Debating Bitcoin L2: A Conversation with Bitlayer, CKB and the Bool Network (Part I)

Author: Faust

Host & Guests: Jomosis, Web3 Geek; Kevin He, Co-Founder of Bitlayer; Baiyu, CKB Eco Fund Partner; Kai, Researcher of Bool Network

1.Jomosis: Please introduce yourself briefly?

Kevin: I am Kevin, the co-founder of Bitlayer. I have been mainly engaged in work related to public chains and Layer2. I have launched a total of 4 public chains and have also worked on Ethereum ZK-Rollup and MPC asset management platforms. As for Bitlayer, we are committed to turning BitVM from a concept into a reality, solving the state verification problem of Bitcoin Layer 2 on Layer 1, and building a trustless bidirectional cross-chain bridge based on this verification capability. At the same time, we hope to support multiple VMs, not just limited to the EVM ecosystem, to provide developers and users with a better experience.

Baiyu: I am Baiyu, a partner at CKB Eco Fund. As we all know, CKB is a PoW and UTXO public chain. It transformed into a Bitcoin layer 2 solution since the end of last year. The core concept is that CKB is originally a UTXO smart contract platform, which is fully compatible with Bitcoin and also operates on a POW consensus mechanism. Additionally, we have proposed RGB++, which defines the concept of homogeneous binding. Without the need for cross-chain bridges, UTXO assets such as RGB, Runes, Atomicals, etc., can be bound to CKB or other UTXO chains.

Kai: I am Kai, a researcher at Bool Network. Bool Network is not a traditional Layer2 solution, but a third-party infrastructure that provides trusted and secure cross-chain mechanisms for Layer2. We ensure the security of bridging assets between L1 and L2 through MPC, TEE, our own privacy-preserving circular VRF, trusted verification, and other technologies. We also provide asset redemption functions such as mandatory withdrawal for Bitcoin L2.

2.Jomosis: What is your view on the current development of the Bitcoin ecosystem?

Kevin: First of all, I think most of the BTC layer 2 models that can be proposed have been covered. The core issue is to make people believe that your layer 2 is secure enough, which is crucial. In terms of technical routes, there can be different paths such as on-chain verification and off-chain verification for BTC. If it is on-chain verification, it means verifying Layer 2 on the Bitcoin layer. If it is off-chain verification, there are different methods such as client verification, isomorphic binding, multisig, and POS. Overall, compared to half a year ago, there have been more technical schools emerging.

Regarding the development situation of the Bitcoin ecosystem, because we ourselves are also in the process of financing, we can feel that most of the major players in the capital market have already taken action, and there are relatively few institutions that have not taken any action. In the West, especially in North America, large capital providers often only invest in one direction or one project. From the perspective of financing, there will not be many important new players in the Bitcoin ecosystem. Institutions that should have taken action have already made their investments, and new project parties may not be able to raise funds.

The current situation is much clearer than six months ago. From the perspective of users or market performance, we may be entering an adjustment period. There are some public chains and BTC Layer2 that do not have strong user data and ecosystem after going live. What should the Bitcoin ecosystem do next? Besides the simple narrative of assets, can we come up with new stories? In the new cycle, can the old stories still hold true? Should there be new narratives, but these still need to be verified by the market.

Baiyu: I feel like the trend is becoming more and more obvious. But it seems like the sentiment of retail investors in the secondary market is completely opposite to that of the primary market. I also feel it in CKB. Previously, the Bitcoin ecosystem was mainly about fair launches, with retail investors playing a major role and only a few institutional players. The heat in the East was much higher than in the West, and the heat of retail investors was higher than that of VCs. But now it feels like everything has reversed. Firstly, fair launches, such as runes or anything else, don't seem to perform as well as expected before.

The second point is the West, now some EVM-compatible BTC Layer2 in the East have begun to go on the exchange, and the performance is not particularly good after listing, but we see overseas big capital Multicoin and polychain, they have supported some EVM-compatible BTC Layer2, we know BoB, Botanix, and recently Arch.

I think in the primary market, people have already recognized that the Bitcoin ecosystem in this round is a beta-level opportunity, a great opportunity, and everyone is positioning themselves, and many projects are also going online one after another. I think this is very clear.

Then, let's talk about the entire Bitcoin ecosystem. I agree with what Kevin just said. More and more mainstream players are entering the scene. The prerequisite for mainstream players to enter is that the logic within the Bitcoin ecosystem must be convincing. Now, different schools of thought have their own set of logic, which is basically defensible.

on-chain the verification type, that is, if you want to move the practice of Ethereum Layer 2, then rely on BitVM, and then do OPR and ZKR based on BitVM, which can introduce a lot of long things in the Ethereum Rollup ecosystem, and it will not be as rough as some Bitcoin layers in the past, and it will be a long signing bridge, even if it is a bridge in the future, it must be Decentralization as much as possible, even if it can't do ZK-level security, you can also ensure security through economic games.

