Nervos Chief Architect: Why We Need a Bitcoin Renaissance

On March 9, at the Bitcoin Singapore 2024 conference co-organized by Nervos Foundation and ABCDE, CKB Chief Architect Jan Xie delivered a keynote speech "Bitcoin Renaissance: Why & How?"

The following is based on Jan Xie’s English speech:

Why is the Bitcoin Renaissance needed?

Why do we need a Bitcoin Renaissance? The simple answer is that everyone wants to use BTC.

Currently, there are already many Bitcoin L2 projects, and users are transferring their BTC to these L2s and locking BTC on these L2s. The problem is that people are also moving BTC to other platforms, such as to Ethereum, and not just to the orthodox Bitcoin L2. Moreover, the amount of BTC on Ethereum is far greater than the amount of BTC in Bitcoin L2. To make matters worse, more BTC is actually stored in centralized exchanges. For example, Coinbase has approximately 1 million BTC in its cold wallet.

What I want to say is that people don’t just use BTC as a store of value ( SoV) tools, they also want to use BTC to pay, participate in transactions, or do other things. Whether Bitcoin maxis like it or not, if we do nothing, someone else will and they will offer worse solutions because BTC is like water, flowing everywhere.

Another demand we can see is that people want new assets. The total value of assets issued on the Bitcoin blockchain so far is $3 billion, lagging far behind the total value of assets issued on other blockchains. Bitcoin is the most secure, most decentralized, and most censorship-resistant platform, yet the total value of assets issued on this platform is the smallest. For comparison, Tron’s market capitalization is approximately US$12 billion, and the total value of assets issued on the Tron blockchain reaches US$10 billion. Do you think this is a good thing or a bad thing?

I want to emphasize again that if we do nothing now, others They will do it and they will provide worse solutions, and everyone can only use what they make.

After the Ethereum mainnet was launched, Peter Todd and Greg Maxwell pointed out in 2016 that there was a problem with the architecture of Ethereum, and that was not the direction the industry should follow. But in the past 8 years, because Bitcoin has not made substantial progress in meeting real needs, the entire encryption industry has turned to a direction we don’t want to see: building everything on PoS, account models blooming everywhere, sharding, Expansion solutions such as Rollup have become mainstream. I don’t think this is the path the crypto industry is going to go.

Bitcoin has brought about many real innovations, but the industry has abandoned these things in the past few years, such as PoW, UTXO, and P2P networks.

So, why do we need a Bitcoin Renaissance now? I think the reason is that there is real demand, demand for new assets, demand for use cases for Bitcoin. Therefore, I hope that we can use the opportunity of the Bitcoin Renaissance to change the direction of the entire crypto industry, follow Bitcoin's architecture, values ​​and ideas, create new things, and move in the right direction.

Some historical introduction to Bitcoin

The value of Bitcoin, as written in the white paper, is a peer-to-peer electronic cash system. It is not the peer-to-contract we see everywhere now, nor is it a peer-to-sequencer like Rollup.

Bitcoin is based on PoW and UTXO, and UTXO is a better accounting method than the account model, because on UTXO we can create real peer-to-peer assets and create bearer assets, just Like cash, not an asset against a peer-to-peer contract, or an arbitrary number of balances in an account.

Bitcoin focuses on verification rather than calculation. It emphasizes self-keeping and emphasizes that "no key means no currency, and the currency key is one."

How to build a better blockchain? The Bitcoin community has discussed it a lot. For example, Peter Todd wrote a series of articles and blogs discussing various ideas. I think three of the articles are very important. They are:

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“Disentangling Crypto-Coin Mining: Timestamping, Proof-of-Publication, and Validation”, 2013

• “Building Blocks of the State Machine Approach to Consensus” , 2016

• “Scalable Semi-Trustless Asset Transfer via Single-Use-Seals and Proof-of-Publication”, 2017

Peter Todd’s core point is that we only need a one-time seal (Single-Use Seal), we need to create a blockchain that is all one-time sealed, and there is no need for other things on the chain. We need to integrate all calculations Even more verification is placed off-chain, that is what Client Side Validation does. We need to do more things off-chain. We can build many new products off-chain, such as dyed coins, RGB, Ordinal, Atomics, etc.

We can also create channels off-chain. The existing channel is the Lightning Network, but in fact there is a lot of related research on channel architecture and channel design. Interestingly, you can think of the channel as client-side verification on both sides, which in my opinion is also a type of client-side verification.

