Nervos’ Chief Architect: We need to build Web5 (= Web2 + Web3).

On March 9, at the Bitcoin Singapore 2024 conference jointly organized by the Nervos Foundation and ABCDE, Jan Xie, the Chief Architect of CKB, delivered a keynote speech titled “Bitcoin Renaissance: Why & How?” Here are the key points from Jan Xie’s speech:

Why Do We Need a Bitcoin Renaissance?

Why do we need a Bitcoin renaissance? A simple answer is that people want to use BTC.

Currently, there are many Bitcoin Layer 2 (L2) projects, and users are moving their BTC to these L2 solutions or locking BTC on these L2 solutions. However, people are also moving BTC to other platforms, such as Ethereum, not just traditional Bitcoin L2 solutions. Moreover, the amount of BTC on Ethereum far exceeds the amount on Bitcoin L2 solutions.

Furthermore, more BTC is stored on centralised exchanges, such as approximately 1 million BTC in Coinbase’s cold wallets.

What I want to say is that people don’t just see BTC as a store of value (SoV); they also want to use BTC for payments, transactions, or other purposes. Whether Bitcoin maximalists like it or not, if we do nothing, others will do it, and they will offer worse solutions because BTC flows everywhere like water.

Another demand we can see is that people want new assets. So far, the total value of assets issued on the Bitcoin blockchain is $3 billion, far behind the total value issued on other blockchains. Bitcoin is the most secure, decentralized, and censorship-resistant platform, yet the total value of assets issued on this platform is the least. For comparison, Tron’s market capitalization is approximately $12 billion, and the total value of assets issued on the Tron blockchain has reached $10 billion. Do you think this is a good thing or a bad thing?

I would like to reiterate that if we do nothing now, others will do it, and they will offer worse solutions, and we will have no choice but to use what they create.

After the launch of the Ethereum mainnet, Peter Todd and Greg Maxwell pointed out in 2016 that Ethereum’s architecture had flaws, which were not the direction the industry should follow. However, over the past eight years, due to Bitcoin’s lack of substantial progress in meeting real-world needs, the entire crypto industry has shifted to a direction that we do not want to see: building everything on PoS, proliferation of account models, and mainstream adoption of scalability solutions such as sharding and Rollups. I do not believe this is the path the crypto industry should take.

Bitcoin has brought many genuine innovations, but over the past few years, the industry has abandoned these innovations, such as PoW, UTXO, and P2P networks.

So, why do we need a Bitcoin renaissance? I believe it’s because there are indeed real needs, demands for new assets, and demands for Bitcoin use cases. Therefore, I hope that we can seize the opportunity of the Bitcoin renaissance to change the direction of the entire crypto industry, follow Bitcoin’s architecture, values, and ideals, and create new things, moving in the right direction.

About Bitcoin’s History

Bitcoin’s values, as written in the whitepaper, are a peer-to-peer electronic cash system. It is not the peer-to-contract systems or peer-to-sequencer systems like Rollup that we see everywhere now.

Bitcoin is based on PoW and UTXO, and UTXO is a superior accounting method compared to account models because on UTXO, we can create genuinely peer-to-peer assets, create anonymous assets, just like cash, rather than assets in peer-to-contract or balances in accounts.

Bitcoin focuses on verification rather than computation, emphasizing self-custody and the inseparability of coins and keys.

How to Build a Better Blockchain? The Bitcoin community has discussed many ideas. For example, Peter Todd has written a series of articles and blogs discussing various ideas, and I believe three of them are particularly important:

1. Disentangling Crypto-Coin Mining: Timestamping, Proof-of-Publication, and Validation, 2013
2. Building Blocks of the State Machine Approach to Consensus, 2016
3. Scalable Semi-Trustless Asset Transfer via Single-Use-Seals and Proof-of-Publication, 2017

Peter Todd’s core idea is that we only need single-use seals, and we need to create a blockchain consisting entirely of single-use seals, without the need for anything else on-chain. We need to put all the computation and even more verification off-chain, which is what client-side validation should do. We need to move more things off-chain, and we can build many new products off-chain, such as colored coins, RGB, Ordinal, Atomicals, and so on.

We can also create channels off-chain. The channels we have now are the Lightning Network, but there are actually many related studies on channel architecture and channel design. Interestingly, you can think of channels as client-side validation on both sides, which I also see as a form of client-side validation.

