Why is the Bitcoin ecosystem bound to surpass the Ethereum ecosystem?

Foreword:

The Bitcoin ecosystem is not built on Layer 1, and the Bitcoin blockchain is naturally not Turing complete. Moreover, Bitcoin’s minimalist UTXO and limited block space cannot handle complex data and calculations. Therefore, Bitcoin needs Layer 2 to develop its ecosystem, and it is a completely decentralized Bitcoin Layer 2. Several major upgrades of Bitcoin in the past 15 years have brought about many technological innovations, but they have been ignored by people. Therefore, most people believe that the Bitcoin ecosystem cannot create a fully decentralized Layer 2 that can support large-scale ecological applications. This is a lack of awareness of the development of Bitcoin, a lack of understanding of the nature of Layer 2, and arrogance and prejudice against the Bitcoin ecosystem.

The biggest obstacle to people’s progress is pride and prejudice.

I advise you all to put down your arrogance, learn from an empty cup, and correct your perceptions.

I would like to use this article to rectify the name of decentralized Bitcoin Layer 2.

text:

1. What is Layer2 and what is the essence of Layer2?

2. What are the similarities and differences in the design of Bitcoin Layer 2 and Ethereum Layer 2? What are the design principles of Layer 2?

3. The correct path for Bitcoin Layer 2.

4. Bitcoin Layer 2 will definitely surpass Ethereum Layer 2, and the Bitcoin ecosystem will definitely surpass the Ethereum ecosystem.

1. What is Layer2 and what is the essence of Layer2?

The concept of Layer 2 is well-known because of the Ethereum ecosystem. However, the concept of Layer 2 is not original to the Ethereum ecosystem, but comes from Bitcoin.

The code of Bitcoin version 0.1 retains an original version of the code, which was left by Satoshi Nakamoto. This code allows users to update transactions before they are confirmed by miners. If one user’s balance increases, another user’s balance will decrease accordingly. Once the user completes the transaction, they can only transmit a transaction result to the main chain network and close their payment channel. Based on the “payment channel”, the Lightning Network was later born. The Lightning Network is the earliest Layer 2 of Bitcoin and the earliest and feasible Layer 2 in the encryption world.

Therefore, when we talk about what Layer 2 is, we cannot just follow the lead of Ethereum Layer 2, nor can we use Ethereum Layer 2 as the only criterion (after all, it was after two years of development that Ethereum Layer 2 basically determined the feasibility of the design direction of roullp. nature), but we should see the essence through the phenomenon. We need to understand what is the essence of Layer2? Only in this way can a practical Layer 2 be designed.

Whether it is Bitcoin Layer 2 or Ethereum Layer 2, the background of its birth is that when the Layer 1 main network cannot realize more complex and higher-performance application scenarios, Layer 1 assets need to be jumped to Layer 2 for implementation. Ethereum needs Layer 2 to expand its performance, and Bitcoin needs Layer 2 even more. For example, BTC can implement fast and efficient payment scenarios in the Lightning Network; ETH can cross over to Arbitrum to implement faster, lower Gas, and more complex smart contract scenarios.

Therefore, whether it is Bitcoin Layer 2 or Ethereum Layer 2, the essence is the same, which is to allow the main network assets of Layer 1 to be transferred to Layer 2 to achieve more complex and higher-performance application scenarios. Therefore, the essence of Layer2 is a decentralized cross-chain solution + a high-performance and trustless second-layer network.

So, whether it is Bitcoin Layer 2 or Ethereum Layer 2, some of the most basic principles must be followed when designing:

1. It is necessary to realize that Layer1 assets can be transferred to Layer2 without trust. This is the most important first step.

2. The ledger of the Layer 2 network must be secure and trustless.

Only when the above two conditions are met at the same time can a practical and fully decentralized Layer 2 be achieved.

2. What are the similarities and differences in design between Bitcoin Layer 2 and Ethereum Layer 2?

We have figured out the essence of Layer 2 and the basic principles of Layer 2 design. Then, let’s take a look at the similarities and differences in the actual design of Bitcoin Layer 2 and Ethereum Layer 2?