The Bitcoin community also has many ideas about L2 chains. There have been many related discussions before. The L2 chain is not a new thing, and it is different from Ethereum’s L2 and is not Rollup. There are two dimensions for measuring L2 chains. One is the consensus mechanism, such as merged mining, Staking, and a chain with an independent consensus mechanism (Sovereign Chain). The other dimension is the way to connect L1 and L2, which is called Two- Way Peg (2WP). Interestingly, the underlying on-chain and off-chain protocols are orthogonal, such as CSV and Channels. This means we can merge them into one piece.

The current problem is that the Bitcoin community has had a lot of great ideas, but after so many years, progress has been slow. The first reason is the lack of programmability of Bitcoin, and the second reason is caused by the characteristics of Bitcoin itself. Bitcoin tries its best to avoid changes. It is very difficult to add any changes to the Bitcoin protocol. That's why we're meeting here today.

How to realize the Bitcoin Renaissance?

How can we get what we want? If we want to do anything in this circle, there are three principles:

1. Meet the needs of users 

2. Adhere to the values ​​of Bitcoin 

3. Do not rely on any soft fork/hard fork 

Fortunately, users want to issue new assets. User needs have always existed, and there are also some asset issuance protocols, such as Ordinals, Runes, BRC-20, Taproot Assets, etc. We can issue assets on the Bitcoin chain and issue peer-to-peer, censorship-resistant assets without requiring any changes to Bitcoin or forks. The ability to issue assets on the Bitcoin chain is only limited by our own brain-hardened thinking or Bitcoin maximalism. Issuing assets on the Bitcoin chain will actually bring many benefits to Bitcoin. For example, the more assets issued on the chain, the higher the mining fee income will be, which means the greater the future security budget of Bitcoin.

We also need a programmable layer because Bitcoin itself is restricted and we can’t do much on the Bitcoin chain. If we can create a layer based on Bitcoin and give the assets on the Bitcoin chain programmability, we can do a lot of things. This programmable layer will be the foundation for everything else, including scalability, privacy, Bitcoin financial activities, and more. This programmable layer will be the hub for assets on the Bitcoin chain, which is completely different from Ethereum. Ethereum is programmable, so it doesn’t need a programmable layer, but Bitcoin does.

Then we need a highway between Bitcoin and the programmable layer. We can use Two-Way Peg (two-way peg), or use an innovative method to bridge assets between Bitcoin and the programmable layer. This method I call UIB (Universal Isomorphic Binding, Universal Isomorphic Binding) Certainly). The idea of ​​UIB originated from Cipher, who isRGB++ protocol's author, while isomorphic Binding is one of the core technologies of RGB++. Cipher will introduce the RGB++ protocol in detail later, so I will skip this part of the introduction.

One thing I want to point out here is the difference between Two-Way Peg and UIB. Two-Way Peg means that you transfer assets to an entity, and this entity sends you the corresponding assets on another chain; UBI is a point-to-point mapping, and you directly establish an association between the UTXOs of the two chains without any intermediate suppliers or third parties.

Once we have a programmable layer, we can build another layer on top of it for scalability and privacy. We have many options at this layer, such as client verification, Open Transactions, Nostr, Chaumian E-Cash, P2P market, etc. Then, we can use channels to connect all of this. We can use channels to connect L1, L2, L3, and use channels to connect Web2 and Web3.

In this way, we get the following picture:



< p>Bitcoin, as the underlying asset issuance platform, is topped by a programmable layer, on which the scalability and privacy layers are built. In my opinion, L3 doesn’t even need to use blockchain because blockchain is good for transparency and global consensus, but it’s detrimental to scalability and privacy. This is different from the Ethereum ecosystem. The Ethereum ecological panorama is Rollup superimposed on Rollup. Why does this industry need so much blockchain? In fact, it is not necessary. There should be a P2P network on L3, and then the tunnel can connect it all.

So, I think what we are building is Web5, and Web5 is Web2 plus Web3. Web3 strives to move everything to the chain, but why do we need to move everything to the chain? The Internet is actually doing very well, but it has some problems. We can use P2P technology, cryptography technology and other new technologies to repair Web2. It is not Web3. We do not need to put everything on the chain. . Using these technologies, what we want to build is actually Web5.

Summary

Finally, briefly list the key points in this speech:

• Yes The need for new applications and new assets is real.

• If we don’t build something censorship-resistant, privacy-enabled, and user-friendly, they will build something censorship-resistant, privacy-unfriendly, and user-unfriendly.

• Bitcoin needs programmable L2.

• UIB gives assets programmability.

• Programmability is the foundation for everything else.

• L3 needs to achieve scalability and privacy.

• Channels connect everything.

• BTC is everywhere.

• Web5 > Web3