Debate on Bitcoin L2: Dialogue between Bitlayer, CKB and Bool Network

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 the way out of 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 public chain and Layer2 related work before. 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 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 transformed into a Bitcoin second layer 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, which allows UTXO assets such as RGB, Runes, and Atomicals to 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 Layer2 in the traditional sense, 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 and trusted verification to ensure the security of bridged assets between L1 and L2. We also provide asset redemption functions such as forced withdrawals for Bitcoin L2.

2.Jomosis: What do you think of 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 safe 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. Generally speaking, there are more technical schools than six months ago.

Regarding the development of the Bitcoin ecosystem, because we are also raising funds, we can feel that the major players in the capital market have basically made their moves, and there are relatively few institutions that have not made any moves. In the West, especially in North America, large investors often 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 make their moves have almost made their moves, 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 ecology move forward? In addition to the simple asset narrative, can new stories be told? In the new cycle, will the old story 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 ecology was mainly fair launch, with retail investors playing, and there were few regular troops. Then 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 like the opposite. First of all, it is fair launch. For example, whether it is runes or anything else, the performance 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 started to be listed. After listing, their performance is not particularly good, but we have seen that overseas big capital Multicoin and polychain have supported some EVM-compatible BTC Layer2. We know that there 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-level opportunity in this round, which is a big opportunity, and then they are all laying out, and many projects are also going online one after another. I think this is very clear.

Then talking about 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 logic within the Bitcoin ecosystem must make sense. Now different schools have their own set of logic, which can basically stand.

On-chain verification type, that is, if you want to move the Ethereum Layer2 approach, then rely on BitVM, and then do OPR and ZKR based on BitVM, you can introduce many things in the Ethereum Rollup ecosystem, which will not be as crude as some of the previous Bitcoin second layers, which are multi-signature bridges. In the future, even if it is a bridge, it must 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 verification of CSV, but different client verification schemes can be divided into levels according to security levels. CKB has the idea of ​​RGB++ for this, and there are heavyweight players such as Lighting Labs. They issued assets with Taproot Asset. Of course, this technology is still in its early stages. Lighting Labs is obviously much more active than the 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, it is a very certain thing in the primary market, in the capital, and in the West. Our UTXO Stack has recently received good feedback when raising funds from Western institutions. In summary, I think the Bitcoin ecosystem has gradually become clear.

Kai:I thinkfrom a technical perspective, everyone's plan is basically clear, and everyone's definition of Bitcoin Layer2 will be more standardized and clear.For example, it can inherit some of the characteristics and settlement mechanisms of the Bitcoin main network, and it can have functions such as forced redemption like Ethereum Layer2. There may be a consensus on what is Bitcoin Layer 2 and what is not.

3. Jomosis: In everyone's eyes, what conditions should BTC Layer 2 meet? All guests can introduce to everyone the reference indicators of Bitcoin Layer 2 in their eyes. In addition, what is the significance or value of Bitcoin Layer 2 in your eyes?

Kevin： Now, I may look at it more broadly. In theory, any layer that expands some capabilities, such as performance, decentralization, or TPS, can be considered a second layer. Some people even think that CEX is also a second layer. As for the conditions that Layer2 should meet, I think as long as users recognize its security, it can be a good Layer2. This may not be that complicated.

Let's look at the so-called standards proposed by Bitcoin Magazine before. BTC should be used as a gas token, and then there should 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, Bitlayer, want to do verification on the BTC chain, and we think that it is very important to settle on the BTC chain. If it is some teams doing side chains, they will think that using BTC as gas is the most important condition.

Generally speaking, the so-called "conditions that should be met" are really a matter of opinion. Each project or each person has a different view. We are more traditional or more technically halal, and we follow the broad consensus on the security of the second layer. Therefore, we believe that on-chain verification is critical.

