Bitcoin Layer 2 Hundred-Chain War: Chinese Return to Encryption C Position

Author: flowie, Source: ChainCatcher

At the just-concluded Denver conference, founding partner of Waterdrip Capital  Jademont met several overseas investment institutions and founders, "They asked about the mysterious Bitcoin Layer 2 from the East, why the TVL is higher than most Ethereum L2."

In the second half of last year, more than 20 investment institutions pursued Jeff, the founder of Bitmap and Merlin Chain, and wanted to invest in his Bitcoin Layer 2 project. "Investors are very FOMO."

The media is also adding fuel to the flames. After Inscription became popular, Jeff participated in no fewer than ten interviews and Spaces in a month.

ChainCatcher learned that in early 2024, nearly a hundred Bitcoin Layer 2 projects appeared, 90% of which were led by Chinese.

After experiencing the popularity of Inscription, entrepreneurs and investment institutions are trying to get on the wealth train through Bitcoin Layer 2. They believe that Bitcoin The currency ecosystem has finally ushered in an epic opportunity similar to the 2017 Ethereum ICO.

ABCDE investment research partner LaoBai has watched more than 20 Bitcoin Layer 2 projects since the second half of last year. OKX Ventures, HashKey Capital, Waterdrip Capital and other well-known investment institutions have also successively announced investments in Bitcoin Layer2.

However, the Bitcoin Layer 2 narrative dominated by Chinese has gradually divided into two camps. Supporters believe that it is a rediscovery of the value of the Bitcoin network, and the Chinese community will rediscover the value of the Bitcoin network. Login encryption bit C. In the eyes of opponents, this is undoubtedly old wine in new bottles. In essence, it is still a huge capital pool. "It was a lot of faith drama when it started, but it was nothing when it fell."

For most ordinary investors who don’t care about technology and are more concerned about wealth cryptography, Bitcoin Layer 2 is like a pretty good Meme.

The train has just started. The future has arrived but the overall situation is still uncertain. No one wants to lose at the starting line.

Conservatism and progressivism

The explosion of Inscription in 2023 will divide the crypto market of the two camps.

Conservatives believe that this is a story of old wine in new bottles. "It starts with a lot of faith drama and falls with nothing but chicken feathers."

Conservatives think this is a story of old wine in new bottles. p>

What progressives see is an epoch-making revolution in the Bitcoin ecosystem. "Bitcoin will be the biggest killer of Ethereum, and Ethereum can be a test network for Bitcoin." ”

In early 2023, after Ordinals/BRC-20 turned out to be popular, the market was booming. dForce founder @mindaoyang’s thoughts went back to Vitalik’s tinkering with colored coins 10 years ago. That story.

In 2012, Vitalik  and his team launched Colored Coins to support users in issuing coins on the Bitcoin ecosystem. Anyone can use Bitcoin The protocol builds assets, transactions, and voting.

Not long after, Vitalik and EOS founder BM wrote a smart contract platform for Bitcoin, trying to realize the world computer dream on the Bitcoin network. However, due to the architectural limitations of Bitcoin itself and the value storage concept adhered to by the community at the time, Vitalik’s two attempts ended in failure. This is how Ethereum and ERC20 came to be.

@mindaoyang believes that Vitalik 's failed experience represents Bitcoin's extremely stubborn ideology. "This is the key to its success, and it also means that it is extremely closed. Don’t have too high expectations.”

Long, an early participant in Ordinals, recalled that most of the Bitcoin community believed that this was undoubtedly old wine in new bottles, so at the beginning ORDI and other BRC-20 tokens are not very popular.

But the Bitcoin encryption OG who missed the 2017 Ethereum ICO and Defi summer noticed something different. At that time, he was still focusing on modular blocks in Ethereum. Jeff, who is a blockchain development engine, turned his head and plunged into the development and application of the Bitcoin ecosystem.

