The Scoop - Botanix Labs's EVM L2 on Bitcoin

In this episode of The Block which took place on July 11, 2024, Frank Chaparro hosted Willem Schroé from Botanix Labs to discuss Bitcoin layer-2s, the future of DeFi on Bitcoin, the potential of Botanix Labs, and more! Read our notes below to learn more.

Background

Frank Chaparro (Host) – Host of The Scoop, Director of Special Projects at The Block

Willem Schroé (Guest) – Founder at Botanix Labs

Botanix Labs – the first EVM L2 on Bitcoin

Exploring Bitcoin Layer-2s: Insights from Willem of Botanix Labs

Willem provides an overview of his background in mathematics and cryptography, highlighting his research in authenticated encryption and his experience in various industries before founding Botanix. He explains that Botanix is a second-layer EVM on Bitcoin, allowing users to deploy Ethereum smart contracts while paying gas fees in Bitcoin.
Frank asks Willem to break down the landscape for Bitcoin layer-2s. Willem notes that the space has exploded recently, with numerous projects emerging. He categorizes these projects into those built on Ethereum, those pivoting towards Bitcoin, and those fully connected to Bitcoin, like Botanix. Willem details various technological approaches such as Spiderchains and BitVM, and the trade-offs each entails.
Frank asks about the recent surge in Bitcoin layer-2s. Willem attributes this to cultural shifts, technological advancements like the Taproot upgrade, and the influence of Ordinals, which allowed NFTs on Bitcoin. He explains that developers, who initially moved to other platforms, are now returning to Bitcoin due to these innovations. The Taproot upgrade enabled new layer-2 designs, and Ordinals demonstrated the potential for applications on Bitcoin, reigniting interest and development.
Willem elaborates that the Taproot upgrade was crucial for enabling the Spiderchain and other layer-2 technologies. Additionally, Ordinals provided a tangible application on Bitcoin, showing the community that advanced functionalities, like NFTs, were possible. This breakthrough led to a renewed focus on building on Bitcoin.
Willem highlights the significant impact of Ordinals in revitalizing interest and development in the Bitcoin ecosystem, marking a pivotal moment for Bitcoin layer-2s.

Building a Bitcoin Layer-2: Challenges and Future Prospects

Frank asks Willem about the catalyst for the renewed interest in Bitcoin layer-2s, specifically referencing Ordinals and the technical challenges that need to be addressed for Bitcoin layer-2s to work effectively.
Willem acknowledges that while Ordinals played a significant role in sparking interest, there are substantial technical hurdles to overcome. He explains that building on Bitcoin is challenging due to its UTXO model, which complicates the development of layer-2s. Despite recent developments, there hasn’t been a fully functional end-to-end Bitcoin layer-2 on the main net yet.
Willem mentions Botanix’s upcoming main net launch and highlights that new technologies, such as spider chains and BitVM, are promising but still limited. He also notes the potential impact of the proposed OP_CAT soft fork, which could enable more advanced capabilities like zk-rollups on Bitcoin, though its adoption is uncertain due to Bitcoin’s slow-moving nature.
Frank asks about the convergence of Bitcoin and Ethereum communities and asks Willem’s thoughts on StarkNet’s newly announced Bitcoin layer-2.
Willem is enthusiastic about the development, highlighting the need for multiple layer-2s to support a robust financial system on Bitcoin. He observes a growing interest among Ethereum developers and applications to build on Bitcoin, thanks to recent advancements. This trend is indicative of a broader convergence where developers from different blockchain ecosystems see value in leveraging Bitcoin’s stability and security.
Frank asks about the types of applications that would benefit most from being built on Bitcoin and how Bitcoin’s characteristics might influence their success.
Willem identifies DeFi as the primary application area that would thrive on Bitcoin due to its security and decentralized nature. He mentions the potential for native Bitcoin lending, stablecoins, and Bitcoin yield-generating applications. These use cases align well with Bitcoin’s strengths and offer significant market opportunities. He notes that while gaming applications may not be immediately viable on layer-2 due to slower block times, they could be feasible on layer three solutions built on top of Botanix.
Frank asks Willem to envision what a Bitcoin-native ecosystem might look like in the future, specifically in 10 years or more.
Willem envisions a future where Bitcoin serves as the global monetary standard, with a fully developed financial system built on top of it. This includes permissionless stock markets, perpetual DEXs, and advanced lending platforms, all using Bitcoin as the base currency.
He sees a world where the traditional financial system is complemented or even replaced by a decentralized, Bitcoin-based financial ecosystem, accessible to anyone globally and operating 24/7. This vision drives Botanix and other projects working towards making Bitcoin the foundation of a new financial paradigm.

The Future of Bitcoin and Ethereum: Security, Tokenization, and DeFi Integration

Frank asks Willem about the role of Ethereum in the long-term future and whether Ethereum is just a testnet for Bitcoin.
Willem believes that while some see a multi-chain world, he envisions everything aggregating towards Bitcoin. He acknowledges the EVM as the winning software layer, likening it to the dominance of Windows in the 1980s. However, he is unsure of Ethereum’s long-term role but suggests that Bitcoin’s larger market might make it the preferred choice for many applications.
Frank asks about potential attack vectors and how Botanix plans to improve security.
Willem explains that while Bitcoin’s base layer cold wallets are the most secure, moving to second layers introduces additional trust assumptions. Botanix’s spider chain aims to be fully decentralized, with tens of thousands of nodes ensuring security. However, this requires assuming that two-thirds of these nodes remain honest, similar to Ethereum’s security assumptions. Initial phases with fewer nodes might pose risks, but the system aims to replicate Ethereum’s proven security model over time.
Frank asks about the target audience for Bitcoin layer-2s and how they might appeal to Bitcoin purists.
Willem explains that the audience comes from both sides. Within the Bitcoin community, opinions are divided, with some embracing new applications and others preferring the status quo. However, a significant portion of users will come from outside the Bitcoin community, attracted by new opportunities to use their Bitcoin in ways previously unavailable. He likens this to the Ordinals phenomenon, where many users who were active in other ecosystems engaged with Bitcoin for the first time.
Frank discusses the broader implications of tokenization and how Bitcoin might play a role in the future.
Willem is confident that everything will be tokenized eventually due to its efficiency, despite regulatory challenges. He argues that Bitcoin, with its permanence and large market, is the ideal platform for tokenization. He envisions a future where regulatory advancements in some jurisdictions spur widespread adoption, leading to significant premiums for tokenized assets and encouraging broader participation.
Frank asks about the steps needed for Bitcoin to become a hub for tokenized assets and what the path to that reality looks like.
Willem anticipates that certain jurisdictions will take the lead in allowing tokenized assets on-chain, setting an example for others. Successful trials with large money markets will create competitive pressures, leading to broader regulatory acceptance and implementation.
Frank asks about the future plans for Botanix and what excites Willem the most.
Willem shares his excitement about the imminent mainnet launch and the range of applications coming to Bitcoin through Botanix. He mentions that favorite DeFi applications from other ecosystems, like liquidity pools, Bitcoin-backed stablecoins, lending protocols, and liquid staking, will soon be available on Bitcoin. Additionally, EVM bridges will enable seamless interaction between Bitcoin and other layer ones, offering a decentralized alternative to wrapped Bitcoin. Willem is particularly enthusiastic about the potential for loans against Bitcoin, stablecoins on Bitcoin, and the overall DeFi ecosystem.

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Show Information

Medium: YouTube (Video)

Show: The Block

Show Title: DeFi and stablecoins are coming to the Bitcoin ecosystem | The Scoop Podcast w/ Willem Schroé

Show Date: July 11, 2024