Baiyu: This is the fun part of the 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 company's solution has its own focus, and the views are definitely different. As for our views on CKB, Jan, the architect of CKB, wrote a tweet at the beginning of the year. The core view is that the Bitcoin ecosystem should be a flexible layered currency system. Bitcoin is gold, like a central bank. Then it is distributed, and the currency of Bitcoin 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 as payment in it, and the side chain is also. So I think that meeting the above conditions is to some extent 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 views. What we value most is inheriting some of Bitcoin's design philosophy and some of its values, such as the values ​​of PoW and the design of UTXO. We think that this is the most important innovation brought by Satoshi Nakamoto or Bitcoin, which was not available 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, which 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 try to avoid hard forks and soft forks. Of course, we can use Bitcoin UTXO as a coloring tool, based on which we can issue assets such as colored coins, slightly expand Bitcoin, and allow BTC to become 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. This belongs to the second layer in a broad sense, but the second layer I understand is 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. This is a so-called second layer. This is not.

Then the second point, your security and trustlessness need to be guaranteed by Bitcoin. At the same time, you can build your own execution environment on it. For example, the second layer further expands some limitations of Bitcoin script due to non-Turing completeness. You can do some more meaningful Defi or asset protocols on it.

So I think there are these two points, one is that it does not have its own native token, and then it does not have its own independent consensus system. I think it is a real second layer only when these two points are met. Then 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 interact with some Defi protocols as flexibly as Ethereum. You may have to cross to CEX to do it, but this is out of the trustless and decentralized environment, and there are many security risks. But if the second layer can be realized in the true sense, a more prosperous application ecosystem can be created.

4.Jomosis: The next question is to ask the guests about their understanding of entrepreneurship itself. 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 entrepreneurship requires a lot of conditions. It is originally a matter of life and death, and it is a very accidental thing. Then, to build the second layer of Bitcoin, you actually build a public chain. To build a public chain, you need more things. You are not just building a project, you are building an entire ecosystem, and you need to expand it, because the public chain is like a digital community, a large community, where governance culture and other things are more complicated than ordinary startups. Of course, technology is very, 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, turning the digital messages we transmit into money. This is a groundbreaking thing. Before Bitcoin, there were centralized banking systems that mapped legal currencies into money and relied on centralized issuers. But Satoshi Nakamoto created something like BTC from 0 to 1. There must be a role for other disciplines here, and technology is a very core point in it.

So sometimes I feel that in this cycle, too many people have returned to Web2, which is basically just a gathering to make a plate. Many people are stressful and say that technology is not important. I don’t agree with this view. Without technology, there is no Web3, and there is 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 just like the emperor’s new clothes. I may oppose that view.

But from the personal lessons of the CKB team, in addition to technology, there is definitely a need for market and marketing, and the market needs to be met. I think this is also something that the Bitcoin community should reflect on. If Bitcoin continues to adhere to its fundamentalism, and does not recognize any other currency except Bitcoin, and only adheres to that set of idealistic ideologies, 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 the needs of users, and in the end people are more likely to forget Bitcoin.

But this round of Bitcoin ecology has begun to accept these changes and 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 very much. Throughout history, I 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, there will also be some operations-oriented projects, but at present, most of these projects have not experienced a bear market, and it is impossible to determine whether they can still exist in the next bull market.

So the root of technology is very important. Without technology, there is no soul. Without innovation, in the end, you can't even let down the community, let alone investors and users.

So in general, technical narrative is the soul. We must see that in the past cycle, the tolerance of capital, market and users for the implementation of new technologies has become lower and lower. Some ZK projects that were very popular in the last cycle have a much weaker presence in this cycle. Why? Because they did not get adoption in time, and they kept saying "End Game" every day, but users did not buy in. This also echoes Mr. Baiyu's view that technology itself is to solve problems, and solving problems is to solve problems for users, and everything must return to the needs of users.

Regarding the nature of Bitcoin's second layer, if you regard it as a business, its revenue model is also very simple, that is, the transaction fee you receive from users, minus your operating expenses, is your profit. This is a very simple model. Based on such a model, we think, how can we 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 on the basis of security, which is essentially a balance between security and operating expenses, such as choosing different chains as DA facilities.

Back to the original question itself, I think that a second layer or even a public chain needs TVL 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 blockchains are now used in financial applications. Without TVL, it's just a waste of time, which is very uncomfortable. 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 separate Space.

To sum up, you need to have technology, but it can't be left unimplemented for a long time. In the end, you still need to attract users and achieve adoption. As for the ecosystem, you also need to make it successful so that it can last forever.