Gavin, who has never been able to realize the interoperability of Bitcoin and the entire chain, is planning how to revive the old project that was brilliant 4 years ago but quickly stalled. Construct it.

In their view, any business is worth redoing based on a major variable. The innovative logic often said in the traditional Web2 business world is also happening in the Bitcoin ecosystem.

"Every bull market is based on the emergence of new assets, generating new narratives, asset transactions and business models." The NFT market in 2021 is booming and the birth of The unicorn OpenSea. After the Ethereum ICO in 2017, DeFi Summer appeared in the next cycle, and Ordinals will also explode the Bitcoin ecosystem.

What Jeff sees is the innovation of Ordinals: "All content of Ordinals is on the chain, while all non-financial assets such as NFT and game content on Ethereum are None of them are on the chain. Ordinals’ innovation can make Bitcoin more suitable for applications than Ethereum.”

Gavin sees more of Taproot based on Bitcoin After the upgrade, Bitcoin's scalability conditions have changed dramatically. "The emergence of Ordinals is a historical necessity, and the Pandora's box of the Bitcoin ecosystem is about to open."

But what they did not expect was that the Bitcoin ecosystem was developing faster than expected.

In early May 2023, the Bitcoin ecosystem ushered in its first small climax. The daily transaction volume on the Bitcoin chain has repeatedly broken new highs. On May 8, the daily transaction volume on the Bitcoin chain reached 663,000.

Based on the Ordinals protocol, a large number of derivative protocols and wealth cryptography soon appeared, and Jeff became one of the important promoters. He has tried nearly 10 applications on the Bitcoin layer, and Bitmap.Game (Bitmap metaverse land) and BRC-420 protocol (asset protocol based on module data) have created a lot of wealth utility.

The floor price of the BRC-420 protocol asset blue box once reached 0.798 BTC (approximately US$34,067), while the mint cost was only about US$1 in September 2023 , an increase of more than 30,000 times.

However, the overly active transaction volume on the Bitcoin chain has caused Bitcoin to face congestion and high handling fees. In early May 2023, the average BTC output reward per block has soared to 4.85 BTC handling fees, an increase of 25 times compared with 0.19 BTC 2 months ago.

This is like spring coming back to ChainX, the Bitcoin cross-chain project that was suspended by Gavin.

In 2017, cross-chain is one of the hottest topics in the blockchain technology circle. Cosmos, one of the cross-chain duo, came to China to hold a development competition. Gavin caught Cosmos founder Jae Kwon and asked a question he had been wondering about for a long time: "The market value of Bitcoin is so huge, why don't you cross Bitcoin?"

Jae Kwon smiled and said: "Who can do this?"

Gavin still insisted on launching the Bitcoin cross-chain project ChainX, and he chose Polkadot, another cross-chain star. . In 2019, the ChainX mainnet was launched. In two years, the number of BTC that ChainX can cross-chain has reached 100,000. However, with the slot auction launched by Polkadot at the end of 2020, this bidding model has little to do with Gavin’s ideal Internet of Everything, and it also creates too much financial burden. ChainX is temporarily abandoned.

Gavin has not left the Bitcoin ecosystem. In 2022, he launched a new Bitcoin application project, OminiBTC, to allow Bitcoin to participate in decentralized lending across the entire chain. But after many twists and turns, what was achieved was a multi-chain ecosystem other than Bitcoin.

During this period, Gavin and another partner flew to Singapore to seek help from Jump, intending to work with his Wormhole to try to solve the problem of Bitcoin full-chain interoperability. But in the end they were shelved as "unable to be done".

"On the one hand, the limitations of Bitcoin's own architecture make it difficult to achieve safe decentralized cross-chain." More importantly, what do other chains do when they cross over? Woolen cloth? Bitcoin has no assets and no ecosystem.

Turn around around October 2021, Bitcoin’s first major upgrade-Taproot was launched. Gavin said excitedly: "This is a cross-generational upgrade of Bitcoin's underlying technology."

