The London Real - Bitlayer

In this episode of The London Real which took place on August 6, 2024, Brian Rose hosted Charlie Yechuan Hu from Bitlayer to discuss Bitlayer’s mission to innovate within the Bitcoin ecosystem, challenges like network congestion and high gas fees experienced during the Ordinals summer, and more! Read our notes to learn more!

Background

Brian Rose (Host) – Host at The London Real

Charlie Yechuan Hu (Guest) – Co-Founder at Bitlayer

Bitlayer – a Bitcoin Layer 2 (L2) solution, extends the capabilities of Bitcoin by integrating a Turing-complete computational layer based on the BitVM paradigm

Revolutionizing Bitcoin: Bitlayer’s Vision for Scalable Security

Brian introduces Charlie Hu, co-founder of Bitlayer, a Bitcoin L2 solution. Brian highlights Charlie’s experience, including his early investments in Polkadot and leadership at Polygon, and describes Bitlayer’s mission to revolutionize the Bitcoin ecosystem using BitVM and zero-knowledge proofs to ensure security and scalability.
Charlie explains that Bitlayer was inspired by the resurgence of interest in Bitcoin during the Inscriptions or Ordinals summer, which saw significant congestion and high gas fees. This led him to question the future of Bitcoin and consider new approaches to enhance its capabilities.
He describes Bitlayer’s vision of achieving “Bitcoin finality,” allowing transactions to be settled back to Bitcoin L1, unlike previous attempts by companies like Lightning and Stacks, which only settled on sidechains.
Charlie highlights that achieving Bitcoin finality is crucial for creating a trustless, programmable environment on Bitcoin, which would unlock new DeFi opportunities such as lending and stablecoins.
He notes that the Bitcoin community, particularly the OGs, has been skeptical of solutions that rely on trusting third-party bridges or sidechains. Bitlayer aims to address this by ensuring transactions are ultimately settled on Bitcoin’s highly secure and decentralized network.
Charlie says that Bitlayer is committed to developing a Bitcoin-friendly proof system. He shares that they have been engaging with ZK researchers and have found an innovative, cost-effective solution to achieve Bitcoin finality without compromising on decentralization or security.

Bitcoin’s Layer 2 Breakthrough: Bitlayer’s Ascendance and Institutional Impact

Brian talks about Bitlayer’s success in the Bitcoin L2 space, overtaking other competitors like Merlin with a 31% market share.
Charlie acknowledges the support from both retail and institutional investors, mentioning that Franklin Templeton, a major Bitcoin ETF-licensed firm, led their Series A funding round for Bitlayer.
He reflects on how this endorsement from a traditional financial institution is significant, particularly as it signals increased institutional interest in Bitcoin. Charlie notes that while Bitlayer is leading in the Bitcoin infrastructure space, it is still in the early stages compared to Ethereum’s L2s like Arbitrum, which have much larger TVL.
Charlie explains that Franklin Templeton’s interest began when he met their CEO at a Dubai FinTech Summit. Their investment is part of a broader strategy to explore Bitcoin yield opportunities without selling their clients’ Bitcoin exposure. He describes how this aligns with the institutional shift in the current market cycle, which is more driven by institutions rather than retail investors, as was the case in 2021.
Charlie goes on to discuss Franklin Templeton’s digital assets arm, which was established two years ago to focus on Web3 investments. He notes that while Franklin Templeton had previously made limited investments in the Bitcoin space, they became more active this year, particularly after seeing the growth in Bitlayer’s TVL and community. This institutional interest, according to Charlie, is partly driven by the desire to differentiate themselves in the Bitcoin ETF market by offering higher returns rather than just competing on fees.
Brian points out that while Ethereum offers staking and potential yield, Bitcoin has traditionally lacked these features, making it an attractive area for innovation.
Charlie agrees, explaining that the Bitcoin market has matured to a point where yield generation is becoming necessary. He discusses how Bitcoin’s shrinking block rewards due to halving cycles are pushing the industry to find new ways to generate fees and use cases on the Bitcoin network.
He highlights how the emergence of Ordinals and BRC-20 tokens has shifted perceptions within the Bitcoin community, even among miners, who initially saw these innovations as problematic but later recognized their economic benefits. This shift has sparked renewed interest in building on Bitcoin, marking a significant change in the network’s development.

