Understanding Bitfinity: Bitcoin L2, which is riding the ICP Express, also needs to be an inscription cross-chain bridge?

On January 11th, Bitfinity, an Internet Computer-based and EVM-compatible Bitcoin L2 network, completed a $7 million financing round with a valuation of $130 million. Polychain Capital, ParaFi Capital, Warburg Serres, Dokia Capital, and Draft Ventures were among the participants in this round of financing.

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At the end of 2023, the Bitcoin-related ecology ushered in a revival after being dormant. Although the popularity of Inscription has caused some people to remain opposed, it is undeniable that market enthusiasm has also brought the return of the “builder culture” to Bitcoin. This development momentum has promoted the wave of innovation in Bitcoin and even pushed the market’s response to it. The enthusiastic narrative of the inscription attracted other public chains.

However, inscriptions and memes alone aren’t enough to shake up Bitcoin’s current, somewhat fragile ecosystem. In order to further develop the Bitcoin ecosystem, building a prosperous DeFi application layer based on the current Bitcoin ecosystem has become another hot narrative. Among them, the Bitcoin L2 narrative headed by Stacks has also been the focus of recent discussions.

Compared with the highly structured Ethereum L2 system, Bitcoin L2 is like a brand new world. This new concept, which has become increasingly important after the inscription craze, is showing rising momentum, but its ecosystem is becoming increasingly chaotic and chaotic. Out of the chaos, all kinds of L2 projects sprouted up like mushrooms after a rain.

As a Bitcoin L2 solution, Bitfinity aims to integrate its Ethereum Virtual Machine, Bitfinity EVM, with Bitcoin on its ICP. The goal is to achieve interoperability between L1 and L2 assets on a single chain. Currently, Bitfinity is building its own cross-chain bridge to enable cross-chain functionality for Ordinals and brc20 tokens.

With a price surge of more than 4 times, ICP once led investors to a ‘Waterloo Bridge’ moment

To understand Bitfinity, let’s briefly introduce what ICP is.

ICP stands for Internet Computer Protocol. It is the native token in the Internet Computer protocol and is used to pay network usage fees and reward nodes. Internet Computer is a high-speed blockchain network developed by the non-profit organization Dfinity Foundation and designed specifically for decentralized applications. It adopts a new consensus algorithm that enables high-throughput and low-latency transaction processing, while supporting the development and deployment of smart contracts and decentralized applications.

From the perspective of the development path of blockchain, there is a saying in the community: “BTC proposed electronic cash, opening up the blockchain industry from 0 to 1; ETH proposed smart contracts, leading the blockchain industry from 1 to 100; ICP proposed ChainKey technology, driving the blockchain industry from 100 to 100,000,000.”

Looking at the price performance of ICP, the market value of ICP continued to rise along with the token price within a few hours of listing, once exceeding 230 billion US dollars, jumping to third place in market value after BTC and ETH. However, as the pulling action ended, the price of ICP began to fall sharply. In just 6 weeks, ICP’s market value shrank by 90%. In this regard, Dfinity founder Dominic Williams has always believed that SBF and FTX conducted price manipulation on ICP.

Related Reading:”Exclusive interview with DFINITY: ICP is a victim of SBF Capital’s operation; much of the future of Web3 lies in Asia.》

The shrinking market value has even caused ICP to be nicknamed “ICU”. That is, if you buy ICP, you will definitely be admitted to the ICU.

Affected by this, since the launch of the autonomous network, ICP ecological projects have once been in the embarrassing situation of “no one is using it”, thus falling into a vicious cycle of “ecosystem scarcity → outflow of excellent projects → further loss of ecosytem participants”.

However, in this round of bull market, the price of ICP, which was originally considered “not worth buying,” has once again shone, with a cumulative increase of over 4 times, bringing new life to countless investors. According to Coingecko data, at the time of writing, the price of ICP has reached $12.4.

In addition to the rise in currency prices, its ecological projects are also gradually becoming active.

Among them, the writing platform mora has launched a free inscription. Recently, Kaosrrr announced that the Asia Pacific Foundation has received a $20 million funding, but in reality, it has not reached MORA’s hands. However, many users, unaware of the truth, rushed to MORA, causing the price of MORA to soar. Currently, due to insufficient supply from the project side, the price has started to plummet, but the community is still active. Subsequently, the first inscription platform, ICscriptions, also launched the first minted inscription. MORA, nnsdao, and other inscriptions are the most popular on the platform.