The new pricing model of Segregated Witness in 2017 has made Bitcoin The soft expansion is 4 times, but the 4 times expansion space cannot be utilized. Until the Taproot upgrade, developers allowed the original script space to change from a limited size to an unlimited size, which provided the possibility for the expansion of Bitcoin.

In other words, Vitalik’s concept of issuing colored coins and building smart contracts on Bitcoin more than 10 years ago, and the Bitcoin scalable technology brought by Taproot upgrade Under the framework, it is really possible. "The birth and popularity of Ordinals and BRC20 in 2023 are based on this premise."

In May 2023, Gavin launched Bitcoin Layer2 BEVM after upgrading ChainX’s original technology. Compared with ChainX, BEVM uses the schnorr + Mast + Bitcoin light nodes in the Taproot upgrade to form a decentralized POS network, transforming the security and decentralization of Bitcoin Layer 2 into the security of BFT and POS models.

Fomo's venture capital

As we enter 2024, hundreds of Bitcoin Layer 2 chains will emerge.

In January 2024, according to incomplete statistics from the bitvm Chinese community, there were at least 34 project parties claiming to be Bitcoin Layer 2 in just a few days, but they were interviewed by ChainCatcher Many Bitcoin Layer 2 project parties believe that the number is far more than that, and it is estimated that there are hundreds of them ready to move. Jeff joked: "There are more banks than depositors, so it's hard not to be called a hype."

The veteran Bitcoin information media "Bitcoin Magazine" founded by Vitalik also stands He came out and said that "a new wave of speculators are trying to use the development of Bitcoin Layer 2 to promote their crypto assets."

Such a popular Bitcoin Layer 2 is a fast track for the bull market for both project parties and investors.

In the bull market, under the principle of speculating on the new rather than speculating on the old, Bitcoin Layer2 is indeed a shortcut for project developers to attract users and capital.

The Rooch Network began to develop modular blockchains at the end of 2022, and planned to link to all L1 blockchains in the future. At that time, they did not consider Bitcoin Coin ecology.

HaiChao and jolestar, the two co-founders of Rooch Network, were also among the many doubters of Inscription at the beginning. HaiChao admitted that he did not realize the value of inscriptions at the beginning. In May 2023, jolestar stated on the X platform that inscriptions require application scenarios to ensure sustainable development.

However, as ORDI, the leader in the inscription market, was listed on Binance in November 2023, the price of ORDI once soared from US$7.4 to exceed US$12, and the price continued thereafter. It rose, even approaching $100 at one point.

"Inscription users and the ecosystem have reached a point where they cannot be ignored." HaiChao is also among the group of people who have been "increased in popularity".

At this time, he also realized that the essence of the inscription is actually the third form of token SFT (semi-fungible token) that is different from NFT and FT. It is a truly new asset and has the dual advantages of FT and NFT, which also means that the Bitcoin network has native innovation.

As the basic development work of Rooch Network has come to an end, it is necessary to find a suitable market entry, and the Bitcoin network has become one of the first choices for Rooch Network. Rooch Network launched the first pioneer network RoochBTC, which is built on the BTC ecosystem and builds a bridge for Move developers to enter the BTC ecosystem.

After deploying Bitcoin Layer 2, Rooch Network has not only received more media interviews and space invitations, but also attracted the attention of many investors in a short period of time.

In addition to new projects, for some old projects from the last round, Bitcoin Layer 2 is also a shortcut to quickly stand in the new round of bull market. Nervos Network (CKB), founded in 2018, is a Layer 1 public chain ecosystem based on PoW consensus and supporting smart contract development.

In early January 2024, Nervos chief architect Jan Xie published an article on the X platform saying that CKB is the ideal second layer of the Bitcoin monetary system. CKB rose from $0.0047 to nearly $0.02 in less than a month.

