Bitcoin Layer2 Hundred Chain War: Project owners and capital "conspire", Chinese return to the center of cryptocurrencies

Original author: flowie, ChainCatcher

At the just-concluded Denver conference, Jademont, founding partner of Waterdrip Capital, 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 fire. After Inscription became popular, Jeff participated in no fewer than ten interviews and Spaces in a month.

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

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

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 Layer 2.

However, the Bitcoin Layer 2 narrative dominated by the Chinese has gradually divided into two camps. Supporters believe that it is the rediscovery of the value of the Bitcoin network, and the Chinese community will return to the crypto C position. In the eyes of opponents, this is undoubtedly old wine in a new bottle, and in essence it is still a huge capital pool. When it started, it was a lot of faith drama, and when it fell, it was nothing.

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 has divided the encryption market into two camps.

Conservatives believe that this is a story of old wine in new bottles. It started out as a drama about faith, and when it went down, it was nothing but chicken feathers.

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 the Ordinals/BRC-20 came out, the market was booming. dForce founder @mindaoyang thought back to the story of Vitalik tinkering with colored coins 10 years ago.

In 2012, Vitalik and his team launched Colored Coins to support users in issuing coins in the Bitcoin ecosystem. Anyone can build assets, trade and vote based on the Bitcoin protocol.

Soon after, Vitalik also worked with EOS founder BM to write 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 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 ORDI and other BRC-20 tokens were not very popular at first.

However, the Bitcoin crypto OG who missed the 2017 Ethereum ICO and Defi summer noticed something different. At that time, Jeff, who was still focusing on the modular blockchain development engine in Ethereum, turned his head and plunged into the Bitcoin ecological development and application.

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

In their view, any business is worth redoing based on some significant 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, resulting in new narratives, asset transactions and business models. The NFT market in 2021 is booming, and the unicorn OpenSea was born. 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 NFTs and game content on Ethereum are not on the chain. The innovation of Ordinals can make Bitcoin more suitable than Ethereum. Make applications.

What Gavin sees more is that after the Taproot upgrade on Bitcoin, the scalability conditions of Bitcoin have changed dramatically. The emergence of Ordinals is a historical necessity, and the Pandoras box of the Bitcoin ecosystem is about to open.

But what they didnt expect was that the Bitcoin ecosystem was moving 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 codes soon appeared, and Jeff became one of the important promoters. He has tried nearly 10 applications on the Bitcoin layer, including Bitmap.Game (Bitmap metaverse land) and BRC-420 protocol (asset protocol based on module data), which have created a lot of wealth utility.

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

However, the excessively 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 a new life for the Bitcoin cross-chain project ChainX, which 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: Bitcoins market value is so huge, why dont 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. The ChainX mainnet was launched in 2019. 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 nothing 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 subsidiary Wormhole to try to solve the problem of Bitcoins full-chain interoperability, but in the end they were shelved as unable to do it.

On the one hand, the limitations of Bitcoins own architecture make it difficult to achieve safe decentralized cross-chain. More importantly, what do other chains do? Bitcoin has no assets and no ecosystem.

The turning point came around October 2021, when Bitcoin’s first major upgrade, Taproot, was launched. Gavin said excitedly: This is a cross-generational upgrade of Bitcoins underlying technology.

The new pricing model of Segregated Witness in 2017 allowed Bitcoin to softly expand by 4 times, but the 4x expansion space cannot be utilized. Until Taproot was upgraded, 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, Vitaliks concept of issuing colored coins and building smart contracts on Bitcoin more than 10 years ago has become truly possible under the Bitcoin scalable technical framework brought by Taproot upgrade. The birth and popularity of Ordinals and BRC 20 in 2023 are based on this premise.

In May 2023, Gavin launched Bitcoin Layer 2 BEVM after upgrading ChainXs 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 modes.

Fomos Venture Capital

Entering 2024, hundreds of Bitcoin Layer 2 chains will be launched.

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. However, multiple Bitcoin Layer 2 project parties interviewed by ChainCatcher believed that the number was far more than , it is expected that hundreds of them are ready to move. Jeff joked: There are more banks than depositors, so its hard not to be called speculation.

The old Bitcoin information media Bitcoin Magazine founded by Vitalik also stood up and said that a new wave of speculators are trying to use the development of Bitcoin Layer 2 to promote its encrypted assets.

