On the evening of May 16, "Geek Web3" invited guests from Bitlayer, CKB, and Bool Network to discuss many issues related to Bitcoin Layer 2 on Twitter.
The following are the key points shared by Baiyu, partner of CKB Eco Fund, in this Space, excerpted from the article "Dialogue between Bitlayer, CKB and Bool Network: A Great Debate on Different Schools of Bitcoin Layer 2" (Part 1 and Part 2) by "Geek Web3".
Q1: What do you think of the current development of the Bitcoin ecosystem?
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 or 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 very 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 talking about the entire Bitcoin ecosystem, 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 basically they can all 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 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-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 Assets. 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 Assets 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 Western world. 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.
Q2: What conditions should BTC Layer 2 meet? What is its significance or value?
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 the opinions are definitely different. Regarding our CKB's views, CKB architect Jan wrote a tweet at the beginning of the year. The core idea is that the Bitcoin ecosystem should be a flexible layered currency system. Bitcoin is gold, like a central bank, and then it is distributed. 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 values of PoW and the design of UTXO. We think these are the most important innovations brought by Satoshi Nakamoto or Bitcoin, which did not exist before.
The above features can bring an experience close to the first layer of Bitcoin, which is more important in our opinion. Others are 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, and expand Bitcoin a little bit so that BTC can become an asset issuance platform, but if we go further, we think it may damage the security and stability of the entire Bitcoin system.
Q3: What problems do Bitcoin layer 2 projects need to solve for success? 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 something like 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, too many people are returning to Web2, basically just to get together and make a big deal. Many people react by saying that technology is not important. 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, 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.
Q4: Bitcoin is actually not suitable as the first layer supporting the second layer. Where are the obstacles it poses to the second layer?
Baiyu: I think the biggest obstacle is that Ethereum is too successful, and many people have been impressed by Ethereum’s ideas. Ethereum was very avant-garde back then, breaking through the Bitcoin fundamentalist community and telling everyone that blockchain can be used as a smart contract platform. Then it abandoned UTXO and used an account model.
Although Ethereum seemed very avant-garde back then, after so many years, we have to find that the most suitable application on Ethereum is financial applications. Even the founder admitted that this is a highly financialized world. It seems that the only non-financial large-scale application is ENS. Then ENS was pulled down by Vitalik Buterin’s words at the time, which is the most ironic thing.
At present, when we want to build the Bitcoin ecosystem, we still habitually move things from Ethereum. Everyone is working hard to build the Bitcoin ecosystem, and we don’t know when they will be swayed by the words of the existing forces in Ethereum. A few days ago, I met a friend and wanted him to join the North American team of CKB, but he has been in the Ethereum community for a long time. After listening to my ideas, he finally asked me a question: These things are all on Ethereum, why go to the Bitcoin ecosystem?
In fact, many elites have the same idea as him, thinking that all the things that Bitcoin ecosystem does, Ethereum has, so why do we need to go to Bitcoin? Why do we need to start all over again? I am actually tired of hearing such questions, so I think the most important thing in this round is to think about how to use the Bitcoin ecosystem to do things that the Ethereum ecosystem cannot do. Ethereum changes every day, and in the end it is still Staking and Restaking. Do we still have to do the same in the Bitcoin ecosystem?
I think getting rid of the Ethereum-style ideological stamp is the key, and it is also the biggest problem hindering the flow of talent into the Bitcoin ecosystem. How to attract the best talents and the smartest minds to build the Bitcoin ecosystem and continue to advance the blockchain.
Q5: How to solve the security issue of the withdrawal bridge?
Baiyu: For CKB, we divide assets into two categories, one is Bitcoin itself, and the other is derivative assets issued on Bitcoin, such as BRC-20 or various runes. We have done internal research and found that if Bitcoin does not undergo a hard fork or soft fork, the most ideal bridge/second-layer solution for verification capabilities is BitVM, but it will take a long time for BitVM to land, so it can be assumed that there is no cryptographically secure way to allow Bitcoin to safely move back and forth between the first and second layers in the short term.
In this case, we think that Bitcoin cross-chain bridges are prone to two extremes. One is extreme centralization, such as a licensed custodian like a financial institution. Bitcoin can be stored with them, and large investors can rest assured because it is regulated by law. The representative of this type of solution is actually wBTC. There should be a market value of tens of billions of wBTC on Ethereum, right? It was made by the company BitGo.