Some holders in the CKB community have also tasted the sweetness of Bitcoin’s Layer 2 narrative. They are actively discussing how to make greater use of the Bitcoin Layer 2 narrative. One community member keenly pointed out that Binance's introduction to CKB - "Nervos Network is an open source public chain ecosystem and protocol collection" needs Quickly change it to a definition that fits Bitcoin Layer 2.

There are also many well-known projects that have benefited from "Bitcoin Layer 2". Conflux, which is good at chasing hot spots, announced an EVM-compatible Bitcoin Layer 2 solution. The price of the currency rose by 12% that day.

In December 2023, the 5-year-old project MAP Protocol transformed from a full-chain interoperability protocol benchmarking LayerZero to Bitcoin Layer2, and Disclosed at least 5 investments from well-known institutions such as Waterdrip Capital, DWF Labs, LK Ventur, and Alchemy Pay.

For a time, everything can be Bitcoin Layer 2, and project developers flocked to it, which caused dissatisfaction with Telepathy, who is responsible for the Bitcoin expansion project.

On the X platform, they oppose all Bitcoin Layer 2, insisting that Bitcoin has no so-called "second layer". The reason why there are so many Bitcoin Layer 2s is obviously that venture capital investors are envious of Ordinal’s success, but without the opportunity to participate, they can only create a product that imitates Ethereum.

After talking to more than 20 investors, Jeff, the founder of Bitmap and Merlin Chain, basically all wanted to invest. "Investors are very FOMO, even though most of them are not interested in technology." I can’t quite understand the gameplay.”

Inscription will lead the Bitcoin ecosystem to explode in 2023, but it is all the excitement of retail investors. Investment institutions are very FOMO but cannot participate.

Bitcoin Layer2 is almost the most suitable narrative for investors to enter the Bitcoin ecosystem. Not only can they participate in the Bitcoin ecosystem, but "Ethereum Layer 2 serves as a clear benchmark."

Around the beginning of 2024, Bitcoin Layer 2 has become a popular financing track, with nearly 10 investments disclosed, and well-known venture capitals such as OKX Ventures, HashKey Capital, and ABCDE are all active of participation.

ABCDE investment research partner LaoBai said bluntly, "No one can truly predict whether the Bitcoin ecosystem will prosper as expected, but Bitcoin Layer 2 is an absolutely must-have. The track of the car."

When new concepts and Meme are combined

January 2024 According to incomplete statistics, there have been at least more than 30 Space and podcast events around Bitcoin Layer 2, and Jeff, the founder of Bitmap and Merlin Chain, is the most popular guest.

In about a month, Jeff accepted interviews from almost all mainstream Chinese blockchain media, and participated in Space, podcasts, and interviews no less than 10 times.

In the second half of 2023, LaoBai, investment research partner of ABCDE Capital, focused on more than 20 Bitcoin Layer 2 projects.

Similar to the rise of the early Ethereum Layer 2 narrative, when the early concepts were unclear, various technical routes flourished and were debated endlessly.

However, based on the experience of Blast, the Ethereum Layer 2 disruptor, LaoBai said that strong technology and strong narrative are two core considerations.

The so-called technology, because Bitcoin only does on-chain settlement without verification, basically all Bitcoin Layer 2 cannot achieve the same level as Ethereum Layer 2 and the main network. safety equivalent. LaoBai needs to find a Layer 2 solution with security close to that of the main network.

But for the project side, in addition to safety, implementation must also be taken into consideration. Bitcoin’s past three mainstream expansion solutions include the client verification solution represented by the RGB protocol, the state channel solution represented by the Lightning Network, and the side chain solution. In the view of Stone, the head of research at B² Network, it is impossible to take into account both security and implementation.

The B² Network team imagined whether they could learn from the Ethereum Rollup solution, but it did not go well at the beginning. They were unable to solve a fatal security problem.

Stone explained: "That is, Bitcoin cannot complete the execution of Rollup and the verification of the entire state transition like Ethereum."

