based on this verification capability. At the same time, we hope to support multiple VMs rather than just being limited to the EVM ecosystem, bringing a better experience to developers and users.
Baiyu: I am Baiyu, a partner of CKB Eco Fund. As for CKB, everyone knows that it is a PoW and UTXO public chain. It has been transformed into a Bitcoin layer 2 since the end of last year. The core is that CKB is originally a UTXO smart contract platform, which is completely isomorphic to Bitcoin and is also POW. Secondly, we proposed RGB++ and defined the concept of isomorphic binding. UTXO assets such as RGB, Runes, and Atomicals can be bound to CKB or other UTXO chains without a cross-chain bridge.
Kai: I am Kai, a researcher at Bool Network. Regarding Bool Network, it is not a traditional Layer2, but a third-party infrastructure that provides a trusted and secure cross-chain mechanism for Layer2. We use MPC and TEE, as well as our own privacy-preserving ring VRF, trusted verification, etc. to ensure the security of bridged assets between L1 and L2. We also provide asset redemption functions such as forced withdrawal for Bitcoin L2.
2. Jomosis: What do you think about the current development of the Bitcoin ecosystem?
Kevin: First of all, I think that the proposed BTC second-layer model is almost complete. The core issue is to make people believe that your second-layer is secure enough, which is more critical. In terms of technical routes, there are different paths such as BTC on-chain verification and off-chain verification. If it is on-chain verification, it means verifying Layer2 on the first layer of Bitcoin. For off-chain verification, there are different methods such as client verification, isomorphic binding, multi-signature, POS, etc. In general, there are more technical schools than six months ago.
As for the development of the Bitcoin ecosystem, since we are also raising funds, we can feel that the major players in the capital market have basically invested, and there are relatively few institutions that have not invested at all . In the West, especially in North America, large investors tend to only invest in one direction or one project. From the perspective of financing, there will not be many important new players in the Bitcoin ecosystem. The institutions that should invest have almost invested, and new project parties may not be able to raise money.
The current situation is much clearer than it was six months ago. If we look at the performance of users or the market, we may have entered an adjustment period. Some public chains and some BTC Layer2 do not have strong user data and ecology after they are launched. How should the Bitcoin ecosystem move forward? In addition to the simple asset narrative, can new stories be told? In the new cycle, will the old stories still work? Should there be new narratives? But these still need to be verified by the market.
Baiyu: I think the trend is becoming more and more obvious. But it seems that the sentiment of retail investors in the secondary market is completely opposite to that of the primary market. I also felt it in CKB. Before, the Bitcoin ecosystem was mainly fair launch, and retail investors were playing. There were few regular troops. The enthusiasm in the East was much higher than that in the West, and the enthusiasm of retail investors was much higher than that of VC. But now it feels the opposite. First of all, the fair launch, such as runes and other performances, does not seem to be as high as expected before.
The second point is the West. Now some EVM-compatible BTC Layer2 in the East have begun to be listed. Their performance after listing is not particularly good, but we have seen that large overseas capitals such as Multicoin and polychain have supported some EVM-compatible BTC Layer2. The ones we know are BoB, Botanix, and the recent Arch.
I think in the primary market, everyone has begun to recognize that the Bitcoin ecosystem is a beta opportunity in this round, a big opportunity, and everyone is making plans, and many projects are about to be launched. I think this is very clear.
Then speaking of the entire Bitcoin ecosystem, I agree with what Professor Kevin said just now. More and more regular troops are beginning to enter the market. The reason why regular troops enter the market is that the prerequisite is that the logic within the Bitcoin ecosystem must make sense. Now different schools have their own set of logic, and they can basically stand up to scrutiny.
For the on-chain verification type, if you want to bring over the Ethereum Layer2 approach, you can rely on BitVM, and then do OPR and ZKR based on BitVM. You can introduce many things from the Ethereum Rollup ecosystem. It will not be as crude as some of the previous Bitcoin second layers, which started out as a multi-signature bridge. In the future, even if it is a bridge, it should be decentralized as much as possible. Even if it cannot achieve ZK-level security, it can be guaranteed through economic games.
There is also CKB. We think that the essence of not doing on-chain verification is client-side verification of CSV, but different client-side verification schemes can be divided into different levels according to security levels. CKB has the idea of RGB++ for this. There are also heavyweight players such as Lighting Labs, who have issued assets with Taproot Asset. Of course, this technology is still in its early stages. Lighting Labs is obviously much more active than its previous very Buddhist state. It is trying to reuse the assets issued by Taproot Asset in the Lightning Network. This is very similar to our idea. We also hope that RGB++ assets will enter the Lightning Network.