Another extreme cross-chain bridge solution is to decentralize as much as possible. However, the difference between bridges is very large. Don’t think that they are all the same thing when you hear the word “bridge”. The difference between bridges can even be greater than the difference between bridges and non-bridges. You must clearly understand the degree of trust in the bridge. What can be achieved in the end is a model similar to PoS, which relies on economic security measures to approach cryptographic security, that is, if the witness does evil, it can be punished.
But in fact, all the modes of Bitcoin cross-chain bridges have been basically used in various cross-chain bridges between BTC and ETH. Everyone has already thought of many ways to get Bitcoin out and then go to the Ethereum chain. Various solutions have been thought of long ago, and we don’t need to think about other things. Among them, the more decentralized solution I see is tBTC, but tBTC may not be so easy to use and is not particularly widely used.
We at CKB are actually also in talks with Bool Network about how to cooperate, and we are also working on a solution similar to wBTC. Another one is similar to RGB++ or other UTXO-like asset protocols. This type of asset can be transferred trustlessly between CKB and other UTXO public chains through isomorphic binding.
As for whether homogeneous binding can be combined with DLC, or some progress on the BitVM side can allow it to be verified on BTC, finally we will use RGB++ to issue an RBTC, something similar to Wrapped BTC. We are considering this type of solution, and there seems to be some hope, but we cannot draw a conclusion now.
So everyone should still pay attention. The bridge is a honeypot with so much money locked in it, and there is also a risk. In addition to hacker attacks, is it possible that, like Multichain, the team suddenly encounters an irresistible external force and the money is gone?
Q6: Both the Lightning Network and the RGB Protocol were once highly anticipated, but the results in terms of ecosystem construction have been disappointing. What do you think about this?
Baiyu: One of our favorite Bitcoin routes is the Lightning Network. In the words of Cipher and Jan, the Lightning Network is the beacon of the Bitcoin world. We really want to promote things related to the Lightning Network, but the Lightning Network has been built in the Bitcoin ecosystem for five or six years, right? A big company like Lightning Labs is pushing it, but the progress has been very slow. I think this is the problem shown by the Bitcoin community, so more catfish teams like CKB are needed.
We saw that CKB proposed to build its own Lightning Network, and then RGB++ could be reused in the Lightning Network. After that, Lighting Labs also accelerated its development. We believe that the Lightning Network should become more open, rather than concentrating the right to speak in the hands of a few centralized companies, but become an open standard that can be compatible with any standard-compliant UTXO asset on the Bitcoin layer. However, Lighting Labs is now more focused on developing Taproot Assets, and the Lightning Network infrastructure will first be compatible with things like Taproot Assets, and it has not become completely open.
We hope that the Bitcoin ecosystem can continue to promote the openness of technical standards such as the Lightning Network. In our opinion, it is currently more To B than directly To C. A large number of users cannot stand the operating experience of the Lightning Network, and the latter sacrifices the convenience of UX for security. To be convenient, you have to give up some security. There are many service providers similar to financial institutions that survive in the Lightning Network ecosystem. We can see that such institutions have made some compromises in security, but their products are very convenient, such as LSD, and compliance issues are also considered in the design of the solution. These are the progress I have learned about the Lightning Network.
Then CKB’s own lightning network will be on the testnet in mid-June, and then we will start some tests. We look forward to everyone testing some of our things. We hope that the lightning network plus RGB++, plus PassKey wallets like JoyID, can really make people use it on a large scale.
Regarding the second topic, RGB, I think when we discuss it, we should directly discuss the two things it contains. One is CSV (client-side verification), which is a very important expansion idea in the Bitcoin community. Unfortunately, CSV has been buried and not discussed much. More people still want to use Ethereum's idea to expand Bitcoin, but when expanding Bitcoin, it is not to build another chain outside the Bitcoin chain, but to build a P2P network outside the chain.
The core of the Bitcoin community is P2P, which is a point-to-point connection that allows us to directly verify important things with each other. CSV is basically such an idea, that is, I build a P2P network outside the Bitcoin chain, so that everyone can spontaneously verify the validity of the transfer between two people. In order to achieve this, there is another core concept, which is one-time sealing, using UTXO on the Bitcoin chain as a Single-Use Seal.
