Scaling Bitcoin The Future of L2s | Alisia & Dylan

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more input gain. Okay. Thank you very much. So, we were waiting for someone named Dylan Hunzer to show up and moderate this, but it seems like he hasn't showed up. Dylan, if you're here, you can take my spot.

If not, I will just do this. The conversation is about scaling Bitcoin with L2s and the future of L2s. And we have Alicia and we also have Liam. Let's talk about L2s. Like why are we scaling with L2s and why not just, you know, make changes to the base layer.

Huh. If only it were that easy. Uh yeah, there's lots of things that you can't do on Bitcoin that uh I think we should be able to do like private transactions. um have more scalability. Um yeah, maybe DeFi stuff.

Uh and currently the only way to do that with Bitcoin in a trust minimized way is is with uh L2s.

I would also say there's a performance difference, right? So with a lot of these L2s, they offer, you know, much faster block times and cheaper transaction fees. So if you want that meaningful scale activity, I think you would need some sort of a second layer on Bitcoin. And also I mean the reason why a lot of L2s and Bitcoin have popped up, right, is because a lot of them are leveraging the EVM. I mean we're at ETH Denver, right?

So we have to talk about that a little bit. So EVM you can argue is maybe not, you know, the the the VM of choice for a lot of Bitcoiners, but it's the most scale one. It has an entire ecosystem, the most number of devs, tooling, um, smart contracts of course, right? And so I think that's also really important that you we have this entire ecosystem that we can plug into um, through an L2.

That's beautiful. But in Bitcoin culture, when people talk about an L2, they usually think about the lightning network, sometimes liquid, but that's not really an L2. It's more like a federation, like a layer 1.5 or something. So how come there's so much talk about bringing the VM to Bitcoin and there's not much talk about improving or not much capital for improving lightning.

So I think I mean everybody there are lots of projects using it so I'm sure they all have their own justifications but the EVM has the most users the most um audited like uh well tested code and it's the easiest to deploy a lot of existing things on. I think that's the primary motivation for using the EVM. Um why not improving lightning? I think that uh lightning is um not capable of doing some of the things that people want to do with uh L2s. So, for example, like a lending pool.

I I mean, at least I don't I don't know how you would do that with Lightning. Um it's like kind of a many to many interaction, whereas Lightning has these like peer-to-peer connections and it's also limited by what you can do on L1 to settle disputes in Lightning channels. Um, so in in that way you're limited by the functionality of Bitcoin. Whereas the the nice thing about rollups and uh by extension L2s um at least the ones that I work on is we reduce the whole problem of the verification of the L2 to verification of a zero knowledge proof um which uh kind of reduces the scope of changes you would want to L1 and what you need to do and uh I don't think there's a way to do that with lightning. I think there's also this piece of vulnerability, right?

So, um if you think about a lot of the programmability that is occurring on liquid or stacks or some of these other um Bitcoin layers that are using different VMs, um a lot of these protocols get hacked because they actually don't have that scale smart contract environment. So, I think there's definitely a question of vulnerability. And I think the other one that we haven't really spoken about as much is UX honestly. Um, so EVM again just being the most scale virtual machine, you can plug into Privy and have email authentication, login, right? Just like there's an entire universe that's built using that as the as a core tech stack and um it's just a lot easier to onboard a lot more users.

Yeah. So, it's relatively popular nowadays to try to bring the EVM to Bitcoin. But the question is, why should the average user give up on Ethereum or Salana or whatever it is that they're using and switch to a Bitcoin layer?

They shouldn't. So, I actually don't think there is that much additionality there. So, if you're using Ethereum and you're using WBTC on Ethereum, you should continue using WBTC on Ethereum. you're assuming the the trust assumptions of WBTC as well as you know the bridging risk of Ethereum right so if you're comfortable with those trust assumptions you should continue I think the opportunity here is really to open up the market to a new set of users which in our opinion is like the silent majority of Bitcoiners basically like off-chain Bitcoiners maybe like your mom or your dad who maybe DCA into Bitcoin through the centralized exchange that is also Bitcoin and that is also Bitcoiners and I feel like we don't talk about them enough and they also want products s that financial products that cater to their needs. Um, and they're not dejetting on Ethereum right now.

So, I think there's there's a difference in user segmentation between what is relevant for a Bitcoin layer versus what is relevant for any of the plethora of blockchains that we see in the space right now. I think that um I I agree that it's I mean it remains to be seen like because a lot of this stuff is very new how much um like latent Bitcoiner interest will be unlocked. I think it it is valuable to increase the security of the bridge over wrap Bitcoin. Um and like the structure of BitVM bridges is maybe more uh feasible for like big custodians to use because they can participate more easily. Um and uh I I kind of yeah okay it is a very much practical problem because Citra launched like a month ago and so far we haven't seen the reactions that we expected.