I think from this perspective, the Bitcoin ecosystem is a big opportunity. In fact, in the primary market, in capital, and in the West, it is a very certain thing. When our UTXO Stack recently raised funds from Western institutions, the feedback we received was very good. In summary, I think the Bitcoin ecosystem has gradually become clear.
Kai: I think from a technical perspective, everyone's solutions are basically clear, and some of the definitions of Bitcoin Layer 2 are relatively standardized and clear. For example, it can inherit some of the characteristics and settlement mechanisms of the Bitcoin mainnet, and it can have functions such as forced redemption like Ethereum Layer 2. There may be a consensus on what is Bitcoin Layer 2 and what is not.
3. Jomosis: In your opinion, what conditions should the second layer of BTC meet? Can the guests introduce to everyone the reference indicators of the second layer of Bitcoin in their own eyes? In addition, what is the significance or value of the second layer of Bitcoin in your opinion?
Kevin: Now, I might look at it more broadly. In theory, any layer that expands some capabilities, such as performance, decentralization, or TPS, can be considered a layer 2. Some people even think that CEX is also a layer 2. As for the conditions that Layer 2 should meet, I think as long as users recognize its security, it can be a good Layer 2. This may not be that complicated.
Let’s look at the so-called standards proposed by Bitcoin Magazine. BTC must be used as a gas token, and there must be a reliance on Bitcoin. The third is that if Layer2 issues a token, it is best to be a Bitcoin-related token. Different people have different views on these three conditions.
We at Bitlayer want to do verification on the BTC chain, and we think it is very important to settle on the BTC chain. If some teams are doing side chains, they will think that using BTC as gas is the most important condition.
In general, the so-called "conditions that should be met" are really a matter of opinion. Every project or every person has different views. We are more traditional or more technically halal, and we follow the broad consensus on the security of the second layer more. Therefore, we believe that on-chain verification is critical.
Baiyu: This is the fun part of Bitcoin ecosystem. I think Bitcoin L2 does not have a clear standard. It is not what Bitcoin Magazine says. Since there are so many technical solutions, each has its own focus and different opinions. As for our CKB's views, CKB architect Jan wrote a tweet at the beginning of the year. The core idea is that Bitcoin ecosystem should be a flexible layered currency system. Bitcoin is gold, like a central bank. Then it is distributed, and Bitcoin as a currency will flow into wherever it wants to go.
So CEX is also the second layer of BTC, and the Lightning Network is also the second layer. Bitcoin can be used for payment in it, and so can the side chain. So I think that to some extent, all of the above conditions are the second layer of Bitcoin. Its core is a currency system. You have to admit that Bitcoin is a major payment tool in your country, and then you have to admit the value of this currency. This is the most important thing.
Secondly, we have some additional opinions. What we value most is inheriting some of Bitcoin's design philosophy and some of its values, such as the value of PoW and the design of UTXO. We think that these are the most important innovations brought by Satoshi Nakamoto or Bitcoin, which have never existed before.
The above features can bring an experience close to the first layer of Bitcoin, which is more important in our opinion. Others are some side chains like Liquid, which also use UTXO and extend some operation codes. Although it is a consortium chain, it still wants to maintain a certain consistency with the first layer of Bitcoin. This is what we are more concerned about.
In summary, we think that since Bitcoin is a currency system, it is better not to change as frequently as Ethereum. There is no need to add a lot of unnecessary things. It is better to avoid hard forks and soft forks as much as possible. Of course, we can use Bitcoin UTXO as a coloring tool, issue colored coins and other assets based on it, expand Bitcoin a little, and make BTC an asset issuance platform, but if we go further, we think it may damage the security and stability of the entire Bitcoin system.
Kai: The two previous teachers had a broad view on Layer2, which belongs to the second layer in a broad sense, but the second layer I understand is a little different. First of all, it should not have its own native token (generally referring to Gas Token). You can’t say that you issued an asset and then mapped Bitcoin to it, and this is a so-called second layer. This is not.
Then the second point is that your security and degree of trustlessness need to be guaranteed by Bitcoin. At the same time, you can build your own execution environment on top of it. For example, the second layer further expands some limitations of Bitcoin script due to its non-Turing completeness, and you can do some more meaningful Defi or asset protocols on it.
