gateLive Roundtable Discussion: Bull Run Approaching, What Unmissable Wealth Opportunities Does the Bitcoin Ecosystem Hold?
Roundtable topic: The bull run is approaching, what are the wealth opportunities not to be missed in the Bitcoin eco?
Guest of this issue: Hong Shuning ( Bitcoin Researcher), Haotian (Blockchain Researcher), Ben (Discoco Labs Founder), Leo Deng (LK Venture VP), bitrabbit Stacks BNS dao council）
Watch the complete live broadcast playback: https://www.gate.io/live/video/4f88759b894a6a34321069848b5a99ad
What are the implications of the current development of the Bitcoin eco?
Hong Shuning:
In 2009, Satoshi Nakamoto made a statement that predicted the future of Bitcoin. He said, “In 20 years, either Bitcoin will be widely used for large transactions, or no one will be using it, no transaction volume. If it’s to the point where no one is using it, it has no value.” Up to now, the fate of Bitcoin’s future still hangs over all holders. How can we make Bitcoin more widely used for large transactions? So far, we have not found a good solution. In fact, Bitcoin’s usage is not high, and the current blocks are not full. In my view, if Bitcoin is to become a successful currency like the US dollar, it must establish a large number of applications on its own basis.
From the birth of Bitcoin, people have been constantly exploring how to create more applications for it. After the hard fork event in 2017, the entire BTC community entered a conservative state, and everyone was worried about the problems caused by forks. Therefore, they became conservative in terms of technological innovation. This also led to Bitcoin being positioned purely as digital gold or a store of value, and no longer attempting to explore applications.
However, with the emergence of taproot technology, it solves the programmability issue of Bitcoin, making it feasible to implement smart contracts on the Bitcoin blockchain. Only when these application technologies mature gradually and people around the world start using Bitcoin-based applications, a large number of application transactions will appear in the Bitcoin eco, bringing substantial income to the Bitcoin blockchain and miners.
Haotian:
Currently, some people are trying to transplant the gameplay of the Ethereum eco to the Bitcoin eco, using the powerful network consensus of Bitcoin to reshape a new narrative. This approach is described as reinventing the wheel, trying to find a new wealth code. This approach has also sparked opposition from some people, who believe that this transplant approach is not suitable for the Bitcoin eco. In the short term, it is difficult to avoid this approach. In the long run, this exploration provides new ideas and directions for the future development of the Bitcoin eco.
With the disappearance of the Bitcoin halving effect, how will miners sustain their livelihood? If the Bitcoin eco lacks a large number of transactions and users, miners will be unable to rely on transaction fees to maintain the massive network. Therefore, relying solely on speculation to drive up the price is not sufficient. Bitcoin price To support the development of the eco. The feasible solution is to earnestly develop the eco of the Bitcoin network, making transaction fees the core income for future miners. I personally have high hopes for the future of the Lightning Network because it has a closer connection with practical applications and is suitable for use in specific consumer scenarios.
Currently, the narrative of Ethereum tends to be more financial in nature, and the issuance and mining of coins are essentially the nature of stacking Lego, lacking practical applications. The Lightning Network of Bitcoin aims to spend the coins in hand. The Bitcoin eco also has excellent projects like Nostr, which are still in the early stages. In short, for the development of the Bitcoin eco, it is necessary to maintain an objective understanding and patience, and look forward to the future development.
Ben:
Since the birth of Bitcoin, we have seen various Alt-Coins emerge. But they all failed. We need to regard Bitcoin as infrastructure. We need Bitcoin to create an application eco because Bitcoin itself is the strongest consensus in the world. We don’t need anyone to change it, whether it’s token protocols or application ecos, we need to build a truly decentralized based on it.
The recent popular project, the Babylon protocol also mentions an important point, that its core uses POW to enhance the security of POS. Because POW is more resistant to long-range attacks compared to POS, it improves the security of the COSMOS chain using Bitcoin. From the popularity of this project, it shows that people agree with this logic, which means that the consensus based on POW of Bitcoin is stronger than any POS chains, and this is recognized.
Bitcoin itself is also in a continuous process of improvement, as just mentioned by the classmate, the Taproot upgrade, and PSBT, in recent years, some new ideas have appeared in papers or proposals. BTC itself is also evolving, just saying it lacks an application explosion. I think from this year, and even for a long time in the future, it will be a period of Bitcoin eco explosion.
Leo Deng:
Bitcoin has gained worldwide consensus on its properties as “digital gold” and “peer-to-peer electronic cash ”. However, based on the current development of Bitcoin, it has not fully realized these two properties. Firstly, some key issues surrounding Bitcoin, such as privacy protection of wallets, lower transaction costs, and security, need continuous improvement and development.
