Bitcoin L2s are like the Beatles who bridged pop with rock-n-roll
Bitcoin L2s is a topic as hot these days as it is controversial: VCs invest heavily hoping for a lucrative exit, while the majority of savvy crypto people say they are bullshit. But there’s something in them, is it? I speculate: yes.
Why’s that?
- Do they bring a killer use case to web3?
- No, at least not the one seen vividly today.
- Are they more advanced than Ethereum L2s?
- No, in fact, they boldly replicate on the Ethereum rollup-centric playbook.
- Do they even exist? 😄
- So far mostly in theory.
This article argues that not only Bitcoin L2s are important but are also an unprecedented phenomenon in the web3 industry.
It’s a subjective view, of course. I won’t try to please everyone.
If you happen to agree, please clap here on Medium. It helps distribute the article to like-minded people.
Initially, I planned to write a comprehensive, non-technical guide to Bitcoin L2s, but you won’t find it here. Frankly, what you are reading now is essentially an intro to the non-tech guide (😂) which got out of my hands so much that it grew into a whole separate topic that I decided not to fight but rather appreciate.
The non-tech guide will be posted later.
Meantime…, what’s such a big deal with Bitcoin L2s? Let’s unpack.
Bitcoin vs Ethereum
If you watched Dune, you know that inside the box, there’s pain, which Paul Attreides has managed to deal with. Arguably, he’s never been numb to pain and he would stumble into it many times along the way, but so far it hasn’t been stopping him.
Noteworthy, I’m not saying pain is bad. I might not like it, but it has to exist.
Thanks to maximalism, we have Bitcoin the way we have it. It’s not perfect, quite slow — not only in transactions per second but also in social consensus about its upgrades.
But, it is Stable. And. Simple. Nothing Fancy.
As a result, Bitcoin can be fairly considered the most uninterrupted accounting system in the world. The only system whose uptime is basically 100%.
I say basically because, over its history, Bitcoin has had two critical bugs (both happening, considerably, in the early days). Not without the social consensus (miners agreed to not mine the chain with the vulnerabilities), but the bugs were resolved quickly. The network was disturbed but wasn’t technically down. Users just had to wait a bit more for their transaction to be confirmed (within the consensus rules). That’s why, although this website shows Bitcoin’s uptime is 99.98…., (which is still extremely high), some people, including me, fairly claim that it’s 100%.
The drawback of Bitcoin’s boldness and simpleness is that it is slow when it comes to core updates. This is why Bitcoin developers always look for ways to improve Bitcoin without having to update its core. Core updates organizationally could take years to be adapted (if ever).
Also, Bitcoin doesn’t support smart contracts which otherwise would have allowed for general-purpose decentralized apps on top of it, such as decentralized exchanges, lending platforms, and other defi stuff.
Slow core updates and lack of programming expressivity are generally considered something good — it’s the price you pay for stability.
However, it is for that same reason the L2s on Bitcoin are much more challenging (and doubtful by some) than the L2s on Ethereum.
Ironically, for the same reason, Bitcoin L2s are needed.
Bitcoin is all about storing digital value in a non-censored way. It also allows you to transfer this value without censorship, but in a quite slow, expensive, and at times clunky way.
The lack of smart contracts (aka expressivity) is the reason the Ethereum community exists today. It took the decentralized blockchain idea even further than just the storing and transferring value: now you can deploy any Turing-complete code on a decentralized network, which is an amazing phenomenon that flips the hardware -> software paradigm.
Previously, hardware was in God mode. It had complete control over the software it ran. You, as a developer, could write any code logic you want, but it is the hardware owner who really controls what is being run (imagine how overpowered Amazon Web Services are!). With blockchains, such as Ethereum, hardware doesn’t have that control anymore: you, as a developer, have guarantees (backed by tech, not a private company) that whatever software code you deploy onto the distributed network will be run exactly like you designed it to run (i.e., software is king now). This is an excellent, short explanation of blockchain paradigm shift which I stole from Chris Dixon’s book: “Read, write, own”.
And so now we have two poles: north and south. Bitcoin and Ethereum. Different goals, different philosophies, different aims. Sometimes same enemies (fiat), but the way of doing things is pretty varied.