The Bitcoin community also has many ideas about L2 chains. There have been many discussions before, and L2 chains are not something new, and they are different from Ethereum’s L2, not Rollup. There are two dimensions to measuring L2 chains, one is the consensus mechanism, such as merge mining, Staking, and chains with independent consensus mechanisms (Sovereign Chain), and the other dimension is how to bridge L1 and L2, called Two-Way Peg (2WP) on Bitcoin. Interestingly, the underlying chains and off-chain protocols are orthogonal, such as CSV and channels. This means we can merge them together.

The problem now is that the Bitcoin community has had many great ideas for a long time, but progress has been slow. The first reason is the lack of programmability in Bitcoin, and the second reason is inherent to Bitcoin itself. Bitcoin staunchly avoids change, and it is very difficult to introduce any changes to the Bitcoin protocol. That’s why we are meeting here today.

How to Achieve the Bitcoin Renaissance?

How can we get what we want in this space? If we want to do anything in this circle, there are three principles:

1. Meet users’ needs.
2. Adhere to Bitcoin’s values.
3. Do not rely on any soft or hard forks.

Fortunately, users want to issue new assets, and their needs have always existed. There have been some asset issuance protocols, such as Ordinals, Runes, BRC-20, Taproot Assets, etc. We can issue assets on the Bitcoin chain, issue peer-to-peer, censorship-resistant assets without needing Bitcoin to make any changes or forks. The ability to issue assets on the Bitcoin chain is only limited by our own mindset or Bitcoin maximalist beliefs. Issuing assets on the Bitcoin chain can actually bring many benefits to Bitcoin. For example, the more assets issued on the chain, the higher the miner fee income, which means more security budget for Bitcoin in the future.

We also need a programmable layer because Bitcoin itself is limited, and we cannot do many things on the Bitcoin chain. If we can create a layer based on Bitcoin that gives assets on the Bitcoin chain programmable capabilities, we can do many things. This programmable layer will be the foundation for everything else, including scalability, privacy, Bitcoin financial activities, etc. This programmable layer will be the hub for assets on the Bitcoin chain and will be completely different from Ethereum. Ethereum has programmability, so it doesn’t need a programmable layer, but Bitcoin does.

Then, we need a high-speed highway between Bitcoin and the programmable layer. We can use Two-Way Peg (bi-directional anchoring) or use an innovative method to bridge assets between Bitcoin and the programmable layer, which I call UIB (Universal Isomorphic Binding). The idea of UIB originates from Cipher, the author of the RGB++ protocol, and is a core technology of RGB++. Cipher will provide a detailed introduction to the RGB++ protocol later, so I will skip this part.

One point I want to mention here is the difference between Two-Way Peg and UIB. Two-Way Peg is where you transfer assets to an entity, and this entity sends you the corresponding assets on another chain; UIB is a peer-to-peer mapping where you directly establish a correlation between UTXOs on two chains, without any intermediaries or third parties.

Once we have a programmable layer, we can build another layer on top of it to achieve scalability and privacy. We have many options for this layer, such as client-side validation, Open Transactions, Nostr, Chaumian E-Cash, P2P markets, etc. Then, we can use channels to connect everything. We can use channels to connect L1, L2, L3, connect Web2 and Web3.

In this way, we get the following diagram:

Serving as the underlying asset issuance platform, Bitcoin has a programmable layer built on top of it to achieve scalability and privacy. In my opinion, L3 doesn’t even need to use a blockchain because blockchain favors transparency and global consensus, but it is detrimental to scalability and privacy. This is different from the Ethereum ecosystem, where the panorama is layering Rollups on top of Rollups. Why does the industry need so many blockchains? In fact, it doesn’t. L3 should be a P2P network, and then channels can connect everything.

So, I believe what we need to build is Web5, where Web5 equals Web2 plus Web3. Web3 aggressively moves everything onto the chain, but why do we need to move everything onto the chain? The internet is actually doing well; it just has some problems. We can use P2P technology, cryptographic technology, and other new technologies to fix Web2; it’s not Web3. We don’t need to put everything on the chain. With these technologies, what we actually want to build is Web5.

Summary

In summary, here are the key points from this speech:

1. There is indeed a demand for new applications and new assets.
2. If we don’t build something that is censorship-resistant, private, and user-friendly, they will build something that is censorable, lacks privacy, and is unfriendly to users.
3. Bitcoin needs programmable L2.
4. UIB provides assets with programmability.
5. Programmability is the foundation of everything else.
6. L3 needs to achieve scalability and privacy.
7. Channels connect everything.
8. BTC is ubiquitous.
9. Web5 > Web3.

Statement:

1. This article originally titled “Nervos 首席架构师：我们需要构建 Web5，而 Web5 = Web2 + Web3” is reproduced from [CKB Chinese]. All copyrights belong to the original author [Jan Xie]. If you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.