Nnsdao is the first dao project in the ICP ecosystem. It has built its own NnsDAO empire by developing ecological projects. It has currently developed an NFT platform, GameFi game product Texas Hold’em and lottery platform, and also built a web3 podcast and knowledge education platform. Currently, NnsDAO has received 5 official grants from Dfinity, and its technical capabilities are the strongest in the current ecosystem. However, this way of building an ecosystem requires operational resources, which also makes the development of the NnsDAO ecosystem slow.

In addition to inscriptions, the ICP ecosystem has also participated in the popular meme narrative. Its first meme coin, Ghost, has experienced a maximum increase of more than 100 times under the leadership of a strong community. Ghost is very good at Twitter marketing and can be said to be the best marketing team in the entire IC ecosystem.

There is also the ICP-based DEX platform ICPSWAP, which provides full-stack financial, market and DAO services. The token of ICPSWAP is ICS, with a total circulation of 1 billion. It has a deflationary model, which increases its value through continuous burning.

Related Reading:”In-depth analysis | Detailed explanation of Dfinity ecology: ICP’s most comprehensive research report》

Enter Ordinals, Bitfinity is going to be Bitcoin L2

Speaking of Bitfinity, as one of the Dfinity ecosystems, it inherits the scalability of the Web assembly execution environment (up to 1000+ TPS). But more importantly, Bitfinity defines itself as Bitcoin L2.

Compared with the highly ordered Ethereum L2 system, Bitcoin L2, while bringing hope to the Bitcoin ecosystem, deliberately conceals its own security risks.

From the barrel theory analysis, the shortest risk of L2 is “contract upgradeability”. As long as the L2 official can quickly upgrade the contract on the L1 chain, the Token locked on the L2 official bridge deposit and withdrawal address can theoretically be stolen, no matter how reliable its DA layer or certification system is.

However, since Bitcoin does not originally support smart contracts, Bitcoin L2 is not controlled by the L1 contract, thus avoiding contract risks. However, Bitcoin cannot rely on the “trustless bridge” implemented by contracts. Its official bridges are basically “notary bridges” composed of a small number of nodes, or “multi-signature bridges”. The security of this kind of bridge , depending on how multi-signature/threshold signatures are set up, a strong trust assumption needs to be introduced: it is assumed that these notaries will not collude, or the private keys will not be stolen.

Related Reading:”Using the barrel theory to dismantle the Layer 2 security models and risk indicators of Bitcoin and Ethereum》

Integrating EVM with Bitcoin

For “trustless bridges”, Bitfinity uses the ChainKey solution.

This is the threshold signature scheme protocol launched by ICP in April 2023, which creates a secure decentralized bridge between Bitfinity and Bitcoin. Since Chainkey does not have any single node that can access the threshold key, threshold key shares are regularly regenerated every 11 minutes using “moon-math”, allowing up to 40 blockchain nodes to shard the key.

Additionally, Bitfinity can build on this security by offering the opportunity to deploy popular Ethereum applications on a Bitcoin PoW-secured network, all written in Solidity.

Bitfinity achieves this with its Bitfinity EVM, an Ethereum virtual machine built on ICP.

On April 17 last year, Bitfinity EVM was launched on the IC main network, making IC an EMV-compatible chain. It is reported that Bitfinity EVM is fully compatible with EMV. This compatibility means that any application running on Ethereum can be deployed on Bitfinity. It allows the deployment of Ethereum applications secured by the Bitcoin hashrate while enabling smart contracts and decentralized applications on Bitcoin. According to Bitfinity’s official announcement, Bitfinity EVM acts as a side chain of Bitcoin and supports Taproot assets.

With Bitfinity, users will be able to deploy smart contracts for Bitcoin, Ordinals, and BRC-20. Developers can refer to the tutorials in the official documentation for contract deployment.

Minting testnet tokens

Currently, Bitfinity supports Bitcoin, but Neuro Bridge, a trustless bridge for BRC-20, is in development. Bitfinity has long aimed to convince Bitcoin purists and Ordinal enthusiasts to use their platform instead of minting directly on the blockchain.