First Ordinal Summit: Tracing Bitcoin’s Evolution and New Frontiers

Charlie shares that although he wasn’t a traditional Bitcoin maximalist, the emergence of Ordinals drew his attention to Bitcoin. He reflects on how Bitcoin’s programmability has evolved, comparing the recent developments to Ethereum’s ICO era in 2017. He highlights how the Bitcoin ecosystem has rapidly caught up, with innovations in synthetic assets, NFTs, and more, mirroring Ethereum’s evolution over the past several years.
Charlie also discusses how Bitcoin’s history and immutability contribute to its unique energy and appeal. He contrasts this with other blockchain communities like Ethereum and Polkadot, noting that Bitcoin’s historical significance adds a special vibe to its ecosystem.
Brian asks whether the Bitcoin community has embraced Charlie, given that he wasn’t originally a part of the old school Bitcoin crowd. Charlie acknowledges that while some traditionalists might be resistant, many in the community appreciate the new energy and users being brought into the space. He highlights that expanding the ecosystem is crucial for mass adoption, and keeping the community open to new ideas and participants is essential.
Charlie then touches on the developments in Bitcoin Layer-2 and programmability, addressing concerns that this could be a Pandora’s box but arguing that the demand and historical trends justify these advancements. He points out that as block rewards decrease, miners will need additional sources of revenue, making the adoption of these innovations necessary.
Brian inquires about the current status of Ordinals and BRC-20.
Charlie responds that while the initial hype has cooled, there is still significant activity and new developments within the space. He mentions that BRC-20 is exploring use cases like bridging to Layer 2 and integration with DeFi protocols.
Regarding Runes, Charlie notes that while they were hyped during the halving season, they are still in the early stages. He highlights that Bitlayer remains neutral and open to supporting various asset protocols as long as they bring interesting transactions and momentum to the Bitcoin ecosystem.
Charlie mentions the ongoing efforts to engage with NFT collections, BRC-20 communities, and other emerging assets on Bitcoin, indicating Bitlayer’s commitment to fostering growth and innovation across the ecosystem.

Exploring Bitlayer: Addressing Bitcoin Layer-1’s Limitations and Unveiling Future Potential

Brian shares his experience with BRC-20 tokens, noting the challenges he faced in using them due to the lack of liquidity and the cumbersome process on Bitcoin’s layer one. He mentions how this experience highlighted the need for better infrastructure and asks if Bitlayer could solve these issues.
Charlie acknowledges the limitations of Bitcoin layer one, including the lack of programmability and liquidity, which prevent more complex financial applications like AMMs, DEXs, and prediction markets from functioning effectively. He explains that Bitlayer, as a layer two solution, addresses these problems by providing faster, cheaper transactions and supporting a broader range of use cases.
Brian asks about the current state of Bitlayer’s ecosystem and its future. Charlie explains that Bitlayer V1 has been live for three months, with over 200 projects deployed, including DEXs, lending protocols, and other DeFi applications.
He mentions that the V2 mainnet, which will enhance security by batching transaction proofs and settling them on Bitcoin layer one, is expected to launch in Q4 of this year. This upgrade aims to bring the security of Bitcoin layer-1 to Bitlayer, making it more attractive to Bitcoin holders who have been hesitant to explore layer two solutions.
Brian asks about potential use cases beyond DeFi, specifically asking about AI and content generation. Charlie describes a concept where AI-generated content could be inscribed on Bitcoin using minimal prompt words, creating a permanent, immutable record on the blockchain. He highlights that while Bitcoin’s block space is limited, combining AI with Bitcoin could enable innovative applications, such as storing proof of content on the blockchain.
Charlie says that while Bitcoin’s high security comes at a cost, it is crucial for applications where decentralization and immutability are paramount. He sees this as a new frontier for Bitcoin, where finding valuable use cases that justify the cost of using Bitcoin’s secure infrastructure will be key to its continued evolution.

