Bitcoin L2 seems to have gained attention "out of the blue". Although the development is a bit "over the top", "this is a very new market and there are a lot of opportunities".
Interviewed: Dominik Harz, Co-founder of BOB
Interview and article: Wendy, Foresight News
Despite the conflict with Bitcoin "fundamentalists", the rise of the new Bitcoin ecosystem has become one of the trends that cannot be ignored in the ever-changing crypto market.
At the latest global industry conferences, including Token 2049, Consensus, and Foresight 2024, "Bitcoin Renaissance" is one of the topics discussed. Perhaps when Oridinals came out and attracted huge attention and participation, it had already foreshadowed that the Bitcoin ecosystem would undergo more disruptive changes. Subsequent developments have shown that many Bitcoin ecosystem projects have begun to sprout during this period.
Capital injections are accelerating these changes.
In March this year, the European-based BOB (Buid on Bitcoin) team officially announced that it had received $10 million in financing, hoping to launch the first Bitcoin layer 2 compatible with Ethereum. The Bitcoin L2 track, which was once ignored by investors, has not only taken shape, but also started to see differentiated competition. Almost at the same time, Babylon, which is built on the Bitcoin ecosystem, also officially announced that it had received a new round of financing of $70 million.
The Bitcoin ecosystem seems to be getting interesting. But is the so-called "Bitcoin Renaissance" just a narrative?
For Dominik Harz, co-founder of BOB, the answer is no.
The Bitcoin Renaissance Is More Than Just a Narrative
“The cryptocurrency market is largely driven by narrative. But I think there needs to be a very real foundation behind (the narrative). Bitcoin’s market cap is about three times that of Ethereum. At the same time, on Ethereum, all the innovation and new user absorption is focused on L2 solutions, such as Arbitrum and Base, which are doing very well in this regard. So if Bitcoin’s market cap is three times that of Ethereum, then the L2 solutions focused on Bitcoin should be at least three times that of Arbitrum and Base. This makes the resurgence of Bitcoin very interesting.”
In a recent interview, Dominik Harz explained the logical basis of the "Bitcoin Renaissance" to Foresight News.
However, the above facts have existed for a long time. Why did investors only start to change their attitudes in the last one or two years? Even as the co-founder of the BOB project, which has received much attention in the Bitcoin L2 track, Dominik Harz seems to find it difficult to fully explain the reasons for the change in capital trends.
Everything seemed to happen just "all of a sudden".
Bitcoin L2 suddenly gains attention
“We started working on the (Bitcoin) L2 project in August last year, but no one really cared at that time. Ordinals were in the early stages, Runes didn’t exist, and BRC-20 had just appeared. It wasn’t until February of this year that people really started to pay attention. The biggest event for us was ETH Denver in March. At that time, we held the Bitcoin Renaissance event with Babylon. Suddenly, everyone started to pay attention. Now there are various different Bitcoin L2s on the market, and new Bitcoin L2s are everywhere.”
But Dominik Harz admits that "this is a bit too much."
“Because you can’t verify anything on the Bitcoin (network). That’s why we say we are hybrid L2, because we want to get to a stage where it can be verified on Bitcoin, but right now it’s verified on Ethereum.”
Different solutions to the ecosystem's native limitation of "L2 cannot be verified on Bitcoin from a technical perspective" have become the key to the current differentiated competition of Bitcoin L2.
Market competition and opportunities coexist: Seeking breakthroughs amid controversy
“There has to be a trade-off on how to deal with this current limitation. One option is to wait for mainnet launch, wait until we have a working version of BitVM or we have an OP-CAT merge. But we don’t want to wait for mainnet launch, we want to be able to build things with Bitcoin (network) now. So, we thought, what is the next safest thing to do now? That’s why we decided to launch BOB as an OP stack rollup on Ethereum. We now have the same security assumptions as Base, Arbitrum or Optimism. We think this is a pretty reasonable trade-off in terms of security. We are very pragmatic about our approach. We are now launched on mainnet. So we are now building the ecosystem. Next, our biggest focus is to have working applications that can unlock new use cases on Bitcoin.”
Finding new use cases is a common challenge faced by all Bitcoin L2s—or even all L2s. Building new types of applications on the Bitcoin native system "may encounter some problems due to the limitations of the UTXO model and the problem that transactions on Bitcoin may be quite expensive." Another common challenge that almost all L2s may face is how to create a user-friendly experience. Currently, the way BOB users use it is to automatically complete all operations in the background through account abstraction technology, so that users can register on the front end through email or Telegram accounts without creating a wallet.
On the one hand, Bitcoin’s huge market share provides huge potential for the development of L2 based on Bitcoin. “We believe that Bitcoin is the best place to build a fundamental new financial system. It is the most resilient in the entire crypto ecosystem. That’s why we want to build this new ecosystem on Bitcoin, rather than building L2 based on other chains such as Ethereum or Solana.”
“Compared to Solana or Ethereum, the Bitcoin community is focused on bringing use cases to real people. What BOB is trying to do is support that desire and goal to get more people on board. By bringing better tools to builders so they can build more interesting applications. By building more tools to make it easier to get started (with Bitcoin). For example, maybe people don’t want to care about managing their seed phrases. Maybe signing up via email, Google, Apple, Facebook, social accounts is a way to get a lot of people on board, and this way can be a temporary solution until users understand enough about cryptocurrencies and are ready to manage their own assets. There are already some good tools in these areas, but they should be centered around Bitcoin assets as stability. Then, some stablecoins can be borrowed to hedge against market fluctuations, such as using Bitcoin loans to buy cars. Focus on these real-world use cases that will still exist even when no one is paying attention to cryptocurrencies. When all the meme coins collapse in the bear market, we hope that there will still be some real use cases. We think they will be centered around Bitcoin.”
On the other hand, in addition to finding new use cases and providing users with a safe, worry-free and labor-saving experience, the development of the Bitcoin ecosystem also faces a challenge, which is to confront another powerful voice within the Bitcoin ecosystem - this may be one of the unique obstacles that distinguish the development of the Bitcoin L2 project from Ethereum and other decentralized network L2 projects.
In Dominik Harz's view, "this is a healthy debate," "One of the core values of Bitcoin is its resilience and extremely cautious attitude towards functionality. But at the same time, I think innovation is also very important."
“The positioning of BOB is that we can build a Bitcoin second layer without making any changes to Bitcoin itself, and do interesting development on it, interact with Ordinals, and interact with the Bitcoin chain. This is also the reason why we promote merged mining, to provide miners with an additional source of income, because we want to keep Bitcoin alive and give back to the Bitcoin (community). Similarly, this is why we promote BitVM because it does not require changing the opcode structure of Bitcoin.”
“I think there will be room to eventually change Bitcoin (the network), especially if a ZK technology solution can be developed on top of the Bitcoin network,” Dominik Harz told Foresight News, saying that this would be very powerful and “allow you to move to a stronger security model.”
At present, the development of Bitcoin L2 is still in a "relatively early stage". It is a very new concept and "has not gained enough power yet". But at the same time, from the perspective of the project founder, this stage also means "this is a very new market with many opportunities".
“There are many different approaches (to build Bitcoin L2), we are Optimism’s rollup, and some people are doing ZK rollup. There are also some sidechains that have not yet been well integrated with Bitcoin. This is very good for Bitcoin users because there are different companies competing for market share and trying to advance the underlying technology (Gexin). I think in the next year or two, we will see several (different) projects become leaders in this field and push it (further) forward.”