I don't think that they have a lot of users and I think this is a cultural problem in Bitcoin. It's very hard to get the people who have been accustomed to the huddle meme and have learned how to use lightning to try something else which doesn't come from the same council of high priests who delivered to them the previous upgrades. So what do you think is a good approach to get people to escape this mindset where they only use the vetted technology and something that is exotic and comes from Ethereum or Zcash or other networks is haram or something.

Um I'm not sure. I think that there's been a long period of uh well I I I'll say for for snark research for example like people were very interested in using snarks on Bitcoin a very long time ago. Um Zcash comes out of an effort to add private transactions to Bitcoin via snarks. Um Starkware Ellie Benison talked about scaling Bitcoin with Starks uh over 10 2013. Um and uh unfortunately because it wasn't possible and then later be for technical reasons and then later for political reasons a lot of these people left but I still think a lot of them would be interested in coming back.

So I think that the Overton window could shift and uh yeah maybe maybe we can make it happen. I'm not sure.

I respectfully disagree. I don't think those users are worth going after, right? I think they're very pure puritanical about the way that they perceive Bitcoin and how to use Bitcoin. I mean, we even see this in the Bitcoin technical community of like the oifiers versus the ones who are in favor of like more upgradability. It's it's almost like a religion.

And so, in my few years of like in my decade in Bitcoin, I feel like it's it's tough to get people to change their religious beliefs about Bitcoin. So, I think the you mentioned, you know, some Bitcoin L2s that may not have had as much traction or users. I think again it fundamentally comes down to not maybe understanding the target user or the target segment because a lightning user who clearly cares about self-custody, cares about permissionlessness, um they may not accept the trust assumptions of a rollup or an L2, right? And so I think there is a fundamental misalignment between a lot of these new blockchains and their trust assumptions and the users that they were claiming to serve and maybe some misalignment in terms of target user. And that's why I keep coming back to we really need to think about who and what is a bitcoiner and like how that's shifting over the past like post ETF because a bitcoiner 10 years ago is very different to a bitcoiner today and they want different things and they care about different things.

Um, at Botanics, a key learning has been like we're massive decentralization maxis. That's our entire ethos to building on Bitcoin. And when we talk to some of these, you know, normie Bitcoiners, they don't even understand the the base value proposition of Bitcoin or decentralization or why that's so relevant. And so, it's been really interesting building a product that speaks to these people and it comes down to utility, right? Like giving them what they want, which boils down to simple financial primitives that run on Bitcoin.

I think that we need to do a better job of communicating to normie Bitcoin users that the fact that you can't do things with Bitcoin in a decentralized way has led to the like growth of centralized intermediaries who pose an existential risk to the protocol. We take for granted things like self-custody being legal, but it's pretty weird and a lot of governments would really like to get rid of it. And I think that maybe if people understood that it was necessary to like either change Bitcoin or via some L2 enable these things in a more trust minimized way. Like Bitcoin could could die if if it was if everybody held their Bitcoin in ETFs and then they just passed a law that said you can only trade it with a white list. Like this is this is definitely something that could happen and I if we don't do something I'm worried it will.

But how do you get someone to care?

I mean who are we trying to convince?

Basically the new wave of people who are buying Bitcoin because I mean Bitcoin like the OG Bitcoin whales are actually selling the cycle, right? Um so the the the profile of like an average Bitcoiner has fundamentally changed. They don't understand these principles. So how do you get them to care? I think that so I want to connect people's greed with the politics that I want to see in Bitcoin.

So I want to convince people that the price will go down if they kill the ethos of Bitcoin.

I agree. I think that's like the best way to get them. Basically what I've noticed hits the best is the like if you care about your bags, if you care about the price of Bitcoin, you should care about adoption because that is a very big driver in terms of the price of Bitcoin. I think a lot of people in in crypto are a bit like uncomfortable with um reckoning with the like fundamentally very political nature of what we do and like wielding political power to to change things, right? Like instead of just accommodating the world as it is, try to make it different.

And I think self-custody is like a really good example of this. It's a huge departure from the traditional financial system. all the governments everywhere in the world banned um bearer assets and then Bitcoin came into existence and everybody just sort of treats it as though it's you know fine now but it's not like a law of nature.

Yeah,

absolutely.

So let me say something very controversial and see how you react to it. The ETF that we got in Bitcoin is a de facto scaling layer because institutions can transact Bitcoin without touching the base layer with zero fees. They just write a piece of paper and they give it they pass it on to each other. And you can also argue that there is some privacy benefit from this because the transactions don't hit the blockchain and it can take a long time until the media finds out about a certain transaction that happened. So would you argue that the ETF is the de facto layer 2 that provides scalability and privacy?