1. Layer1 assets must be transferred to Layer2 without trust.

Cross-chain method between Ethereum Layer1 and Layer2: Layer2 officially deploys a smart contract for managed assets on the Ethereum main network. When a user crosses ETH from the Ethereum main network to Layer2, the user’s ETH is locked in the smart contract and is stored in the smart contract. The Layer2 network generates new ETH 1:1. When the user issues an instruction to cross back to the main network, the ETH in Layer 2 is destroyed and the smart contract on Layer 1 is triggered to unlock the ETH to the user. This is the cross-chain implementation of Ethereum Layer1 and Layer2. It is realized through Ethereum’s smart contracts and Layer1 and Layer2 network communication, which can achieve trustlessness.

So, how can Layer 2 of Bitcoin achieve trustless BTC cross-chain?

Before the Bitcoin Taproot upgrade in 2021, it was impossible to achieve fully decentralized BTC cross-chain. However, since the Taproot upgrade brought Schnorr signatures and MAST contracts, fully decentralized Bitcoin cross-chain became a reality.

Schnorr signature is a signature algorithm more suitable for Bitcoin than elliptic curve signature. Ethereum has always wanted to support this signature. However, because upgrading the signature algorithm involves complex issues such as Ethereum’s account system, Ethereum has not upgraded to Schnorr signature. . The biggest feature of Schnorr signatures is aggregated signatures, which can allow 1,000 Bitcoin addresses to sign and manage the same asset. Not only can it achieve the privacy of signatures, but it can also combine the data submitted by 1,000 signatures into one transaction, completely solving the problems caused by multiple signatures. Therefore, Schnorr signature can break through the original Bitcoin limit of up to 15 multi-signatures and achieve completely decentralized signature management.

The Mast contract, whose full name is Merkle Abstract Syntax Tree, uses a Merkle tree to encrypt complex locking scripts. Its leaves are a series of non-overlapping scripts. When spending, you only need to disclose the relevant scripts and the steps from the script to Merkle. The path of the tree root.

A simple understanding of the Mast contract is equivalent to the function of VM (smart contract-like function). It can perform predetermined operations through instructions. For example, the combination of Mast contract + Schnorr signature can trigger the Mast contract to participate in decentralized asset management. 1,000 nodes sign, thereby intelligently executing the entry and exit and spending of Bitcoin according to the rules set by the contract. There is no human intervention here, and it is completely executed by the contract, thus realizing the decentralized management of Bitcoin. For specific details, please refer to the BEVM white paper:https://github.com/btclayer2/BEVM-white-paper

Let’s take the BTC Layer2 project BEVM as an example to see how the real BTCLayer2 can achieve complete decentralization and cross-chain?

When a user transfers BTC from the Bitcoin main network to BEVM, the user’s BTC enters the contract address hosted by 1,000 nodes. Then, at the same time, new BTC is generated in BEVM, the BTC Layer2 network, at a ratio of 1:1. When the user sends When the BTC is transferred from BEVM back to the main network, the BEVM network node will trigger the Mast contract, and the 1,000 asset-managed nodes will automatically sign according to the established rules and return the BTC to the user’s address. The entire process is completely decentralized and trustless.

As can be seen from the above, by using the combination of Mast contract + Schnorr signature brought by Taproot, Bitcoin can also achieve completely trustless cross-chain like Ethereum Layer2. This is the most important thing to achieve fully decentralized BTC Layer2. the first step.

1. The ledger of the Layer 2 network must be secure and trustless.

The ledger of Ethereum Layer 2 is managed by the sequencer. When processing transactions, the Layer 2 ledger is packaged and uploaded to the Ethereum main network according to a certain ratio, usually a ratio of 10:1, and then verified by the Ethereum node. However, , the sequencer of Ethereum Layer 2 (which is the operating node of the Layer 2 network, usually only one node) is completely centralized, and is officially run and controlled by Layer 2. How can such a centralized design gain user trust? Mainly by packaging the Layer 2 ledger roullp into the Ethereum main network for miner nodes to verify. If the user does not trust the ledger, the ledger can be verified by initiating an off-chain report. Therefore, Op-Roullp is also called optimistic proof, which is its trust. The assumption is that it is optimistic that officials do not do evil, and if they do, it can be proven through reports. These combined designs can basically guarantee that the Layer 2 ledger is trustworthy. However, this also results in the ETH and other assets on Ethereum Layer 2 not being censorship-resistant and can be forcibly frozen by external forces, because the ETH Layer 2 sorter is official A node of its own can be controlled centrally. This will also lead to an upper limit on the asset size of ETH Layer 2, because many large funds will not dare to enter because of the problem of not being able to resist censorship. Just imagine, if you have 100,000 ETH, do you dare to cross these assets into a Censorship-resistant Ethereum Layer 2?

