By Rebbeca Ren (Chef at Crypto Kitchen in New York)

The explosive growth of Ordinals and BRC-20 in late 2023 demonstrated the strong demand for new assets native to the Bitcoin chain.

However, this craze also exposed the inherent limitations of the Bitcoin network: high transaction fees and slow processing speeds severely restricted the circulation efficiency of on-chain assets.

Therefore, Bitcoin's Layer 2 solution, which moves some transactions to off-chain processing to increase transaction speed, reduce fees, and expand network application capabilities, is expected to solve the obstacle.

Today, there are even hundreds of Layer 2 (including sidechains) competing fiercely on the market. Two years ago, only old protocol projects such as Lightning Network, Rootstock, and Stacks were quietly cultivating.

In addition to the popularity of on-chain assets that have made developers smell opportunities, the famous blockchain developer Robin Linus proposed in October last year to introduce programmability to the Bitcoin network through BitVM, providing more developers with a technical blueprint for building Layer 2.

The revolutionary nature of BitVM is that it can use the Bitcoin network for verification without the need for upgrades or forks, and without placing additional burden on the Bitcoin network. Layer 2 is responsible for complex calculations while inheriting the security of the main network. This innovation is so significant that many Layer 2 projects have been built based on BitVM. For example, Bitlayer uses BitVM as a core component and uses layered virtual machine technology to create a second-layer solution.

Crypto Kitchen recently invited Zulu Network, one of the core contributors of BitVM's GitHub code repository, to be a guest at BIT FM Space. Co-founder Luke had a frank chat with us about his experience in building Layer2.

BIT FM Bitcoin2024 Nashville Space EP17：https://x.com/bitfm2024/status/1820459746941661235

Prior to founding Zulu, Luke worked at JP Morgan, Nomura Securities, and OKX. With his extensive experience in traditional finance and cryptocurrency exchanges, he keenly captured the huge potential of BitVM.

The moment he saw the BitVM white paper, he and his team believed that BitVM would completely change the nature of Bitcoin, allowing it to evolve into a truly programmable currency without having to compete with other blockchains, because all decentralized applications in the future would be able to be built on the Bitcoin network.

“Ordinals, Brc-20, Runes, etc., all represent the direction of Bitcoin’s development. We see people’s needs, but the limitations of Bitcoin’s native design hinder this, and this is what we are going to do,” Luke said.

Unlike other Layer2 solutions, Zulu uses Dual-Layer and Trust-Minimized BitVM bridge:

The first layer of the two-layer architecture (equivalent to Bitcoin’s Layer 2) is called ZuluPrime, which is built on the zero-knowledge Ethereum Virtual Machine (zkEVM) developed by zkSync’s zero-knowledge (ZK) stack and focuses on providing stable and mature decentralized applications (DApps) and financial services.

This layer of design cleverly solves the complexity problem of directly executing smart contracts on Bitcoin. By introducing the concept of ZK proof, a proof is generated for the execution of all transactions, thereby ensuring the effectiveness of transaction execution and the security of the network.

The second layer of the two-layer architecture (equivalent to Bitcoin's Layer 3) is called ZuluNexus. This layer does not have EVM compatibility, but it supports both UTXO and account types, making UTXO-based smart contract development possible.

This design retains the basic functions of Bitcoin while introducing new features, providing space for developers to innovate.

ZuluPrime and ZuluNexus are connected via an official bridge, enabling fast transfer of assets.

In Luke's view, ZuluPrime is their ticket to enter the Bitcoin Layer 2 track, and the real "killer weapon" is ZuluNexus, because it can focus on the innovation of Bitcoin's original ecosystem and native assets - this is something that most Layer 2s do not have.

“Innovating Bitcoin in Bitcoin’s way, that’s the direction we want to move forward,” he said.

As for the BitVM bridge, it ensures the security and reliability of cross-chain asset transfers between Bitcoin and the Zulu network. This bridge mechanism is designed to minimize the number of third parties that users need to trust, thereby improving the security of the entire system.

In the process of cross-chain asset transfer, BitVM acts as a validator to ensure that all operations are executed according to the predetermined rules. In addition, even if the Zulu network fails or is interrupted, BitVM can still help users retrieve their assets safely. BitVM is similar to a protection mechanism, providing additional security for cross-chain transactions and improving the robustness and trust of the system.

However, while BitVM is capable of trust-minimized verification, it requires a lot of trust or economic incentives in its operation to ensure that parties do not try to cheat each other. Therefore, it is more suitable for large liquidity providers with a large amount of Bitcoin, and is not friendly to small Bitcoin, BRC-20 tokens, Runes or Ordinals providers because the cost of fraud prevention is too high.

So for small amounts of money, Zulu also launched a decentralized ZK bridge: It is worth mentioning that Zulu is the first project to implement ZK proofs based on BitVM on the Bitcoin mainnet, and it has also been recognized by Robin Linus himself, and the Zulu team's code has been merged into BitVM's central repository.

Through this unique architecture, Luke hopes to help developers build DApps at a faster speed and lower cost without compromising on security.

“If something doesn’t solve a critical need for the ecosystem, I won’t do it. I firmly believe that second-layer solutions for Bitcoin are critical to the future of Bitcoin. They solve some of the key limitations of the Bitcoin network, such as scalability, scripting language limitations, and speed,” said Luke.

In early April 2024, the Zulu Network testnet was launched and has been running ever since. It currently has more than 700,000 registered users and has processed more than 12 million transactions. At the same time, Zulu completed a $3 million Pre-Seed round of financing that month, with investors including well-known institutions such as Cryptogram Venture and D11 Labs.

According to Defillama data, as of August 16, 2024, the TVL of the Ethereum ecosystem is $84 billion, and it once exceeded $170 billion at its peak. However, the current TVL of the Bitcoin ecosystem is only $600 million, less than 2% of Ethereum's TVL. This data reflects the huge development space of Bitcoin in the DeFi field.

With the continuous emergence of infrastructure builders like Zulu Network, Bitcoin is gradually evolving from simple digital gold to a feature-rich, programmable currency network. Let us continue to look forward to the direction of the Bitcoin ecosystem.

Finally, I will end with a quote from Luke that I really like: “I hope to see demand return to Bitcoin, which has been lost to some extent, has moved to other networks, and is now coming full circle.”