I I think it's not it's not a crazy take. It's not that different from a multi-IG bridge to like a side chain that has one operator or something.

I agree and disagree. I agree in terms of the like definitionally like yeah there is utility being created on these ETFs in a centralized off-chain way. I just think we're we're losing sight of how Bitcoin the protocol works, right? And it's like to your point earlier about like an existential threat like uh if we submit to that I think we'll have lost right and so I think it is anyone who's in this room obviously cares about decentralization and I think um the ETFs do pose a threat to all of that and it the onus is on us to to fix it but again it comes down to trust assumptions and what people are willing and not to accept. If you're willing to accept a centralized ETF um transacting on your behalf, then yeah, maybe that is your L2.

Yeah, we're sort of running out of time because we started later. So, I'm going to try to negotiate with Robin if he can give us five minutes from his presentation. Are you fine with that, Robin? Okay, you're going to have 15 minutes instead of 20. Just so you know, you can run.

I'll have to ask spicy questions. The the first spicy one is kind of a shilly one because I want you guys to talk about the projects that you're working on. Say something nice and also something bad that you wish was better about the L2 that you're working on.

Sure. Um, so I'm working on a a new project called Ideal with Robin and Ying Tong and uh we are trying to do like the next generation of BitVM style bridges. Uh we have a new garbling scheme that's significantly better than the uh state-of-the-art prior to that. Uh and that enables bridges that uh are more permissionless, can have more operators, are just all around better. Um so I guess two downsides.

One is that it has a slightly higher onchain cost, which people like to needle me about. And um the other one is that BitVM is is kind of clunky and frustrating to use. And it would just be much much better if we could throw all of this away and activate opcat or a soft fork of some kind to make uh all of all of this work obsolete that I've been doing for the last few years and just do it the right way. But you know,

you stole my talking point. Um yeah, so I'm building Botanics. We're a blockchain that's based on Bitcoin. Uh so I guess a Bitcoin L2, which is the name of the session. Um we went live in July of last year.

And actually the really interesting thing about us, aside from the fact that, you know, we're built on Bitcoin. Bitcoin is the gas token settlement layer. No token, no points, no other funny business, is that we actually have Bitcoin yield endemic to the chain's mechanics. So basically, every time you transact on Botanics in Bitcoin, 50% of all of those gas fees are redistributed as yield back to stakers. So that is our take on native Bitcoin yield um without any sort of other tokens involved.

And yeah, check us out if you want to earn passive yield on your Bitcoin or borrow against your Bitcoin at the lowest boring rates in the entire world. Um, so yeah, that's a bit about us. A bad thing actually, it was kind of he kind of took it, but I was like, yeah, our tech, which is called the spider chain, would be infinitely superior if we are to enable like a soft fork like Opcat. Um, which actually one of our former devs helped uh helped champion. And so that is a technological constraint.

However, our approach to decentralization is obviously an expanding federation of multicights, which is what we're working on right now. Um, another downside, I love this question. I'm trying to think. No, honestly, I think what's been really invigorating to see is like there is adoption happening like we actually have retail users who are using our yield product, who are using our boring products. Um, and so there is that product market fit you're already seeing for Bitcoin layers, but you need to be hyper surgical about utility.

So I think one thing we've learned as a chain over the past however many months um, is the importance of like deprecating products that aren't working in favor of products that are.

Yeah. Final question for the two of you. The topic is Bitcoin layer twos and you're representing just the ones that you're working on. And I want to ask you if there are any other layer 2s that you like which exist out there. You're not working on them.

You have no financial incentive to promote them, but you still like them.

Oh, I I I don't know. I don't want to upset anybody by a mission, but um uh yeah, like on Bitcoin or just in general. I'll let you talk about L2s in general if you want.

No, I mean I think that there aren't very many on Bitcoin. I think um I don't know. Lightning is cool. It it it's it's uh I Yeah, I don't know. Honestly, I I don't really use that many Bitcoin L2s and uh I'm not probably the right person to answer this.

Um the political answer is all of them are amazing. you're doing fabulous, sweetie. Um, but I would say the like honestly I think anyone who's trying to push the envelope in terms of like Bitcoin tech like you guys, Alpin, Citria, all of these folks like obviously pushing the the bar forward for Bitcoin. So I think yeah, I think they're all fantastic. Bit Layer is doing some BitVM stuff.

Um, Bob. So all of these folks I think are doing great things in Bitcoin. We love all of them.

Thank you very much guys. Thank you, Robin, for letting us stay for five extra minutes.

Thank you.

And we're going to give the floor to Robin Linus, the maintor of this session.