The Bitfinity testnet supports minting testnet tokens. Users can pay gas fees when deploying Dapps and mint testnet tokens in 4 ways.

· Minting on Discord

· Minting via the EVM JSON RPC API

· Minting via IC

· Minting via Web Faucet: Navigate to the Faucet page and then click on the “Mint Test Tokens” button in the first row. Connect your Metamask wallet and wait a few seconds to receive the testnet tokens.

You can send a request to the Faucet every 60 seconds. If it is not yet completed, import the tokens into Metamask using the provided token contract address. If the transaction is successful, you will find the claimed tokens in your MetaMask wallet.

Tokenomics and Funding Status

$Bitfinity is the governance token of the Bitfinity network, with a total supply of 1 billion.

At launch, the Governance Committee will hold up to 35% of the governance DAO and community treasury. The purpose is to vote funds in the community treasury to support projects and other growth-led initiatives on the Bitfinity network. 20% of the supply will be held in community vaults.

87% of the token supply will be unlocked and 13% will be locked for 12 or 24 months. Of those who unlocked it, 87% had the option to be governed through a community DAO.

Just under 13% of tokens were allocated to Astari seed and growth investors. The tokens are unlocked monthly over an 11-month period. Astari uses the token to promote sustainable development by aligning incentives between users, applications, and the protocol itself.

On December 30, 2021, the Dfinity ecosystem AMM InfinitySwap completed a $1.5 million seed round financing. It was led by Polychain Capital’s Beacon Fund, with a16z and Dfinity as limited partners. Other participants included Draft Ventures, cycle_dao, and angel investors from the Dfinity ecosystem.

On April 17, 2023, Bitfinity EVM launched by InfinitySwap was launched on the Internet Computer (IC) mainnet.

On January 11th, Bitfinity completed a $7 million financing round with a valuation of $130 million, as reported here. Polychain Capital, ParaFi Capital, Warburg Serres, Dokia Capital, and Draft Ventures were among the participants in this round. Max Chamberlin, co-founder of Bitfinity, stated that the funding was divided into two parts - a seed round of approximately $1 million in 2021, and another round completed in June last year. Both rounds were token financing, and Bitfinity’s valuation reached $130 million in the second round.

Bitfinity is currently in the testnet phase and plans to launch the mainnet later this month or early February.

Team

Dfinity’s team is developed by the largest team in the encryption field, built by “the industry’s most outstanding team of distributed computing engineers, cryptographers and engineering experts.” Founder and Chief Scientist Dominic Williams is an experienced entrepreneur and crypto theorist who pioneered Dfinity’s threshold relay (BLS+VRF) and PSC chain technology.

The number of cryptographers included in the ICP team is the largest among all public chain projects, and the team lineup is also extremely luxurious: Intel, IBM, Coinbase, Facebook, Google wasm, the inventor of Stanford BLS technology, the inventor of bitcoin asicboost and p2contract , multi-party computing and cryptography researchers from Yale University and the European EPFL Distributed Computing Center.

At the same time, a number of well-known VCs are investors in ICP, including top institutions such as A16Z, Polychain, and Multicoin. ICP’s own slogan “Decentralized AWS” is even more eye-catching, inducing countless people to invest real money and look forward to the arrival of the next milestone paradigm that will surpass Ethereum and EOS.

Dfinity also has an SNS (Social Nervous System), which is a decentralized autonomous organization (DAO) based on NNS. It allows community members to create and manage their own subnets and applications, thus establishing an effective universal community governance model.

As mentioned at the beginning of the article, Dfinity’s technology did not benefit its ecosystem construction at the beginning - although Dfinity’s technical features are still very unique today, such as reverse gas, Canister’s scalability, and the architecture itself can be infinitely expanded horizontally, etc. , but these features did not work as expected in the battle of public chains.

In addition, Dfinity’s governance system also faces challenges, including a large number of junk proposals and excessive democratization. As a strong candidate for the “ETH killer”, it still has many potentials and advantages that public chains do not have, and these technical characteristics are important chips for its development. However, at the same time, the ICP Foundation and its ecosystem also need to face the current challenges and try to find a new way out.

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