Guest: Charlie Hu, Co-founder of Bitlayer
Interview: momo, ChainCatcher
With Wall Street institutions and publicly traded companies dominating Bitcoin, the long-dormant Bitcoin Layer 2 sector may be entering a new phase of technological breakthroughs and ecosystem explosion.
As a core developer of the BitVM Alliance, Bitlayer recently released its 2.0 white paper and launched the first mainnet Beta of a cross-chain bridge based on the BitVM paradigm. It aims to redefine Bitcoin's Layer 2 infrastructure with its "Bitcoin-equivalent" Rollup architecture and decentralized "challenge mechanism."
To this end, ChainCatcher interviewed Bitlayer co-founder Charlie Hu. This industry veteran, who participated in the early investment in Polkadot and led the expansion of Polygon's Asia-Pacific ecosystem, went all-in on Bitcoin's Layer 2 platform in 2023 with co-founder Kevin He. Bitlayer has secured $25 million in funding from leading institutions such as Polychain Capital, Franklin Templeton, ABCDE, StarkWare, OKX Ventures, Alliance DAO, and UTXO Management, and has established strategic partnerships with three major mining pools representing over one-third of Bitcoin's total hash rate. In this interview, Charlie Hu systematically analyzed Bitlayer's latest technological advancements and shared key initiatives in business partnerships, institutional development, and its Time General Equity (TGE) plans. He revealed that Bitlayer will soon launch Mainnet V2 and hold a Time General Equity (TGE). Furthermore, Charlie Hu discussed with ChainCatcher how BTCFi, in the era of Bitcoin's institutionalization, can overcome controversy and leverage the real demand for trillions of dormant assets. What are Bitlayer's key technological upgrades? 1. ChainCatcher: Bitlayer aims to facilitate the implementation of BitVM as Bitcoin's Layer 2. Why did you choose the BitVM path? Among the many players who have chosen this path, what are your advantages? Charlie Hu: We decided to work on Bitcoin's Layer 2 primarily because the BitVM whitepaper was officially released in October 2023. BitVM has continuously evolved from version 1 to version 3. During this process, we became core members and core developers of the BitVM Alliance, contributing a significant amount of code and work, including collaborating with audit firms. While this work itself isn't directly profitable, we hope to advance the development of the entire Bitcoin ecosystem through these efforts. We believe that BitVM doesn't require a soft or hard fork of the Bitcoin network. Instead, it optimizes existing Bitcoin scripts, enabling secure and efficient transactions through fraud proofs and Rollup technology. Therefore, it offers significant advantages in decentralization and security. Furthermore, this technology choice doesn't require waiting for Bitcoin network upgrades (such as OP_CAT), making it more feasible. This upgrade is unlikely to be implemented in the near future. Therefore, we have chosen to fully invest in BitVM, while also maintaining our focus and research on other technology options in preparation for possible future upgrades. 2. ChainCatcher: Bitlayer recently released its 2.0 whitepaper and launched the BitVM Bridge mainnet beta. Could you share more details about your key updates? Why is your Bridge the first Bitcoin cross-chain solution based on the BitVM paradigm? Charlie Hu: These updates primarily revolve around our two core products: BitVM Bridge and Bitcoin Layer 2 Rollup. Both products require breakthroughs in the underlying BitVM technology. The core goal of BitVM Bridge is to activate Bitcoin's liquidity and enable its use in DeFi scenarios. Specifically, our BitVM Bridge Mainnet Beta introduces a new mechanism based on Bitcoin Script for on-chain optimization, similar to the fraud proof mechanisms of Optimism or Arbitrum. We've designed a "challenge mechanism." Unlike the traditional multi-signature mechanism used by WBTC, we allow any member of a group of security operators to initiate a challenge to address potentially malicious transactions. Compared to WBTC, our bridge offers significant improvements in security and decentralization. We define this as a "next-generation Bitcoin cross-chain bridge solution based on BitVM technology" because it unlocks more possibilities. The 2.0 white paper explains the entire bridge's working mechanism and all processes in detail, ensuring that users and developers can clearly understand every step. The Bitlayer Network, with its Rollup architecture, is another core product of ours. It aims to enable high-performance, Bitcoin-equivalent transactions. This means that transactions are ultimately verified on the Bitcoin blockchain, ensuring security equivalent to that of the Bitcoin mainchain. 