The Revival of a Bitcoin-Building Culture
Bitcoin is changing. Drastically.
And the Bitcoin halving is less than 60 days away….
A new “order” of Ordinals threatens to divide the community. Inscription technology is crowding out monetary transactions. Even NFTs — maybe a maxi’s worst enemy — are coming to Bitcoin.
But at this point, if you don’t at least understand the trade-offs, then you’re not listening.
Inscriptions, Ordinals, BRC-20s, NFTs, DeFi, Layer 2s…these developments signal a major movement in the Bitcoin paradigm towards the development of applications, infrastructure, and entire industries built on top of Bitcoin blockchain technology.
Another signal, perhaps the biggest of them all, was the SEC’s approval of Bitcoin ETFs and the ensuing scramble for exposure from major TradFi companies. Bitcoin purchased through Grayscale, ARK 21Shares, Franklin Templeton, Fidelity and others totaled more than 10x that of what miners were able to extract from the protocol in late February, 2024.
It’s the confluence of these factors: adoption by global markets, and the development of Bitcoin applications and infrastructure, that gives Bitcoin a new meaning. Namely:
- Increased security from innumerable new transaction fees (especially as mining rewards decrease)
- Inflows of buyers and thriving new global market economies previously blocked by regulation
- Countless applications, projects, companies, and entire industries built on L2s, and later L3s, L4s, and counting…
- Introduction of new Bitcoin buyers and consumers through NFTs, DeFi, and blockchain gaming
- …and all the upside we would otherwise leave on the table, all the innovations and applications we can’t currently conceive
Despite searing opposition, groundbreaking developments are unfolding within the Bitcoin ecosystem. Layer 2 infrastructure and applications are not only coming to the protocol, they’re storming their way in.
Though, their path is not easy.
For years, the unique technical characteristics of Bitcoin and the protocol’s inherent lack of support for Turing-complete smart contracts, while partially addressed by upgrades such as SegWit and Taproot, still posed key problems and left limitations concerning the growth of the Bitcoin ecosystem. The vibrancy of the Bitcoin ecosystem has been, and still is, a far reach from that of blockchain ecosystems such as Solana and Ethereum.
The Lightning Network has committed to bringing faster speeds to Bitcoin payments, but has ultimately been unable to break through the programmability limitations inherent to Bitcoin itself. Stacks introduced programmability and decentralized computation to Bitcoin, and yet still requires more upgrades and iterations to lay the foundation for bringing a broader user base to the Bitcoin ecosystem. Bitcoin developers remain hungry in their search for Bitcoin scaling solutions.
The market has strong expectations for a more sophisticated Bitcoin Layer 2 solution, namely, whether it is possible to inherit the security foundations of Bitcoin while providing all the benefits of scalability such as high throughput, low cost, etc. To do all this without introducing additional risks of centralization and complexity is key.
A solution then emerged in the form of BitVM, which not only aims to meet the aforementioned requirements, but is also executable and implementable in its current form.
In the white paper, researcher Robin Linus elucidates how BitVM provides a brand-new computational paradigm enabling the verification of any off-chain computation on Bitcoin without requiring changes to the network’s consensus rules. The project seeks to solve the tough trade-off between security and Turing-completeness in Bitcoin’s Layer 2 solutions, offering an optimal solution for users and developers. That is, the same level of security assurance as Bitcoin, high scalability, and the possibility for seamless migration from the base layer.
“As long-term observers and builders in the Bitcoin space, the emergence of BitVM has allowed us to envision a future that elevates Bitcoin beyond its simple static value storage capability, and instead construct a robust and vibrant Layer 2 ecosystem based on Bitcoin,” stated Bitlayer cofounder Charlie Hu.
A disruptive new project has arrived on the world stage to build a new Bitcoin future, adopting the BitVM technical philosophy.
Welcome to Bitlayer.
Bitlayer’s Mission
Bitlayer is the first Layer 2 solution offering Bitcoin-equivalent security and Turing completeness. It’s also the first Layer 2 built on BitVM, aiming to be the computation layer of Bitcoin.
“Bitlayer can be understood as a powerful smart contract system established on top of Bitcoin. Its promise is to provide Bitcoin with programmable decentralized computing (like Ethereum), but with a potentially cheaper, faster experience, all backed by the equivalent security guarantees provided by Bitcoin,” said Kevin He, cofounder at Bitlayer.
With hundreds of millions of potential users as an addressable market, Bitlayer and the Bitcoin Layer 2 landscape is positioned to bring scalability at a previously unthinkable scale.
Bitlayer’s core builders include a team of engineers hailing from Huobi, Polygon, and Polkadot, to name a few. Kevin He was responsible for building blockchain infrastructure prior to the upcoming launch of Bitlayer. He also formerly served as Huobi Group’s web3 tech head.
Bitlayer vies to exist as an integral part of the formidable Bitcoin system, stating that their development, goals, and philosophies neatly complement those of the larger Bitcoin ecosystem. The project aims to construct a decentralized economy and establish a competitive edge within it, driving development atop the Bitcoin base layer network.
The solutions offered by Bitlayer will not fundamentally alter Bitcoin in any way, nor will they necessitate the promotion of a Bitcoin BIP upgrade. Bitcoin should function just as it always has, allowing Bitcoin maxis to maintain their identity and vision.