Secondly, the whitepaper of Bitcoin proposes an important concept, which is a peer-to-peer electronic cash transaction that provides a decentralized value network and offers a new solution for electronic payments. However, the performance and efficiency of this still need improvement in practical applications. For example, the costs and various frictions generated during the transaction process need further optimization.
In addition, we cannot simply limit Bitcoin to the above two attributes, but also need to explore it in a wider range of application scenarios. Currently, the bullishness of Bitcoin lies not only in spot ETFs and halving narratives, but also in the prosperity and large-scale development of its eco. When considering the development of the Bitcoin eco, we also need to take into account the objective needs of the entire environment for it.
Bitrabbit:
Recently, the popularity of Ordinals has sparked many people’s imagination of Bitcoin achieving Turing-complete smart contract functions like Ethereum. However, due to the limitations of Bitcoin’s consensus mechanism, it is difficult for this idea to achieve perfect functionality through forks and other means.
At present, the biggest consensus in the Bitcoin community is the payment application eco dominated by the Lightning Network. Many BIP proposals are focused on optimizing the Lightning Network to make Bitcoin a more desirable electronic cash . In this context, Stacks, with its unique design idea, can realize the DeFi application of Bitcoin in a decentralized way at layer 2 without changing the Bitcoin consensus, which is of great significance.
Currently, many trading functions cannot be implemented on Bitcoin and can only be realized on centralized exchanges. However, in recent years, we have encountered multiple exchange collapses, such as the collapse of FTX. Therefore, the demand for on-chain transactions and on-chain applications is becoming more and more urgent. The demand for on-chain transactions, derivative lending, and other needs is also continuously increasing.
What Bitcoin ecological protocol is currently the most promising? Why?
Haotian:
Taproot Assets is a protocol for issuing tokens on the Bitcoin network, which realizes the multi-asset era of Bitcoin and provides developers with more room to play. By leveraging Taproot Assets, we can create a variety of token-based economic use cases that extend the functionality of the Bitcoin network.
However, due to the fact that the Bitcoin network operates based on the UTXO model, it is difficult to implement complex use cases, so the integration of the Lightning Network becomes particularly important. Serving as the computing and application layer, the Lightning Network can extend the functionality of the Bitcoin network, reduce fees, and provide an efficient settlement mechanism. By issuing consumption scenarios based on stablecoins on the Lightning Network, we can create a stablecoin that can circulate smoothly on the Lightning Network, widely accepted and used. This approach brings significant impetus to the expansion and development of the entire Bitcoin eco.
However, Taproot Assets is not perfect. Like any emerging technology, it also faces some challenges and issues. One of them is the potential for substitution attacks on the Lightning Network. Although this attack could potentially impact the future development of Taproot Assets, it is currently not easy to implement. In addition, Lightning Network nodes are trusted, with each node establishing more connections and adhering to certain behavioral guidelines to ensure the security and reliability of Taproot Assets.
In addition, Taproot Assets involves project parties, token distribution, and mid-term nodes throughout the chain. It is a mature and trusted asset issuance and circulation network. Compared to the Ordinals-based gameplay of BRC20, Taproot Assets is more scientific and less prone to formalization issues. However, this field still needs time to develop and mature.
Ben:
In the difference between the Bitcoin and Ethereum blockchain networks, Bitcoin is more like a that constantly subtracts, while Ethereum is a that constantly adds. Taproot Assets is an asset protocol that conforms to the design philosophy of Bitcoin. It can build its own client verification, calculation, and storage on the Bitcoin network to achieve more advanced features in a similar Layer2 manner. The core of Taproot Assets lies in the arrangement of transactions, arranging our assets off-chain through the Nested Merkel Tree, and then achieving on-chain interaction through a transaction format similar to BTC’s native PBST, called Virtual PSDT. Once the Taproot Assets micro-payment channel is launched, it can be used by the lightning network infrastructure of Lightning Labs. This also means that it will be able to integrate all previous proposals on the Lightning Network. However, in sharp contrast, RGB was born earlier and is out of touch with some of the new developments in BTC today. For example, the only significance of the Taproot upgrade to RGB is to put the commitment data into TapLeaf.
Hong Shuning:
First of all, security is the primary task of Bitcoin applications, otherwise it is impossible to discuss other aspects of applications. To address this issue, the RGB protocol adopts off-chain computation, which enables it to achieve complete decentralization while ensuring high security. Because all smart contract computations are peer-to-peer, no third-party assistance is required.
Secondly, the RGB protocol also has the characteristics of scalability and Turing completeness. It can run on the Lightning Network, has scalability, and is designed to implement Turing-complete smart contracts. Its R6VM virtual machine is equivalent to EVM, and even surpasses EVM in some aspects, and can achieve all application scenarios on Ethereum currently.