Bitcoin Layer 2, which is so popular, 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 and not on the old, Bitcoin Layer 2 is indeed a shortcut for project developers to attract users and capital.

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

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. The price continued to rise thereafter, even approaching US$100 at one time.

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 type of asset and has the dual advantages of FT and NFT. This It 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 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 previous round, Bitcoin Layer 2 is also a shortcut to quickly gain a foothold in the new 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 the Bitcoin 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 Binances introduction to CKB - Nervos Network is an open source public chain ecosystem and protocol collection. It needs to be changed quickly 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, and the token price rose by 12% that day.

In December 2023, MAP Protocol, a 5-year-old project, transformed from a full-chain interoperability protocol benchmarking LayerZero to Bitcoin Layer 2, and disclosed a number of well-known projects from Waterdrip Capital, DWF Labs, LK Ventur, Alchemy Pay, etc. At least 5 investments from institutions.

For a time, everything could be Bitcoin Layer 2, and project developers flocked to it, which caused dissatisfaction with Telepathy, who was 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 2 is obvious. Venture capitalists are envious of Ordinals 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 dont understand the technology and gameplay clearly.

In 2023, Inscription led the Bitcoin ecology to explode, but it was all the excitement of retail investors. Investment institutions were very FOMO but could not participate.

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

Around the beginning of 2024, Bitcoin Layer 2 became a popular financing track, with nearly 10 investments disclosed, and well-known venture capital firms such as OKX Ventures, HashKey Capital, and ABCDE were actively involved.

Lao Bai, a partner at ABCDE Investment Research, said bluntly, “No one can truly predict whether the Bitcoin ecosystem will prosper as expected, but Bitcoin Layer 2 is a track that we absolutely must get on.”

When new concepts are combined with Meme

In January 2024, according to incomplete statistics, there were at least more than 30 Space and podcast events surrounding Bitcoin Layer 2, and Jeff, the founder of Bitmap and Merlin Chain, was the most popular guest.

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

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 debates continued.

However, following the example 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 performs on-chain settlement without verification, basically all Bitcoin Layer 2 cannot achieve the same security equivalent to the main network as Ethereum Layer 2. 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. The three major mainstream expansion plans of Bitcoin in the past include the client verification plan represented by the RGB protocol, the state channel plan represented by the Lightning Network, and the side chain plan. 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.”

After half a year, B² Network believes that it has found a more secure processing method, that is, combining bitVM and RGB solutions, which can realize the verification of Bitcoin Rollup Commitment on the Bitcoin main network. Stone said: This is the current BTC Rollup solution. The solution that inherits the security of the Bitcoin mainnet to the highest degree.

But Jeff bluntly said that Bitcoin Layer 2 technological innovation is a common-sense mistake. If you look at the code, everyones technical solutions are very similar. The so-called innovation is nothing more than how to decentralize the second-layer chain sufficiently. and safety.

The security of the chain is the bottom line, not the reason why users are willing to deposit money. In Jeffs view, if you look at the users perspective, there must be a high return if you are willing to put money in.

Since June last year, the first asset blue box on the Bitmap Metaverse and BRC 420 protocol has become popular one after another, bringing wealth effects to users.

In a 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 several plate rotations, he decided to tone down the narrative and look for projects that were more Ponzi and meme-y.

There are Bitcoin Layer 2 projects that use the pledge points model to achieve success, and there are also those that issue coins early and become idiots.

Merlin Chains staking point-based 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 Bitcoin Layer 1 decentralized index may be far less attractive than a meme.

The Telepathy team said that the project team accidentally made a bunch of inscriptions, and after the experience almost reached 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 TE L3, 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 its own faction among many L2 battles. It is very magical and unique. I like this kind of crazy project. @qianqianlaw bought 110+ sats before the Spring Festival. TE L3, after the year it was found that the number has tripled.

Chinese re-enter the encryption C position

In this bull market, the Bitcoin ecosystem is one of the most important narratives that cannot be ignored. Whether it is the inscription or Bitcoin Layer 2, 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 Inscription, Bitcoin Layer 2 has seen the emergence of innovative game players such as Merlin Chain and 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 North American investors have been actively approaching his team since the beginning of the year.

At the just-concluded Denver conference, Jademont, founding partner of Waterdrip Capital, 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.” .

Dashan feels that the last time the Chinese had such a status in the encryption market was in the Chinese public chain era from 2016 to 2017. Later, with the constraints of the regulatory environment, Chinas 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.