< p style="text-align: left;">After half a year, B² Network believes that it has found a more secure method, that is, combining bitVM and RGB solutions to achieve the verification of Bitcoin Rollup Commitment on the Bitcoin main network. , Stone said: "This is the solution that inherits the security of the Bitcoin mainnet to the highest degree among the current BTC Rollup solutions."

But Jeff spoke frankly about Bitcoin Layer 2 Technological innovation is a common-sense mistake. "If you look at the code, everyone's technical solutions are very similar." The so-called innovation is nothing more than how to make the second-layer chain sufficiently decentralized and secure.

"The security of the chain is the bottom line, not the reason why users are willing to deposit money." In Jeff's view, if you stand from the user's perspective, you are willing to put money into it. The money you put in must have a high return.

Since June last year, the first asset blue box on the Bitmap Metaverse and BRC420 protocol has become popular one after another, bringing wealth effects to users.

In the bull market, crypto players don’t have much patience. For example, in the eyes of Lina, a Bitcoin ecosystem player, the core of the project side of the Layer 2 public chain is to make money, expand TVL, and support FDV, while users charge money, get points, and exchange coins.

Beta, a newcomer to cryptography who has been in the industry for half a year, has experienced various narratives such as AI, DePin, and Bitcoin ecology. After a few plate rotations, he decided to tone down the narrative and look for projects that were more Ponzi and meme-y.

Bitcoin Layer2 projects have both those who use the pledge points model to achieve success, and some who issue coins early to achieve success.

Merlin Chain’s staking points battle airdrop gameplay attracted more than $3.6 billion in TVL in one month, surpassing Solana and Blast.

Telepathy tells all parties from personal experience that the narrative of building a decentralized index for Bitcoin Layer 1 may be far less attractive than the meme.

The Telepathy team said that the project team made a bunch of inscriptions unintentionally, and after experiencing almost zero, it quickly rose again. Based on these inscribed assets, they founded Telepathy.

Telepathy is called psychic in the West, but in rural China it can be called "Dancing Master".

The magical style makes Telepathy extremely meme-like. The Telepathy test network has just been launched, and it released the inscription TEL3, accompanied by a video singing "Appeal to Ponzi, equality for all living beings".

Crypto user @qianqianlaw was quickly attracted by this unique style, "This cult-like project has become its own faction among many L2 battles. It is very magical and unique. I just like this kind of crazy project." @qianqianlaw I bought TEL3 for 110+sats before the Spring Festival, and found that it has tripled after the year.

Chinese return to the crypto C position

In this bull market, the Bitcoin ecosystem is the most important One of the narratives that cannot be ignored. Whether it is Inscription or Bitcoin Layer2, it is a narrative led by the Chinese community.

The narrative dominated by the Chinese community has always been unable to escape such criticism: short-termism, cutting leeks, and weak technology. However, with the popularity of Inscriptions, the emergence of innovative gameplay players such as Merlin Chain in Bitcoin Layer 2 and the emergence of masters who can engage in TVL, the mysterious power from the East is also attracting the curiosity of overseas communities.

LaoBai, investment research partner at ABCDE Capital, clearly feels that starting from the end of 2023, Western investment peers will begin to pay attention to the Bitcoin ecosystem and Bitcoin Layer 2.

Stone, head of research at B² Network, also said that since the beginning of the year, North American investors have taken the initiative to contact his team.

At the just-concluded Denver conference, Waterdrip Capital founding partner  Jademont  met several overseas investment institutions and founders, "They inquired about the mysterious Why is the TVL of Bitcoin Layer 2 from the East higher than most Ethereum L2?"

Da Shan feels that the last time the Chinese had such a status in the encryption market was the Chinese public chain era in 2016-2017. Later, with the constraints of the regulatory environment, China's public chains declined, and Chinese projects were almost completely absent from the DeFi Summer of the last bull market.

Under the Bitcoin Layer 2 war in 2024, "With Hong Kong and Singapore, Chinese projects can finally have a place."