At the same time, there are two unfriendly problems for users:

a. Since Op-Roullp has a 7-day reporting mechanism, when a user transfers ETH from Layer 2 back to the Ethereum mainnet, at least the 7-day reporting period needs to pass.

b. Since the sorter of ETH Layer2 is completely controlled by an official node of the project, the cross-chain and transaction fees of ETH Layer2 are completely exclusive to the project official (it is reported that the monthly sorter revenue of ETH Layer2 such as Base and ZKsync exceeds 5 million US dollars, exceeding 10 million US dollars at the peak), and Layer 2 users cannot share these network growth dividends.

So, how does Bitcoin Layer 2 achieve ledger trust?

We still take BEVM as an example. We mentioned earlier that BEVM achieves decentralized cross-chain Bitcoin through the combination of Mast contract + Schnorr signature. In order to achieve real-time communication between Layer2 and Layer1, BEVM’s network is a fully operational Bitcoin Coin light nodes, so BEVM is a trusted network composed of 1,000 Bitcoin light nodes.

In order to ensure the absolute security of the Layer 2 ledger and ensure that network nodes do not do evil, BEVM draws on the economic game mechanism of the Bitcoin network. BEVM combines the nodes hosting Bitcoin and the nodes running the Layer 2 network into one, that is, running the Layer 2 network through pledged assets. The nodes of BEVM are also nodes that host BTC assets. At the same time, BEVM has designed a set of automated dynamic pledge mechanisms completely based on economics, which ensures that the total value of BTC/mainnet tokens pledged by BEVM’s Layer 2 nodes is always greater than the value of the assets under its custody. , using the economic game mechanism to ensure that Layer 2 network nodes have no motivation to do evil, thus ensuring that Layer 2’s ledger is absolutely safe and trustworthy.

In addition, the design of BEVM also brings two benefits, which Ethereum Layer 2 does not have:

a. BEVM’s network nodes are completely decentralized and are not controlled by a certain project party. Therefore, BTC is censorship-resistant on BEVM Layer 2 and cannot be frozen by any force. It can be compared with the Bitcoin main network. Crossing in and out at any time. Therefore, the trust problem of big funds can be solved.

b. Since the BEVM network is run by decentralized nodes, the cross-chain and network handling fees generated are shared with nodes and users, and are not exclusive to the project party.

3. The correct path for Bitcoin Layer 2

Through the above comparison, we can clearly see the similarities and differences between Bitcoin Layer 2 and Ethereum Layer 2. Due to the innate differences between Bitcoin and Ethereum, when designing Bitcoin Layer 2, we cannot copy the Ethereum Layer 2 model, but should see through it. The essence of Layer 2, combined with the characteristics of Bitcoin, can lead to the correct path of Bitcoin Layer 2.

The correct design direction of Bitcoin Layer 2:

1. Bitcoin Layer 1 is naturally not Turing-complete. Bitcoin’s minimalist UTXO design and block space cannot verify complex calculation data and programs. Therefore, attempts to pass client verification or within Bitcoin’s limited UTXO and block space It is not feasible to make improvement plans. Not only is the implementation plan in this direction extremely complicated, but improvements within the limited expansion space of Bitcoin Layer 1 can only support the issuance of assets at most. It is not feasible to expand the direction of Layer 2 with higher performance. . The only correct direction is to jump BTC to Layer 2 in a decentralized manner, thereby achieving more complex and higher-performance scenario expansion.