3. ChainCatcher: There are many Rollup models on the market. What are the differences and advantages of Bitlayer Network's Rollup? Charlie Hu: Existing Rollups on the market cannot be considered true Bitcoin-equivalent Layer 2s. They are essentially sidechains. The security of the sidechains is maintained by the sidechain nodes, and multi-sig is used to transfer liquidity across the sidechains. We believe that a true Layer 2 should provide Bitcoin-equivalent transactions. Data is compressed through recursive proofs and ultimately written to the Bitcoin block. Once written to the Bitcoin block, it becomes an immutable, decentralized record, which is the essence of Bitcoin's security. As long as Bitcoin doesn't fork or is corrupted by the longest chain logic, transactions written to the Bitcoin block remain valid. We aim to implement a Rollup model with Bitcoin-equivalent security. This differs from sidechains, where asset withdrawals can be problematic. If a sidechain node experiences issues or even a fork, assets could become stuck. Our Rollup model offers more secure and convenient asset withdrawals. In summary, our Rollup architecture differs from other projects on the market in two key ways: first, technical security—it offers Bitcoin-equivalent security, exceeding that of sidechains. Second, the economic model. Sidechain transaction fees are not distributed to Bitcoin miners, resulting in no revenue for miners and no value to the Bitcoin mainnet. We hope to align our economic model with that of Bitcoin miners, allowing them to participate in Layer 2 construction and provide liquidity. Currently, we're awaiting code audits for the validator module, which we expect to launch soon. V2 Mainnet and TGE Coming Soon 4. ChainCatcher: How has the Bitlayer mainnet been performing since its launch? Charlie Hu: Since our mainnet launched, we've generated nearly $15 million in BTC in transaction fees. At its peak, over 200 projects deployed to the Bitlayer mainnet, with over 3 million unique addresses participating in the interaction, all of which are verifiably real. 5. ChainCatcher: Besides the technical advances mentioned above, what other business expansions have you seen recently? Charlie Hu: Our core business goal is to use decentralized cross-chain bridges to map our Bitcoin-based asset, YBTC, to more networks, explore diverse profit scenarios, and provide greater returns for YBTC holders. We have partnered with multiple public chains. In addition to the five major public chains we recently announced—Base, Starknet, Arbitrum, Sonic, and Plume Network—we have also partnered with Cardano and will further collaborate with Solana. Some public chains have also provided us with investments and grants. Another unique partnership highlight is the support we have received from major mining pools representing over one-third of Bitcoin's hash rate, establishing strategic partnerships with Antpool, F2Pool, and SpiderPool. The core goal of our BitVM bridge is to provide an excellent user experience while ensuring security, enabling bridged transactions to quickly enter the Bitcoin mainnet's mempool. To achieve this, we need mining pools to accelerate the transaction processing, especially for non-standard transactions. Our BitVM transactions fall into this category. To ensure these non-standard transactions are smoothly incorporated into the Bitcoin mainnet and prioritized, providing a better user experience, the cooperation and support of mining pools is crucial. 6. ChainCatcher: What are Bitlayer's other major developments and goals for the second half of this year? Charlie Hu: First, the upcoming launch of the V2 mainnet, and the much-anticipated TGE event, which is happening soon. Binance's Pre-TGE and Booster events have already begun, and more progress will be announced soon. On a technical level, we will continue to implement BitVM technology, including optimizing Rollup details and promoting the development of V3's high-performance Rollup infrastructure. While specific V3 optimizations may not be rolled out until the end of the year or early next year, we already have some ideas in place and are gradually moving from design to engineering and production. Secondly, regarding business expansion, we will collaborate with various large DeFi protocols and ecosystems to increase YBTC volume. We will particularly focus on promoting YBTC adoption among major investors. Simultaneously, we will collaborate with major institutions like 21Shares and Franklin to issue ETP products, Bitcoin interest rate products, and even future Grayscale trust products. We will also explore