Bitcoin L2 carries the mission of OrdFi and unlocking Bitcoin liquidity, but how to implement Bitcoin L2 is a new topic in the crypto industry.
Written by: NingNing
The birth, growth and popularity of Ordinals, BRC20, BRC420, Atomicals and other inscription protocols in the past 23 years have completely updated the connotation of the Bitcoin ecological concept.
When the Bitcoin ecosystem is mentioned, the first thing that comes to mind for industry professionals are the Lightning Network, the side chain LiquidNetwork, the client-verified smart contract RGB, and other high-end protocols.
After 23 years of the perfect storm of inscriptions, now when people mention the Bitcoin ecosystem, various images of inscription assets will emerge in everyone’s mind.
If we compare the evolution of Bitcoin ecology in 23 years to the ecology of the biosphere, the early Sub10K inscription NFTs that were disorganized and meaningless were like fungi and microorganisms that grew arbitrarily on empty soil; Yuga's TwelveFold, the first inscription token of the BRC20 protocol ORDI, and Bitcoin Frog NFT were like new plants that broke out of the soil on the substrate; the various MeMe inscriptions since October 23 were like wild weeds that grew wildly; and this wave of deep adjustments before the Spring Festival was like a wildfire that burned away the weeds, and application-based inscriptions began to emerge.
As of January 2024, the Bitcoin ecosystem has become a prosperous and lively new field of the crypto industry. During this period, Bitcoin L2, along with Bitcoin VM, has become a prominent part of the Bitcoin ecosystem.
The market has two basic expectations for the functions of Bitcoin L2: OrdFi (inscription DeFi) and unlocking Bitcoin liquidity.
OrdFi (OrdFi). Benny's Trac team used Taproot script to implement the Swap function of OrdFi. But its interactive experience is far behind that of DEX built on EVM.
Under such circumstances, OrdFi's other solution, Bitcoin L2, has received more attention from the market.
Taking the Map protocol as an example, users can cross-chain the BRC20 inscription to the Map Relayer network through Map’s ZK light node cross-chain bridge.
Different from the common Relayer in cross-chain bridges, the Map Relayer network adopts the PoS consensus mechanism and supports and is compatible with EVM.
After BRC20 assets are cross-chained to the Map Relayer network, users can trade BRC20 assets just like trading ERC20 tokens on DEX.
Unlocking Bitcoin liquidity. As shown in Figure 1, the current Bitcoin outflow value is $9.139 billion, accounting for only ~1.08% of Bitcoin's total market value. Ethereum's outflow value is $5.711 billion, accounting for 1.8% of Ethereum's total market value. Bitcoin's outflow value ratio is 66.66% lower than Ethereum's.
Moreover, the main channels for the outflow of Bitcoin value at present are WBTC and REN protocols, both of which rely heavily on trust in centralized entities.
The industry expects Bitcoin L2 to unlock more Bitcoin liquidity in a more trustless, verifiable and transparent way, at least to the level of Ethereum's outflow value ratio.
The industry has a basic consensus on the expected functions of Bitcoin L2. However, there is no consensus on how to implement Bitcoin L2. The options are:
Classical solution: state channel, client verification, side chain, OmniLayer;
New solutions: ZK light node, oracle + light node, Rollup+DA, MPC multi-signature mechanism. These new Bitcoin L2 solutions are very similar to the cross-chain bridge solution.
The meta-problem of blockchain is to solve the trust problem between Alice and Bob; the meta-problem of cross-chain bridge is to solve the trust problem between chain A and chain B; the meta-problem of L2 is to solve the trust problem between L1 chain and L2 chain. They are essentially the same problem, that is, how two entities can reach a consensus with trust.
As Crypto Vedo said, the essence of L2 is a cross-chain bridge. The cross-chain bridges that support VM in the relay layer, such as Map Protocol and ZetaChain, are already difficult to clearly define as cross-chain bridges or L2.
The characteristics of Bitcoin’s L2 are very different from Ethereum’s L2 in one respect:
Ethereum's L2 has the luxury of rolling up all state data in batches to the Ethereum mainnet for storage without worrying about accelerating Ethereum's state expansion.
The first principle of Bitcoin L2 is that it cannot cause consensus overload on the Bitcoin mainnet. Therefore, most classical solutions choose off-chain expansion solutions to minimize the load pressure on the Bitcoin mainnet.
Among the new solutions, the ZK light node solution adopted by the Map protocol and Rollup+Celesita DA+ Bitcoin network as the asset settlement layer solution can better balance the relationship between scalability, security and the load pressure on the Bitcoin main network.
In conclusion, Bitcoin L2 carries the mission of OrdFi and unlocking Bitcoin liquidity, but how to implement Bitcoin L2 is a new topic in the crypto industry. Due to the high degree of isomorphism between cross-chain bridges and L2, new Bitcoin L2 based on cross-chain bridge solutions such as the Map protocol may become an important direction for industry exploration.
#L2 #brc20aodo $ORDI $BTC $ETH