There is also the essence of client-side verification CSV for tokens like CKB, but different client-side verification schemes can be divided into different levels according to security levels. In this regard, CKB has the idea of RGB++, and heavyweight players like Lighting Labs have issued assets using Taproot. Of course, this technology is still in its early stages. Lighting Labs is obviously much more active than the previous very Zen state, and is trying to reuse the assets issued by Taproot in the Lightning Network, which is similar to our approach. We also hope that RGB++ assets will enter the Lightning Network.

I think from this perspective, the Bitcoin ecosystem is a great opportunity. In the primary market, it is a definite matter for capital and Westerners. Recently, our UTXO Stack has received positive feedback when seeking financing from Western institutions. Overall, I believe the Bitcoin ecosystem is becoming clearer.

Kai: I believe that **from a technical perspective, everyone's solutions are generally clear. People's definitions of Bitcoin Layer2 tend to be more standardized and clear, such as being able to inherit some features and settlement mechanisms from the Bitcoin mainnet, and having functions like forced redemption similar to Ethereum Layer2. There may already be a consensus on what is and what is not Bitcoin Layer2.

**3. Jomosis: In the eyes of everyone, what conditions should be met for the second layer of BTC? Guests can introduce to you the second-layer reference index of Bitcoin in their eyes. In addition, what is the meaning or value of Bitcoin layer 2 in your eyes? **

Kevin: If I look at it now, I'm probably looking at it a little broader. Theoretically, any one that augments a certain capability for a layer, such as performance, decentralization, or TPS, can be considered a layer two, and some people even think that CEX is also a layer two. As for the conditions that a Layer 2 should meet, I would think that it can be a good Layer 2 as long as the user agrees with its security, which may not be that complicated.

We'll take a look at the so-called standards proposed by Bitcoin Magazine, which require using BTC as the gas token, and then Bitcoin as the dependency. The third condition is that if Layer2 issues tokens, it is preferable for them to be Bitcoin-related tokens. Different people have different opinions on these three conditions.

We at Bitlayer want to perform verification on the BTC blockchain and consider settlement on the BTC blockchain to be very important. If it is a team working on sidechains, they would consider using BTC as gas to be the most important condition.

Overall, the so-called "conditions to be met" are really subjective. Each project or individual has different opinions. We are more traditional or technically orthodox, following the widely accepted consensus on the security of the second layer. Therefore, we believe on-chain verification is crucial.

Baiyu: This is the interesting part of the Bitcoin ecosystem. I think Bitcoin L2 does not have a clear standard. It's not like Bitcoin Magazine says how it should be. Since there are so many technical solutions, each solution has its own focus, and different opinions are certain. Regarding our view on CKB, CKB architect Jan wrote a tweet at the beginning of the year, and the core idea is that the Bitcoin ecosystem should be an elastic layered currency system. Bitcoin is like gold, like the central bank, and it is distributed, so Bitcoin will flow to wherever it needs to go.

So CEX is also the second layer of BTC, and the Lighting Network is also the second layer. Bitcoin can be used for payment within it, and so can sidechains. Therefore, I think that meeting the above conditions is to some extent the second layer of Bitcoin. Its core is a monetary system. You have to acknowledge that Bitcoin is a major payment tool for you, and you have to acknowledge the value of this currency. This is the most important thing.

Furthermore, we have some additional perspectives. What we value most are the design philosophy inherited from Bitcoin and its values, such as the value of PoW and the design of UTXO. We believe that these are the most important innovations brought by Satoshi Nakamoto or Bitcoin, something that did not exist before.

The above features can bring an experience that is close to Bitcoin, which is important to us. There are also some sidechains like Liquid that use UTXO and extend some opcodes. Although it is a consortium chain, it still wants to maintain some consistency with Bitcoin, which is what we are concerned about.

In summary, since Bitcoin is a currency system, it is best not to change frequently like Ethereum, and there is no need to add unnecessary things. It would be better without hard forks and soft forks. Of course, we can use Bitcoin UTXO as a colored tool to issue colored coins and other assets based on it, slightly expanding Bitcoin and making BTC an asset issuance platform. However, if we go further, we think it may compromise the security and stability of the entire Bitcoin system.

"Kai: The views of the previous two teachers on Layer2 are quite broad, which belongs to the general sense of Layer2. However, my understanding of Layer2 is a little different. First of all, it should not have its own native token (usually referring to Gas Token). You cannot say that you have issued an asset and then mapped Bitcoin to it. This is a so-called Layer2, but it is not."

Then secondly, your security and trustlessness need to be ensured by Bitcoin, and you can build your own execution environment on top of it. For example, the second layer further expands on the limitations caused by Bitcoin's non-Turing completeness, allowing you to do more meaningful DeFi or asset protocols on top of it.