Exploring Bitcoin’s Unique Value and Future in the Crypto Landscape

Charlie discusses how NFTs on Ethereum often lose value over time due to a lack of use cases and perceived scarcity, contrasting this with Bitcoin NFTs, which are viewed as more precious due to their tamper-proof nature and the cultural significance of Bitcoin. He believes this creates a product-market fit for Bitcoin that should be explored rather than simply copying Ethereum’s model.
Brian asks when Bitcoin holders might see yield with finality, to which Charlie predicts an early version will emerge within six months and expects significant traction within 12 months, drawing parallels to the adoption of Ethereum L2 solutions.
Charlie explains that Bitlayer’s L2 is EVM-compatible to be developer-friendly, acknowledging that while EVM is widely used, it’s old technology. Bitlayer is exploring multiple virtual machines (VMs) like SolanaVM and CairoVM to create a high-performance, multi-VM programmability layer for Bitcoin.

Exploring Real Assets and Crypto Trends

Brian asks when retail investors might return to the market, questioning if a significant price milestone like $100,000 for Bitcoin would trigger widespread interest.
Charlie responds that retail interest usually returns with major price movements and media coverage. He believes that hitting a new all-time high would generate significant attention, and he sees the current phase as the beginning of a bull market. Charlie also stresses the importance of new user adoption and innovation in Web3 infrastructure, which he believes will drive future growth.
Brian speculates on the potential duration of the current bull market, noting that if it began in early 2024, it could last into 2026. Charlie agrees that it could extend depending on factors like national policies and interest rates. He highlights the importance of increasing Web3 user adoption, noting that even doubling or tripling the current user base could lead to significant market momentum.
Brian shifts the discussion to Asia’s role in the crypto market, recounting his experience at the Token2049 conference in Singapore, where he observed a vibrant crypto scene despite a bear market elsewhere. He notes the significant interest from Asian countries like Vietnam, Thailand, and the Philippines, and asks Charlie to explain Asia’s influence on crypto.
Charlie provides insight into the Asian crypto market, highlighting the strong recognition of Bitcoin across the region. He explains that in China, for example, while not everyone owns Bitcoin, the concept is widely understood, and some individuals still hold it secretly or through OTC channels. He highlights the historical dominance of Asian countries in Bitcoin mining before regulatory changes shifted much of that activity elsewhere.
Charlie praises Singapore as a critical crypto hub in Asia, citing its favorable infrastructure, tax policies, and the presence of major crypto firms. He notes that Singapore’s strategic position, including hosting the Token conference, has solidified its importance in the region.
Addressing Brian’s observation about gambling being culturally ingrained in Asia, Charlie explains that the appeal of crypto in Asia is also tied to the region’s hardworking and ambitious culture. He notes that crypto provides a unique opportunity for social mobility, which resonates with many in Asia who face challenges in advancing through traditional industries.
Charlie contrasts the decentralized, free-market nature of Bitcoin with the more centralized approach of Ethereum, noting that Bitcoin’s lack of a central authority like the Ethereum Foundation appeals to many in Asia.

Exploring Global Crypto Adoption and the Future of Blockchain

Brian shifts the focus to the Middle East, particularly Dubai, as a major hub for crypto activity. Charlie acknowledges the wealth in the region and the interest in Bitcoin, but points out that the Middle East has not yet fully embraced Bitcoin’s broader ecosystem, such as Bitcoin DeFi.
Charlie discusses the upcoming token launch (TGE) for Bitlayer, highlighting the importance of careful planning and decision-making. He outlines the utility of the $BTR token, which will be used for governance, staking, and as a trading pair across various liquidity pools.
Brian then asks for advice for young people considering a career in blockchain. Charlie warns that Web3 entrepreneurship is extremely challenging due to the high levels of uncertainty and rapid changes in the market. However, he encourages those who are willing to work hard and embrace the challenges to pursue opportunities in this exciting and potentially history-making industry.
Brian asks how people can learn more about Bitlayer and get involved. Charlie directs them to the Bitlayer website for documentation and to their Twitter account for updates on the project and ecosystem. He also encourages reaching out directly through their contact information available on the website.

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Show Information

Medium: The London Real (Video)

Show: The London Real

Show Title: BITCOIN’S NEXT LEAP: HOW BITLAYER IS BUILDING A FASTER, MORE SCALABLE BLOCKCHAIN

Show Date: August 6, 2024