In addition, the RGB protocol has the advantage of high privacy. Only the parties to the transaction and the participants in the transaction know the contract content and transaction information, and others are completely unaware of the existence of this transaction. This eliminates many problems that currently exist in Web3, such as MEV and hacker attacks.
However, the RGB protocol also has some obvious shortcomings. First of all, its development is very slow. Although the RGB protocol started development 5 years ago, the stable version was only released this year. This is mainly because there are very few developers involved in the development and the development threshold is too high. Although RGB has built a grand technical framework, it still takes some time to fully implement it. Currently, there are very few developers, which has led to slow progress in development. But don’t worry, because the stable version has been released, our applications can try to develop on it.
The second issue is that the combination of RGB and the Lightning Network is not perfect at the moment, and there are still many engineering problems to be solved. This leads to various bugs when using it, although these issues do not affect the security of the protocol itself, the user experience may become very bad.
The third issue is that RGB is still a relatively small technological toy, and the establishment of a commercial and economic incentive mechanism after large-scale commercialization in the future has not been considered. This is one of the reasons why the RGB protocol has not received widespread attention and application so far.
Leo Deng:
Earlier, Professor Hong mentioned that the RGB protocol focuses on off-chain computing, which aligns with the design philosophy of the Lightning Network. Smart contract technology is another highlight of RGB, which can expand the application scenarios of the Bitcoin eco. Recently, we have also observed some applications of the RGB protocol.
There are news reports that Tether Gate’s new CEO Paolo Ardoino stated in an interview that the RGB protocol could be the best choice for issuing stablecoins on Bitcoin, and even a legitimate successor. From the perspective of Tether, RGB’s smart contracts and client integration offer many opportunities for the future Bitcoin eco.
The development of an eco depends not only on the passion and direction of developers, but also on the joint efforts of capital and large institutions. We can see that support and endorsement like Tether are very important for the RGB protocol. The RGB protocol itself is constantly evolving, and there are also more and more developers participating in the application development of this eco protocol. Taking these factors into account, I personally believe that RGB’s potential will be greater.
Bitrabbit:
Here I will introduce Stacks to you. First, let’s talk about its background. The core team of Stacks comes from the computer science department of Princeton University. The founder has been developing on Bitcoin for ten years. He initially worked on the Bitcoin Name (BNS), which is currently the longest-running blockchain domain name in the crypto industry. Later, after a SEC-compliant financing, a chain based on Proof of Transfer (PoX) consensus mechanism was established, which is now called Stacks. In Stacks’ Proof of Transfer, there are two roles: Stacks miners and STX stakers. The more Bitcoin sent by Stacks miners, the higher the probability of receiving STX block rewards.
Next, let’s focus on the Nakamoto upgrade in the first quarter of next year, which is the main direction of the current Stacks work. The Nakamoto upgrade includes three aspects. The first aspect is sBTC, which is based on the above PoX and threshold signatures, and realizes the decentralized anchoring of Bitcoin to Stacks in a bidirectional manner. The second aspect is security upgrade, which includes two parts. One part is the removal of arbitrary forks, which stipulates that 150 blocks of Stacks will never fork, to a greater extent inheriting the security of Bitcoin. The other part is that stx stakers will also participate in the block production of Stacks, which also improves the security assumption. The third aspect is performance upgrade. Currently, Stacks anchors Bitcoin for block production, which is very slow. After the Nakamoto upgrade, the block production speed of Stacks will be increased to 5 seconds through a mechanism called Proof of Elapsed Time, without sacrificing security. However, it also sacrifices transaction fees. The transaction fees in the 5-second blocks will be much higher than those in the anchor blocks.
The above sBTC, security upgrade, performance upgrade, and performance upgrade are the three major aspects of the upcoming Nakamoto upgrade.
The trustless cross-chain solution of Stacks looks very good in terms of technology, but it also has its drawbacks, which is sacrificing liquidity to ensure security. The capacity of sBTC is limited by the market value of Stacks, so it will take some time to develop to a certain scale.
How do you view the future development of the Bitcoin eco?
Hong Shuning:
In the short term, I think there are two main advantages to the RGB protocol. First of all, it supports native BTC, which means that we don’t need to do any cross-chain or peg operations and can get BTC native assets directly from the Bitcoin blockchain. Second, it supports Tether’s USDT, which is enough to build various use cases on the RGB protocol.
In my opinion, decentralized lending will be the first explosion on the RGB protocol. By borrowing and lending BTC and USDT, we can get more flexibility and freedom in how we use our funds. At the same time, decentralized lending will become a very large market, surpassing all existing centralized lending platforms.
