The Edge Podcast - Merlin Chain on Bitcoin

In this episode of The Edge Podcast which took place on July 2, 2024, DeFi Dad and Nomatic were joined by Jeff from Merlin Chain to discuss how Merlin is revolutionizing Bitcoin with Layer-2 solutions, bridging assets, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) – Host of Edge Podcast

Nomatic (Host) – Co-Host of Edge Podcast

Jeff (Guest) – Founder at Merlin Chain

Merlin – a Native Bitcoin Layer2 powered by BitmapTech, building upon the native assets, protocols, and products on Bitcoin Layer1

Enhancing Bitcoin with Merlin: A Deep Dive into Layer-2 Solutions and Future Prospects

Jeff shares his background as a web2 entrepreneur for 12 years before transitioning to crypto. He bought his first Bitcoin in 2013, influenced by his main investor IDG, who had invested in Coinbase and Ripple. Jeff experienced various phases of crypto, including the ICO era, DeFi summer, NFT, and GameFi, but he continued his web2 career until last year. The concept of Ordinals on Bitcoin intrigued him, leading to the creation of several free dApps on Bitcoin Layer-1, such as Recursiverse and Bitmap, which gained significant traction. However, realizing the limitations of Bitcoin Layer-1 for more complex applications like DeFi and smart contracts, he decided to build Merlin, an EVM-compatible chain for Bitcoin.
Nomadic asks Jeff to elaborate on Bitmap and its role in the decision to create Merlin. Jeff explains that Bitmap is a community-invented concept where each Bitcoin block can be inscribed as a unique asset. This decentralized approach inspired them to build a Bitcoin metaverse and other applications, but they faced limitations on Bitcoin Layer-1. Hence, they created Merlin to enable more advanced functionalities like smart contracts and DeFi, which require lower gas fees and higher transaction speeds.
Jeff describes Merlin as a sidechain rather than a true L2 because, unlike Ethereum, no Bitcoin sidechain can claim the same security level as Bitcoin Layer-1. Merlin uses multi-signature and MPC solutions, offering scalability and lower gas fees while allowing composability between protocols. This setup makes it possible to build complex applications on Bitcoin.
Jeff says that while “Layer-2” is a recent term, the ultimate goal for Bitcoin builders is to share Bitcoin’s security level, similar to how Ethereum has developed various rollup solutions. However, achieving this will take more time for Bitcoin. Despite technically being a sidechain, Merlin is branded as an L2 due to common industry terminology and the community’s preference.
Jeff higlights that while Merlin currently operates as a sidechain, the goal remains to develop more advanced solutions that can one day offer the same security as Bitcoin Layer-1, ultimately enhancing Bitcoin’s scalability and usability.

Unlocking Bitcoin DeFi: Jeff on Merlin’s Innovations and Rapid Growth

DeFi Dad asks Jeff to explain what features make Merlin attractive to users, particularly for DeFi and Web3 applications.
Jeff explains that Merlin is an EVM-compatible chain, which is user-friendly for those familiar with Ethereum tools like MetaMask. This compatibility allows Ethereum users to easily transition to Bitcoin-based applications without needing a new wallet for Ordinals inscriptions.
Merlin’s main innovation is bridging Bitcoin-related assets like Runes, BRC-20 tokens, and Ordinals from Bitcoin Layer-1 to Layer-2. This bridging creates a better trading ecosystem with lower gas fees and higher transaction speeds, enabling functionalities such as lending, DEXs, and perpetual contracts.
Merlin is currently the only Bitcoin Layer-2 that bridges BRC-20 and Runes, and it also generates zk proofs for enhanced security and transparency, though these proofs can’t be verified on Bitcoin Layer-1.
Nomatic highlights Merlin’s rapid development since December and asks about the secret to its community growth and fast execution.
Jeff clarifies a common misunderstanding, noting that Merlin’s success stems from its strong user base from previous projects like Bitmap and BRC-20. Merlin’s launch attracted significant attention, accumulating $540 million in TVL within the first 24 hours from numerous small contributions. This growth was organic and community-driven, contrasting with other projects that rely on large investors. Jeff highlights that Merlin’s users are regular Bitcoin holders who value decentralization and community-driven projects.
DeFi Dad asks about key applications driving this success, mentioning Solv as a standout example.
Jeff attributes Merlin’s growth to its unique position as an EVM-compatible chain for Bitcoin, offering functionalities that Bitcoin Layer-1 can’t support. He describes the initial phase as meeting a fundamental need for Bitcoin users to engage in DeFi activities. In the growth phase, Merlin’s DEXs and perp DEXs like Solv have seen significant trading volumes. Solv, initially, a CeFi project, transitioned to DeFi on Merlin, quickly growing to $1 billion TVL.
Jeff highlights that Merlin encourages multi-chain development and collaboration, aiming for a unified Bitcoin DeFi ecosystem. Looking ahead, Jeff envisions a third phase of Bitcoin-native innovation, fostering unique applications that leverage Bitcoin’s strengths in ways not seen on Ethereum.