collaborations with key industry partners such as Tether, Circle, and BitGo. We have already achieved significant results in both the depth and breadth of our ecosystem collaborations. We're already collaborating with custodians (such as Coinbase Prime and BitGo), multi-chain and cross-chain solutions (such as Chainlink and LayerZero), DEX tools (such as DEXTools), Nansen, and other projects. We've also established partnerships with over a dozen wallets. Going forward, we'll continue to deepen our ties with these partners, truly implementing YBTC into real-world scenarios and expanding its reach to more users, thereby generating revenue from gas fees, cross-chain bridges, and TVL liquidity. Our goal is to become a profitable infrastructure project with real business applications. How will the institutionalization of Bitcoin impact the BTCFi ecosystem? 7. ChainCatcher: With the Bitcoin ecosystem narrative you're involved in, launching in 2023, has the industry's development met your expectations? The community seems to generally agree that this wave of the BTCFi ecosystem has seen a bit of a high start and a low end. Charlie Hu: This phenomenon is similar to how Nokia users, after experiencing the iPhone, couldn't go back. The Bitcoin ecosystem's infrastructure is still not perfect, and the user experience needs to be improved. The current pace of Bitcoin infrastructure development is generally in line with expectations, but there is still room for improvement. Bitcoin has been around for 15 years and has experienced many setbacks, even being considered unsustainable at one point. However, the Bitcoin ecosystem has continued to develop steadily. Bitcoin's development requires time to gradually improve its infrastructure and ensure security and stability. While it could be faster, over-pursuing speed can lead to problems. The implementation of technology requires rigorous auditing and verification, and continuous optimization. The Bitcoin ecosystem has indeed undergone many changes over the past two years, including new capital inflows and asset appreciation. Overall, these developments are satisfactory. 8. ChainCatcher: Looking at a longer timeframe, the crypto community has been experimenting with leveraging Bitcoin's liquidity for over a decade, starting with the Lightning Network. What substantial progress or significant changes do you see in the BTCFi industry? Charlie Hu: Before 2021, the Bitcoin ecosystem was largely stagnant. The only truly significant event was the block size dispute of 2016-2017—the BTC vs. BCH hard fork. Several of our investors today were core participants in that fork. What truly set Bitcoin in motion was the Taproot upgrade in November 2021. This upgrade significantly advanced Bitcoin's address format and scripting capabilities. Without Taproot, there would be no Ordinals protocol launched by Casey in early 2023, and no subsequent narratives like BRC-20 and Runes. The inscription craze in the spring of 2023 also made everyone realize for the first time that Bitcoin could be a platform for ecosystem development. Miners, who had originally been non-supporters, also began to embrace it because they were making money. From the official launch of the project at the end of November 2023 to now, we've experienced the complete "explosion, congestion, and reshuffle" of Bitcoin's second layer in the 20 months since then. I believe that the entire Bitcoin and even the crypto ecosystem has undergone tremendous changes. We are no longer in the wild, grassroots era of retail investors shouting orders and influencers leading the trend. Geeks like Casey and Domo have faded from public view. The real steering wheel has been handed over to major hedge funds and public companies like MicroStrategy, BlackRock, and Franklin. They buy Bitcoin just like they hoarded gold and Treasury bonds in the past, locking it directly into cold wallets or ETF custody accounts and rarely moving these assets. The on-chain data is stark: single transactions exceeding $100,000 now account for 89% of the network, up from just 66% three years ago. Exchanges are seeing fewer and fewer coins. This means that price, sentiment, and even the macro narrative are largely driven by the sentiment of these whales. 