In addition, due to the infinite scalability of the RGB protocol, full-chain games can also be easily implemented on it. Game companies can directly deploy complex game logic on the chain, which will be a very imaginative direction. Once full-chain games become popular on the Bitcoin chain, traditional world traffic will also start to enter. In short, the RGB protocol has tremendous potential to create a more open, transparent, and decentralized application eco for us.
Haotian：
In my opinion, one of the biggest expectations for the Bitcoin eco is the subsequent effect of the Lightning Network. Since the launch of the Lightning Network Taproot Assets, some projects like Tether have redeployed in the Bitcoin eco, for example, issuing USDT and then allowing this USDT to enter the Lightning Network for circulation. This is an exciting trend, indicating that virtual currencies and assets are truly landing and being applied in consumer scenarios.
Another phenomenon observed recently is that the entire Ethereum network is working on some abstract layers, such as account abstraction, with the aim of lowering the user threshold for using smart contracts, attracting more users, and achieving large-scale adoption. However, at present, Ethereum seems to have entered a dilemma, that no matter how it develops, the user threshold remains high.
Will there be projects that issue assets on the Lightning Network and push them to the application layer? For example, issuing a game on the Lightning Network that adopts a dual-currency model, with one currency possibly being issued on the Lightning Network. The purpose of doing this is to encourage people to spend these currencies. Can we find game companies or teams to do such things? This is something we need to look forward to and pay attention to. If this potential can be fully realized, especially in combination with Ethereum, I believe there will be better development prospects.
Ben:
First of all, from the perspective of giants, why does Tether pay attention to the stablecoin on the Lightning Network? There are two layers in the token economy, one is settlement money and the other is payment money. For giants, they not only want to earn Bitcoin transaction fees but also want to earn money from stablecoin payments.
Last year, Gate.io approached Lighting Labs with the expectation of collaborating to distribute USDT on the infrastructure of Lighting Labs. However, this plan failed because Lighting Labs controls over 90% of the market share of the Lightning Network LND client. Since Lighting Labs couldn’t provide Gate.io with the desired share, Gate.io chose to collaborate with RGB to issue USDT and earn transaction fees.
When there is a stablecoin in the eco, it has a foundation of liquidity. Compared to only having Bitcoin before, now there will be more imagination. Based on this, developers can create a lot of infrastructure, such as Dex and collateral loans. Especially for traditional crypto application developers, they can now do DeFi.
So, which scene should we be optimistic about? I believe the payment eco will be the first lively scene, but this eco may be driven by giants. And if we want to see the outbreak of other ecological scenes, then DeFi would be a good choice. If we want to see more diverse applications, then we need to wait for the overall development.
Leo Deng:
In my opinion, there is huge potential for stablecoin payments based on the Bitcoin second-layer network. The second-layer network has significant advantages in transaction speed and user experience, which can greatly improve the usability of encrypted payments for C2C, B2C, and even B2B. In addition, the network stability of Bitcoin over the past decade has made it possible to use stablecoin payments based on the Bitcoin second-layer network and can solve the current problems in the stablecoin payment scene.
In addition, cross-chain interoperability is another important direction for the Bitcoin eco. The introduction of smart contracts can greatly improve the interoperability between Bitcoin and other non-EVM public chain networks. This demand for cross-chain asset and data sharing, identity verification, and other needs will bring huge opportunities for cross-chain interoperability. For example, the Harry Pod project and the cross-chain solution invested by Connet focus on cross-chain interactions between the Bitcoin eco and other ecos, including swap and MP trading markets.
With the increasing acceptance and expansion of Bitcoin, the spillover effect of the Bitcoin eco will become more prominent. This spillover can provide opportunities for Bitcoin to connect with other non-Bitcoin eco networks. I believe that the Bitcoin eco will play a greater network role in the future and connect with other ecos, including the Ethereum eco and other non-EVM chain ecos.
Bitrabbit:
As I mentioned before, the Stacks project turns independent secure-budget sidechains into a Bitcoin smart contract layer with a complete ution environment in a way that does not change the Bitcoin consensus, which unlocks a lot of programmability for Bitcoin.
With such infrastructure, Bitcoin holders can engage in decentralized transactions on the Bitcoin network, similar to DeFi operations on Ethereum. Currently, Stacks has achieved a considerable level of maturity in this regard.
At last week’s London Hackathon, 250 developers participated and submitted applications for various projects. Among them, there are four representative projects, which represent the four directions of DEX, derivatives, lending, and stability. These include Dex (currently the largest decentralized exchange platform on Alex), a decentralized stablecoin protocol (similar to MakerDao) Arkadiko protocol, and two protocols involving derivatives Velar and Bitcoin lending Zest, respectively.
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