Ethereum is all about being agile, adaptive, and general-purpose.
Bitcoin is all about being stable, secure, and laser-focused on one use case.
Ethereum is a decentralized computer.
Bitcoin is a decentralized currency.
That’s the gist of it. Really.
Despite both communities employing the open-source nature of code distribution, which naturally helps any technology to innovate faster (copy and improve instead of writing everything from scratch), Bitcoin and Ethereum people haven’t been looking into each other’s innovations much.
All because their philosophies are different at their core (at least we are used to thinking that). Just like pop and rock-n-roll (!).
It always felt like two separate bubbles each with its religion/constitution. It never felt right to me.
Technology is not religion.
Technology is change.
Making technology a religion can cause its stagnation. This threat to Bitcoin is very real in my opinion.
Something changed
And here came all those Bitcoin L2s with a promise to:
- scale the slow Bitcoin network
- while adding expressivity (for developers to program all kinds of stuff with bitcoins, the liquidity which has previously been untapped with defi)
- while also maintaining the appropriate level of security
These three points shouldn’t be perceived at face value and are a pretty nuanced and deep rabbit hole that’s worth a separate article, which I’m gonna do later soon. Today, as stated, I focus on Bitcoin L2s as a phenomenon, not its technicalities.
In a way, Bitcoin L2s are like Paul Attredes who originally came into the fremen territory as an outsider but was then accepted as their leader to bring them to paradise.
It’s hard to say whether Bitcoin L2s will indeed lead us to paradise (same thing with Paul Attreides), but one thing is clear: “The Berlin Wall” has just been destroyed, and it’s only the beginning of something new.
BITVM paper, with its bold claim “Compute anything on Bitcoin”, was published on Oct. 9 2023, and was one of the things that sparked a wave of new energy towards Bitcoin L2s.
It would be a lie to say that BITVM and the whole Bitcoin L2 topic are entirely appreciated by both Ethereum and Bitcoin communities.
But.
They are not shitcoined by some Bitcoin maxis.
At the same time, some Ethereum people (who have always had love for Bitcoin but left it because of a lack of expressive smart contracts) are getting back to Bitcoin. Or at least consider doing so. Or at least observe the play with a great amount of interest and appreciation.
The influx of new engineers with a new kind of expertise (e.g., zk, rollups) creates fresh design paradigms to innovate and build on Bitcoin.
New creative energy is unlocked for Bitcoin. This is THE reason Bitcoin L2s are such a big thing.
Not everyone is a fan of The Beatles. But you cannot argue as to the exponential change in paradigm their work avalanched for other music bands and pop culture in general.
I finally feel that loving Bitcoin and NOT hating “shitcoins” are not controversial states of mind. If you’re with me, please highlight this so I know I’m not crazy, even though I know I’m not :)
Now, let me finish this article with a bold and spicy claim, which will be a tiny spoiler for the next one.
Bitcoin L2s don’t actually exist
To be more precise: Proper Bitcoin L2s. Don’t exist. Yet.
If you’re a project building on Bitcoin, it’s popular to call yourself a Bitcoin L2 (vcs are hot on this). If you’re a skeptic (all of us are), it is popular to say that Bitcoin L2s are bullshit.
Funnily, both groups are kind of right. What makes it even more confusing is that there is no agreed-upon definition of a Bitcoin L2.
As of today, in my opinion, the primary difference between “bullshit” Bitcoin L2s and non-bullshit ones is that the latter ones are transparent about the security assumptions that are being made due to today’s technology limitations.
As we’ll see in the next article, it’s those assumptions that make all the difference.
Some people say that proper Bitcoin L2s will appear, at least, a year from now. Others claim it could take up to 7 years.
I have no idea. I thought I had one, but it is a hell of a rabbit hole (the more you delve, the more you know how much you don’t know).
As of now, I propose to keep an open eye. The design space for building accounting systems has changed dramatically since 2009 (Bitcoin appeared). It changed one more time in 2014 (Ethereum).
In some not-too-distant future, 2024 might well be one of those significant years when new ways of building things are paved for the next 5–10 years.