Building on this, Bitlayer aims to unlock and expand additional use cases, elevating Bitcoin from the status of a digital gold to a productive asset that could serve as the bedrock of the entire decentralized economy. For Bitcoin holders, value lies in capturing the increasing value created by a wealth of new decentralized applications such as NFTs, DeFi, blockchain gaming and DePIN.
Is Bitlayer the Next Big Thing for Bitcoin？
BitVM’s value is gaining increased recognition by developers as many teams continually work towards its implementation.
Bitlayer’s core stated objective is to address the trade-off between security and Turing completeness in Bitcoin Layer 2 technology. Its design is inspired by BitVM, DLC/LN (Discreet Log Contract/Lightning Network) technical protocols, and multiple VMs (including EVM, the Ethereum Virtual Machine).
The project’s tech team has abstracted three key tasks from these inspirations:
- Trustless entry and exit of Layer 1 assets
- State transitions using a Turing-complete Layer 2 virtual machine
- Layer 1 verification of the validity of Layer 2 state transitions
The security of bridge assets has always been a key for Layer 2 solutions, with the core issue being the method of asset control. The most common industry approach is for Layer 2 platform operators to set up multi-signature accounts based on MPC-TSS (Multi-Party Computation and Threshold Signature Scheme) or Schnorr technology, into which users transfer their assets.
This traditional approach results in users completely losing control of their assets, while the platform’s multi-signature management capabilities retain the power to impact the security of those assets. In the wake of certain extreme events, users have become dissatisfied with these types of multi-signature solutions. Models like DLC/LN that encompass two-party game scenarios offer a more promising direction. Leveraging DLC/LN technology, users could retain partial control over their assets and reliably achieve a secure escape with their assets.
The verification of Layer 2 state transitions operates on a principle comparable to proving one’s innocence– an inherently secure process. Theoretically, the choice of network used for state verification determines the security level of the Layer 2 network. As one of the most secure networks available, using Bitcoin’s base layer for verification enables Layer 2 solutions like Bitlayer to inherit Bitcoin’s robust security measures, achieving a level of security equivalent to Bitcoin itself. The introduction of the BitVM paradigm challenges the existing notion that complex computations cannot be performed on Bitcoin, offering a new pathway for executing Layer 2 state verifications on the Bitcoin network.
Through integrating with BitVM, Bitlayer aspires to incentivize more users and developers in the ecosystem to participate and contribute to its development. Starting with EVM compatibility, Bitlayer can then enable applications and developers from the existing Ethereum ecosystem to migrate to Bitlayer at low cost, eliminating the need for substantial modifications or rewrites (an optimal choice for the launching of new projects and applications).
Compatibility with multiple VMs results in a more excellent DX/UX. So Bitlayer plans to expand the ecosystem further, providing access to more innovative applications for Bitcoin blockchain users.
Above is an outline of preliminary ideation for Bitlayer.
Following the publication of the Bitlayer white paper, expect more insight into the project’s economic model design and core component design solutions. A Layer 2 state commitment challenge protocol based on BitVM, as well as bi-directional message/asset protocols based on DLC/LN, among others, are expected to make the development pipeline.
Bitlayer is Making History on Bitcoin
Bitcoin initially emerged and endured as an asset or “store of value”. Its open-source and decentralized nature have fostered a culture of experimentation. Unfortunately, this has also contributed to relatively sluggish development within the Bitcoin ecosystem. With the viral spread of Ordinals and a cultural shift towards “building on Bitcoin”, the protocol is reaching a significant inflection point, showing potential for an ecosystem larger than Ethereum’s.
At present, it appears that the full blossoming of the Bitcoin ecosystem will take some more time, as foundational issues such as the implementation of BitVM and crosschain security are in urgent need of resolution.
Bitlayer is one of the earliest community advocates for BitVM. Under its advocacy, the BitVM east community has coalesced a group of enthusiasts and researchers focused on BitVM. Continued focus has been placed on summarizing the latest developments in BitVM, disseminating the concepts and vision of BitVM’s technology, and promoting the implementation of BitVM.
Bitlayer also operates as a pioneer in actualizing BitVM. Building a novel protocol based on BitVM that introduces more use cases into the Bitcoin ecosystem, thereby unlocking Bitcoin’s value, and harnessing its security, is the open future we all desire and deserve.
A focus on radically expanding the reach of Bitcoin by addressing the Bitcoin-equivalent security and Turing completeness issues behind Bitcoin’s scalability challenges remains a key endeavor for the team.
Expansion in the level of security available to Bitcoin Layer 2 and the applications they are capable of is of increased importance. Allowing users more access to, and usability of Bitcoin, is a critical next step.
With a thriving ecosystem on Ethereum, Solana, and a number of L1 blockchain ecosystems, many question why not Bitcoin? Don’t we want the future of money, technical infrastructure, decentralized computing, applications, and networking to be built on the first, largest, most decentralized and most secure blockchain ecosystem?
Shouldn’t we seek to secure the future of Bitcoin when block rewards predictably and inevitably diminish? Will we not want to harness fees from flourishing Layer 2 ecosystems, incentivizing miners to continue to secure the network?
Bitcoin has been left in the corner so far. But things might soon change.
Satoshi Nakamoto once predicted: “In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes.”
Now, at the historical juncture of Bitcoin’s fourth halving, the explosive growth of the Bitcoin ecosystem resonates with his foresight. Bitlayer contends to become the computational layer of Bitcoin, building a sustainable and vibrant ecosystem, unlocking the full potential of Bitcoin and cultivating a thriving digital economy.