So I think there are two points here, one is the lack of its own native token, and the other is the lack of its own independent consensus system. Only when these two points are met can it be considered a true Layer 2. Furthermore, speaking in more depth, the Bitcoin Layer 2 can activate some existing scenarios, such as digital assets. Currently, after you hold a large amount of Bitcoin, you cannot directly interact with some DeFi protocols like Ethereum, and you may have to go to a centralized exchange (CEX) to do so. However, this detaches from the trustless and decentralized environment, and there are many security risks. But if we can achieve a true Layer 2, we can create a more prosperous application ecosystem.

4. Jomosis: The next question is to ask the guests about their understanding of entrepreneurship itself. What do you think are the problems that need to be solved for the success of Bitcoin's second layer projects? And is technical narrative a necessary condition among them?

Baiyu: I think there are many conditions required for entrepreneurship. It is a matter of life and death, and it is very accidental. Then, doing the Bitcoin Layer 2 is actually doing the public chain. If you do the public chain, you need even more things. You are not just doing a project, you are doing an entire ecosystem. You also need to expand it because the public chain is like a digital community, it is a very large community. Here, there are various things like governance culture, which are more complex than general entrepreneurship.

Of course, technology is very, very important. Without technology, the entire blockchain industry would not exist. Bitcoin has a genius design. It invented blockchain and the PoW consensus mechanism, transforming our digital messages into money. This is a groundbreaking achievement. Before Bitcoin, we had centralized banking systems that mapped fiat currency to money, relying on centralized issuers. However, Satoshi Nakamoto created something completely new with BTC, starting from 0 to 1. Certainly, there are other disciplines involved here, but technology is a key factor.

So sometimes I feel that there is too much regression towards Web2 in this cycle, basically it's about accumulating and speculating, and many people reactively say that technology is not important. I don't agree with this point of view. Without technology, there would be no Web3, and there would be no progress. But technology should not be the legitimacy source for various projects to be valued at hundreds of millions of dollars in the seed round, because it's like the emperor's new clothes, and I may oppose that viewpoint.

But from the experience of the CKB team, in addition to technology, it definitely needs market and marketing, and needs to meet the needs of the market. I think this is also what the Bitcoin community should reflect on. If Bitcoin insists on its original doctrine, only recognizes Bitcoin and adheres to that idealistic ideology, people will eventually find that Ethereum can create EVM, account model, POS, and a bunch of DEX, and everyone is striving to meet the needs of users, and people will easily forget about Bitcoin.

But this round of Bitcoin ecosystem has begun to accept these changes and meet market demands, so I think apart from technology, it is necessary to meet some user and market needs.

Kevin: Indeed, I also strongly agree. Throughout history, we have not seen any public chain or Layer2 without technical narrative or technical soul achieve great success. In the past year or two, there have been some operation-oriented projects emerging after the maturation of Ethereum Layer2 technology. However, at present, most of these projects have not experienced a bear market, so it is difficult to determine whether they can still exist in the next bull market.

So technology is the root, which is very important. Without technology, there is no soul, no innovation. In the end, you cannot even satisfy the community, let alone face investors and users.

So overall, technical narrative is the soul. We need to see that, in the past cycle, the tolerance of capital, market, and users for new technology landing has been decreasing. The ZK projects that were popular in the previous cycle have weakened in this cycle. Why? Because they did not timely obtain adoption. They kept claiming it was the End game every day, but users did not buy it. This also echoes Baiyu's view that technology itself is for problem-solving, and problem-solving is about solving problems for users. Everything should go back to the needs of users.

About the nature of the second layer of Bitcoin, if you treat it as a business, its profit model is also very simple. It is the transaction fee you receive from users minus your operating expenses, which is your profit. This is a very simple model. Based on this model, we think about how to get more transaction fees, right? You need to have high-frequency applications for that. So how to reduce operating expenses? This requires more optimization based on security. It is essentially a balance between security and operating expenses, for example, you can choose different chains as DA facilities.

Back to the original question itself, in my opinion, whether it is a second layer or a public chain, in the short term, we need to focus on TVL, in the medium term, we look at the ecosystem, and in the long term, we consider the technology. Let's focus on the short and medium term.

In the short term, without TVL, it is basically difficult to have a so-called ecosystem, because many applications on the blockchain are now related to finance. Without TVL, it is like doing nothing on the blockchain, which is very frustrating. Looking at the ecosystem in the medium term, how should the ecosystem be built? How should the ecosystem be defined? To break it down specifically, including defining the concept of "project success", it is enough to open a separate Space.

To sum up, it is important to have technology, but it cannot persist without implementation. Ultimately, it is necessary to attract users and achieve adoption. In terms of the ecosystem, it is crucial to make it successful in order to sustain its growth.