So I think there are two points, one is that it does not have its own native token, and the other is that it does not have its own independent consensus system. I think it is a real second layer only if it meets these two points . Then going further, Bitcoin's second layer can activate some existing scenarios, such as digital assets. Now that you hold a large amount of Bitcoin, you can't directly interact with some Defi protocols as flexibly as Ethereum. You may have to cross to CEX to do it, but this will be out of the trustless and decentralized environment, and there are many security risks. But if the second layer in the true sense can be realized, a more prosperous application ecosystem can be created.
4. Jomosis: The next question is to ask the guests about their understanding of entrepreneurship. What problems do you think need to be solved for Bitcoin's second-layer projects to succeed? And is technical narrative a necessary condition?
Baiyu: I think there are many conditions required for starting a business. It is a life-or-death matter, and it is a very accidental thing. Then, to do the second layer of Bitcoin, it is actually to do a public chain. If you do a public chain, you need more things. You are not just doing a project, you are doing an entire ecosystem, and you also need to expand it, because the public chain is like a digital community, a large community, and here, for example, governance culture and other things are more complicated than ordinary startups.
Of course, technology is very important. Without technology, the entire blockchain industry would not exist. Bitcoin has a very genius design. It invented the blockchain and the PoW consensus mechanism, which turned the digital messages we transmit into money. This is a groundbreaking event. Before Bitcoin, there was a centralized banking system that mapped legal currency into money and relied on centralized issuers. But Satoshi Nakamoto created BTC from 0 to 1. There must be a role for other disciplines here, and technology is a very core point.
So sometimes I feel that in this cycle, everyone has returned too much to Web2, basically just to get together and make a big deal. Many people react by saying that technology is not important and so on. I don’t quite agree with this view. Without technology, there would be no Web3, and there would be no way to move forward. However, technology should not be the source of legitimacy for various projects to be valued at hundreds of millions of dollars in the seed round, because this is simply like the emperor’s new clothes. I may be opposed to that view.
But from the personal lessons of the CKB team, in addition to technology, market and marketing are definitely needed to meet market demand. I think this is also something the Bitcoin community should reflect on. If Bitcoin continues to insist on its fundamentalism, refusing to recognize any other currency except Bitcoin, and only adhering to that set of idealistic ideology, people will eventually find that Ethereum can come up with EVM, account model, and POS, and then there are a lot of DEXs. Everyone is trying their best to meet user needs, and in the end people are more likely to forget Bitcoin.
But this round of Bitcoin ecosystem has begun to accept these changes and start to meet market demand, so I think in addition to technology, it is necessary to meet some needs of users and the market.
Kevin: Indeed, I agree with you. Throughout history, we have not seen any public chain or Layer2 without a technical narrative and a technical soul that can achieve great success. In the past one or two years, including after the maturity of Ethereum Layer2 technology, some operational projects have also emerged, but at present, most of these projects have not experienced a bear market, so it is impossible to determine whether they can still exist in the next bull market.
Therefore, the root of technology is very important. Without technology, there is no soul and no innovation. In the end, you will not even be able to live up to the community, let alone face investors and users.
So in general, technology narrative is the soul. We need to see that in the past cycle, capital, market and users have become less and less tolerant of the implementation of new technologies. Some ZK projects that were very popular in the previous cycle have a much weaker presence in this cycle. Why? Because they did not get adoption in time, and they kept shouting about the end game every day, but users did not buy it. This also echoes Mr. Baiyu's view that technology itself is to solve problems, and solving problems is to solve problems for users. Everything must return to user needs.
Regarding the nature of Bitcoin's second layer, if you regard it as a business, its revenue model is also very simple. The transaction fees you receive from users minus your operating expenses are your profits. This is a very simple model. Based on such a model, we wonder how to get more transaction fees? Right? You need to have this kind of high-frequency application; then how to reduce operating expenses? This requires more optimization based on security. This is essentially a balance between security and operating expenses. For example, different chains can be selected as DA facilities.
Back to the original question, I think that for a second layer or even a public chain, TVL is needed in the short term, ecology in the medium term, and technology in the long term. Let’s focus on the short term and medium term.
In the short term, if you don’t have TVL, it’s basically difficult to have a so-called ecosystem, because many blockchain applications are now related to finance. Without TVL, it’s just a waste of time. In the medium term, how to build an ecosystem? How to define an ecosystem? If you want to break it down specifically, including defining “project success”, it’s enough to open a Space alone.
To sum up, we need to have the technology, but it cannot be left unimplemented for a long time. We still need to attract users and achieve adoption. As for the ecosystem, we also need to make it successful so that it can last forever.
