There is a group of people who always shout “Bitcoin doesn’t need an ecosystem” in today’s popular Bitcoin Layer2. Why is that? Who are the suppliers behind the hot Bitcoin narrative, and who are the harvesters in the end?
(Previous summary:
BTC Layer2, a variety of options, is it the future of the industry or a speculative bubble?
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(Background supplement:
Is it really a bull market? Ethereum Gas Fee only costs $1, analyzing the two main reasons for the coldness of on-chain interactions
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If you pay special attention, you will notice that after the Bitcoin spot ETF was passed and the price of BTC soared to ATH, the frequency of broadcasting Bitcoin documentaries on non-selective television channels has increased significantly. For example, “The Rise of Rise of Bitcoin” is a classic film that features many young faces of crypto entrepreneurs. In 2014, Vitalik Buterin, only 19 years old, talked confidently in front of the camera and showed a Bitcoin magazine he founded.
In 2014, Brian Armstrong’s head wasn’t as shiny, but they had one thing in common: they always talked about how Bitcoin could replace fiat currencies and its main application was for payments.
Fast forward 10 years to 2024, the nature of Bitcoin that everyone is expecting has completely changed. The ecological density of Ethereum, which has the most potential to become the “Bitcoin killer”, has completely reversed users’ perception of public chains. Opening Twitter, many KOLs post about Bitcoin L2, and there are always people complaining in the comments:
“Bitcoin doesn’t need an ecosystem, idiots.”
“Let Ethereum (or XXX chain) handle the ecosystem, the ecosystem on BTC is all about scamming money.”
Soon enough, the supporters of BTC L2 arrived on the battlefield, and the two sides ignited a community war, with one side believing that “Bitcoin doesn’t need an ecosystem, it should remain a prototype for value preservation,” often accompanied by the Lightning Network. The other side believes in “what Ethereum can do, Bitcoin can handle even more.” The atmosphere of these two basic dogmas gradually tore the community apart.
Bitcoin’s ecological tree, where capital reaps the fruits
Let’s first talk about the development of the BTC ecosystem in the past year. The bombardment initiated by Ordinals was deafening, and although the fundamentalist faction was shouting, it couldn’t stop the BRC20 troops behind, going from being close to a meme to completely standing out and becoming a special corner that caught the attention of capital: Can this be done? Can an NFT frenzy be created on Bitcoin?
Next is Runes, making a lot of noise, as Casey even vowed to commit suicide to bet on it, full of gimmicks. But technically, it still takes inspiration from ARC20’s UTXO-based approach, a kind of variant NFT. It doesn’t have a scalable package and is not compatible with BitVM, making it a race that is hard to compare in the long run. Among the users who enthusiastically cast runes, the happiest ones are the Bitcoin miners who are unaffected and whose wallets are expanding.
In fact, what Bitcoin needs most is which Layer2 can gain the narrative power in finance, and truly implement the smart contract layer that can relieve network congestion and reduce Gas fees to a level “normal people can accept.”
The reality is daunting. The first business card that the current BTC Layer2 presents to attract users is still about who funded it, returning to the traditional capital decision argument. Technically, it is also mixed, with Bitcoin Magazine, for example, criticizing:
Using Bitcoin as a native asset:
L2 must be designed fundamentally to use Bitcoin as its primary token or accounting unit, and have a mechanism to pay transaction fees in Bitcoin. If there are tokens, they must be backed by Bitcoin.
Using Bitcoin as a settlement mechanism for executing transactions:
L2 users should have control and be able to return assets to L1 through a mechanism (trusted or trustless).
Showing reliance on Bitcoin’s functionalities:
If the Bitcoin network completely fails but the related system can still operate, the system is not a Bitcoin L2.
Layer2 that loves issuing tokens, benefiting capital. It’s not a problem to make money from airdrops and IDOs, but what’s problematic is the deviation from the technical intent.
Setting aside the fundamentalist faction of Bitcoin, the trend of Layer2’s pursuit of benefits is mainly because Ethereum experienced DeFi Summer, with protocols like Uniswap, Maker, Aave… bringing liquidity into the EVM. And then came NFT Summer, bringing the important narrative of “multimedia” being put on-chain to a new generation of young users and on-chain assets. And in the mouths of Bitcoin ecosystem supporters, these important “liquidity revolutions” need to happen again! Although it’s late, because Ethereum has set an example before, users have a sense of urgency for instant gratification.
Recently, Stacks’ upgrade by Satoshi Nakamoto, Citrea’s Rollup, Botanix’s hybrid POS design, and BitSmiley’s stablecoin initiatives are all worth paying attention to.
BTC L2 has become an opportunity for the market to issue questionnaires to users again. Market demand will ultimately decide where BitEVM, apart from its original dream (political significance), will go. The new fundamentalist faction is being shaped.
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