The above two points are the core points of the RGB protocol, and they can be used to write many articles. You can regard CSV as a service, and then you can make a CSV platform in the form of a dApp. CSV can be done in the form of a service. Of course, the core thing that CKB does based on RGB is to create RGB++. We regard CKB as a client of RGB outside the chain, and security can be guaranteed through isomorphic binding.
In fact, there is another bold idea, which is that CSV based on Bitcoin may not be the best choice, because Bitcoin's verification capabilities are limited, but you can do CSV on CKB, including combining Nostr on CKB to do some things. We may release a technical solution in the next few days, that is, how to combine Nostr with CKB, and then encourage many project parties to do some social-related things.
In short, let me summarize it. The Bitcoin community has the idea of RGB and the idea of Lightning Network. These are excellent protocols in the Bitcoin community and should be carried forward. Combining these things can make things that I mentioned earlier that cannot be done on Ethereum. Ethereum wanted to do Lightning Network back then. If you are someone who entered the circle early, you should know that Ethereum has something called Raiden Network, but later it was stopped and completely abandoned. But this is something that Bitcoin can do, so why don’t we continue to move forward in this direction?
And as far as I know, there are also some projects on Ethereum that are doing CSV client validation, but these things actually come from the Bitcoin community, so we can carry it forward.
In fact, today's Lightning Network is no longer used simply for small payments. No one uses Bitcoin for payment now. People still use it for asset storage, and retail investors don't have many Bitcoins. The real possible scenario is that I think the Lightning Network will become an infrastructure that will be compatible with various asset protocols issued on Bitcoin.
For example, if you use RGB++ to issue USDT, then this USDT can enter the Lightning Network, so the Lightning Network is more like a highway, you can allow other cars to enter as well. Originally, there was only one type of car in it, which was Bitcoin, but now other cars can also enter. This is its biggest change.
The second point I think is more important is that Bitcoin’s lightning network is still not Turing complete, but on CKB, the lightning network can add some conditions, at least to make the lightning network compatible with multiple asset protocols, and then you can complete the swap, and even you can do DeFi in the lightning network. There is a lot of room for imagination here.
Q7: If Bitcoin Layer 2 wants to reach the scale of Ethereum Layer 2, how many problems still need to be solved?
Baiyu: I think people have actually lowered their expectations for the Bitcoin ecosystem. The Ethereum ecosystem has been developing for many years and has explored applications that are suitable for its technical architecture, but the Bitcoin ecosystem still needs a longer time to build a prosperous ecosystem. So we will stand on the shoulders of Ethereum and learn from it in terms of ecosystem construction. I think this is an important point.
Of course, we also need to explore some of the original Bitcoin things, such as what can UTXO do? For example, we are exploring whether UTXO is more suitable for NFT-related things, because it is originally parallelized and is owned by the user personally, not an asset owned by a smart contract.
Then, in the DeFi track, UTXO has a calculation process that is done off-chain in Bitcoin. After the calculation is done off-chain, the result is put on-chain for verification. The off-chain calculation-on-chain verification technology architecture is more suitable for intent and order book. Ethereum was the first to come up with the idea of an order book trading platform, but their order book was not ideal. In the end, AMM automated market makers came out, but this may not be the case in the Bitcoin ecosystem. These all require a longer time to explore, and then they need to go to the market.
Q8: In the current Bitcoin Layer 2 ecosystem, which projects do you admire the most in terms of technology or overall narrative?
Baiyu: What I appreciate most is of course the CSV route represented by RGB and RGB++, and the fast payment route such as the Lightning Network. A feature of these two routes is that they both expand capacity outside the chain, and then rely to a certain extent on the security of Bitcoin UTXO and the very limited capabilities of Bitcoin scripts. This is something very unique in the Bitcoin ecosystem.
We always want to change Bitcoin to be like Ethereum, such as the verification capability of smart contracts, and then we can do many, many things. Everyone will always explore how to do more things off-chain. Then I also hope that more teams can explore the road of innovation. We always envy the emergence of Uniswap, which can be written with 500 lines of code, but in fact, there were other DeFi protocols before Uniswap, and many more people made many attempts, and finally Uniswap came out.
I think the Bitcoin ecosystem is now at such an eve. There are a large number of innovative ideas, but they have not been fully realized or commercialized and brought to the market. In fact, many such opportunities can be found. This is my opinion.