9. ChainCatcher: BTCFi is currently facing criticism for being a "pseudo-demand" platform. What do you believe is the clear market demand for BTCFi? Can you share specific use cases or scenarios? Charlie Hu: Three key areas. European and American institutions hold large amounts of Bitcoin. For example, some liquidity funds hope to earn annualized returns while holding principal to cover operating costs and generate profits. As Bitcoin-based liquidity management grows, these institutions are shifting from relying on traditional financial models to increasingly adopting DeFi models, seeking various on-chain profit scenarios, such as lending and liquidity mining within DeFi protocols. The same is true for miners. They also have their own asset management teams and previously lent Bitcoin to custodial platforms for returns. However, with the instability of traditional financial models, such as the collapse of Three Arrows Capital and BlockFi, miners are now more inclined to seek on-chain income products. Retail investors are even more complex. Some are more professional investors seeking specific profit scenarios; some are speculators seeking to "buy at the bottom" or "buy at the bottom," focusing more on short-term returns; and some are followers, primarily interested in airdrops. 10. ChainCatcher: With Wall Street institutions and listed companies beginning to dominate Bitcoin, how will this impact the BTCFi industry? Will it generate new demands? Charlie Hu: This is primarily reflected in the following aspects: First, compliance and security requirements. Institutional investors currently primarily hold Bitcoin through compliant channels like ETFs, but these assets have yet to be legally and compliantly used in DeFi scenarios. Once the relevant legislation is passed, institutions will be able to use Bitcoin assets for a wider range of financial applications, such as staking and lending, which will significantly boost demand for infrastructure like BTCFi. The increase in institutional holdings is gradually reducing volatility in the Bitcoin market and enhancing market resilience. This will provide a more stable market environment for infrastructure like BTCFi, attracting greater institutional participation. Layer-2 solutions and liquid staking protocols such as RGB, BitVM, and Babylon are injecting DeFi and RWA functionality into Bitcoin, improving capital efficiency. Institutional participation will further drive the development of these ecosystems and provide a richer range of application scenarios for tools like BTCFi. It is expected that the relevant compliance legislation will be passed within the next year and a half, providing a legal basis for in-depth institutional participation in Bitcoin financialization. Infrastructure like BTCFi will benefit from this trend and become a crucial tool for institutions to generate returns. 11. ChainCatcher: In this new era dominated by large institutions, what are Bitlayer's strategic plans or goals? What do you think will be the deciding factor among the numerous competing Bitcoin Layer 2 platforms? Charlie Hu: Based on the current state of the industry, our goal is to build a truly "out-of-the-box" infrastructure that allows both institutions and large retail investors to participate. In the long run, our success depends on two core factors: First, can we activate "dormant" Bitcoin assets through the next-generation Bitcoin cross-chain bridge technology, enabling them to provide liquidity and generate returns in various DeFi scenarios? This is our most core KPI. If this volume is large enough, even surpassing WBTC to become the industry leader, our value will be enormous. The second is whether we can achieve high-performance transactions with Bitcoin-like security. We are currently conducting a series of activities focused on these two core areas. On the one hand, we are actively pursuing the "large mining pool + large institution" partnership: F2Pool, Antpool, and SpiderPool not only provide node security, but have also directly invested in our Bridge. Our shareholder list includes traditional asset management giants like Franklin Templeton, as well as some new large institutions whose participation has not yet been officially announced. On the other hand, we are also conducting a series of ecosystem cooperation activities, such as the Booster campaign with Binance and various campaigns with other Web3 partners. We hope to achieve the following goals:
activate more Bitcoin liquidity and provide TVL for DeFi protocols;
enable more DeFi users (whether retail investors or funds) to earn returns, rather than letting their assets sit idle in their wallets;
generate more transaction fees for miners, stimulate transaction volume on the network, and ensure that a portion of mining pool transactions originate from our platform.
In short, the ultimate goal is a single goal—to activate Bitcoin dormant in cold wallets without custody and feed it into DeFi to earn interest. Whoever can first achieve industry leadership in this liquidity will secure pricing power in the next round.
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