Exploring Innovations and Growth at Merlin: Jeff Discusses BTC-Fi, MBTC, and the Future Roadmap

Nomatic asks Jeff if there are any exciting projects or features being built on Merlin or if there are any unique opportunities that Merlin enables that don’t exist elsewhere.
Jeff highlights several potentials for Merlin, such as cheaper and faster launches for assets like Runes and BRC-20 compared to Bitcoin Layer-1. He also mentions the creation of on-chain metaverse and games, emphasizing that unlike Ethereum, which often relies on off-chain storage, Bitcoin’s assets are fully stored on-chain, ensuring longevity and security.
Jeff points out the possibilities for BTC DeFi (BTC-Fi) innovations, like staking Bitcoin for yield and participating in complex financial products across multiple chains. This provides a revolutionary opportunity for Bitcoin holders to earn substantial returns.
DeFi Dad inquires about $MBTC, asking Jeff to explain what it is and where it’s deployed.
Jeff explains that $MBTC is similar to Lido’s staked ETH ($stETH). Users can wrap Bitcoin to use as gas on Merlin and stake it in Merlin’s PoS system, earning yield in the form of $MBTC, a yield-bearing Bitcoin. $MBTC can then be used in various DeFi protocols, enhancing liquidity and providing additional earning opportunities for users. Jeff mentions that the flexibility of wrapping and unwrapping $MBTC instantly, with zero security issues so far, is a key advantage, making it easier for users to participate in BTC-Fi.
DeFi Dad asks about the token used for gas on Merlin and the recommended bridges for users.
Jeff confirms that the gas token on Merlin is wrapped Bitcoin ($wBTC). For bridging, users with native Bitcoin can use Merlin’s official bridge, while those with $wBTC or Binance Bitcoin ($BTCB) can use third-party bridges like Meson, Orbiter, and Symbiosis. These bridges facilitate smooth transactions between Bitcoin and Merlin.
Nomatic inquires about the Merlin token $MERL, its utility, and distribution.
Jeff explains that 21% of $MERL tokens were distributed to users through a fair launch program, the largest for any Layer-2. The team has a 24-month cliff and another 24-month vesting, ensuring no immediate token circulation from the team, investors, or advisors. Users can earn Merlin tokens by staking Bitcoin, offering a high APY compared to other Bitcoin or Ethereum Layer-2 solutions.
DeFi Dad asks how they plan to grow and compete with established Ethereum Layer-2s.
Jeff highlights that Merlin focuses on practical solutions that users need, such as scaling and smart contracts for Bitcoin. Despite early debates about centralization and technical approaches, Merlin has proven its value by attracting significant TVL and transaction volumes. Jeff believes in moving fast, iterating, and improving based on user feedback, avoiding unnecessary political debates.
DeFi Dad asks about Jeff’s favorite on-chain yields.
Jeff recommends bridging Bitcoin to Merlin, staking it as $MBTC, and then restaking $MBTC in various protocols like Solv and Babylon for additional yields. By leveraging different layers and chains, users can maximize their returns through multiple yield streams and potential token distributions from these protocols.
Nomatic asks about Merlin’s roadmap for the next six to twelve months.
Jeff outlines four key areas:
- Liquidity Provision and Fair Launches: Enhancing liquidity for Bitcoin-related assets like Runes and BRC-20 on Merlin.
- BTC Staking and Restaking: Onboarding more retail users, whales, and institutions to stake Bitcoin and participate in DeFi across multiple chains.
- Decentralizing Validators and Sequencers: Implementing PoS systems to make Merlin more decentralized and secure.
- ZK Rollups and Transparency: Collaborating with more DeFi leaders to implement ZK rollups, enhancing transparency and permissionless participation in the network.

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Show Information

Medium: YouTube (Video)
Show: The Edge Podcast
Show Title: How Merlin Chain Aims to Make Bitcoin Fun Again!
Show Date: July 2, 2024