2. We must solve the problem of Bitcoin decentralization cross-chain to Layer 2, which is the basis of everything. It is difficult to gain users’ trust through traditional Bitcoin cross-chain methods such as Hash time locks, hooks, encapsulation, and multi-signatures. The technology combination of Mast contract + Schnorr signature brought by Bitcoin’s 2021 Taproot upgrade can solve the decentralized cross-chain problem of Bitcoin and is also a direction worth exploring for Bitcoin Layer 2.

3. In order to ensure the security and credibility of the Layer 2 ledger, we must not copy the Ethereum Layer 2 model and try to compress and package the BTC Layer 2 ledger to the Bitcoin chain for verification through roullp. This is not feasible because, Bitcoin The blockchain does not support OP or ZKP verification, and miners will not participate in the verification of Layer 2 ledgers. Saving these ledgers on the Bitcoin chain is just a deposit certificate and has no meaning. To ensure the security of the Layer 2 ledger, you can learn the economic game mechanism of Bitcoin and design a node dynamic pledge mechanism through the aspects of economics and game theory, so that Layer 2 network nodes have no incentive to do evil, thus ensuring the security of the Layer 2 ledger.

4. We all hope that Bitcoin will be upgraded to the BIP level again in the future, so that the Bitcoin network can verify OP or ZKP, and Bitcoin mining machines can perform ZKP calculations. At this time, ZK-roullp can enter the Bitcoin network. At that time, Bitcoin Layer 2 can achieve a more ultimate solution. However, this may only be achieved in the next 5-10 years.

Based on the above analysis, we can see that the most feasible BTC Layer2 solution at present is based on the Mast contract + Schnorr signature brought by the Taproot upgrade, combined with the Bitcoin light node dynamic pledge network to achieve real-time communication and network security of Layer2 and Layer1, thus To achieve a truly decentralized Bitcoin Layer 2, this is exactly what BEVM has implemented.

4. Bitcoin Layer 2 will definitely surpass Ethereum Layer 2, and the Bitcoin ecosystem will definitely surpass the Ethereum ecosystem.

Why do we think that Bitcoin Layer 2 will definitely surpass Ethereum Layer 2, and the Bitcoin ecosystem will also surpass the Ethereum ecosystem?

We believe there are at least the following reasons:

1. There is currently a completely decentralized BTC Layer2 solution available. Before there was a completely decentralized solution, the largest Bitcoin encapsulated asset was WBTC issued through the centralized institution Bitgo, which currently has a scale of approximately US$6.5 billion. After the emergence of completely decentralized solutions (such as BEVM), it is predicted that the market can grow by more than 5-10 times, and the volume can reach 32.5 billion-65 billion US dollars, which is far larger than the current total TVL of 20 billion US dollars for ETH Layer2 ( This data includes cross-chain ETH and other assets on ETH Layer 2. The actual cross-chain ETH is far less than 20 billion US dollars)

2. Since Bitcoin is naturally not Turing-complete, Bitcoin needs Layer 2 more than Ethereum to develop its ecosystem. Therefore, there will be a large amount of BTC going to Layer 2 in the future to build various decentralized BTC applications. This is determined by market demand.

3. Bitcoin Layer 2 can be more censorship-resistant than Ethereum Layer 2, and it is easier to gain the trust and favor of users, especially those with large funds.

4. The market value of Bitcoin is three times that of Ethereum. The current total TVL of ETH Layer 2 is about 20 billion US dollars, accounting for about 10% of the market value of Ethereum. According to the same proportion, if 10% of BTC enters Bitcoin Layer 2 in the future, the entire TVL will reach 85 billion US dollars, which is three times the size of Ethereum Layer 2.

Summarize:

We analyzed the essence of Layer 2 and compared the design similarities and differences between Bitcoin Layer 2 and Ethereum Layer 2. We saw a practical implementation plan for Bitcoin Layer 2. At the same time, based on the advancement of Bitcoin Layer 2 design and the rigid demands of Bitcoin itself and ecological development, we deduce that Bitcoin Layer 2 will definitely surpass Ethereum Layer 2.

Eventually, the Bitcoin ecosystem will surely surpass the Ethereum ecosystem.

Disclaimer：

1. This article is reprinted from [mirror]. All copyrights belong to the original author [Peter.G]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
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