What are the pain points of development of BTCFi L2/L1

Author: Jan Source: X, @busyforking

First, we will rule out three options that I think are not pain points:

1. Too many projects distract attention and resources——This is very normal for a prosperous ecology, and no one complains about too many projects on ETH/SOL.No matter how many items you have, you have to learn to distinguish between signals and noise by yourself.

2. No representative work——The Lightning Network can be regarded as a masterpiece, but the Lightning Network often gives people the illusion that “it has only been developed for so long.”This illusion is caused by it’s easy to ignore the limitations of Bitcoin Script and the caution of Bitcoin developers.Bitcoin L2 can just solve these problems. On the one hand, L2 can provide stronger contract capabilities, and on the other hand, it is also a good experimental field.Why is Lightning Network a representative work?Because it represents a completely different technology route and has advantages in all aspects such as privacy, throughput, response time, cost, etc.Lightning Network still has many extremely challenging problems to overcome, but its potential is worth investing our energy and resources to overcome challenges.

   Secondly, to a more basic level, UTXO itself is a disruptive architecture.Subversiveness means the difficulty of understanding and construction, which will hinder ecological development and it will be difficult to create a “representative work explosion” landscape.But as long as it takes a long enough time, anything that grows on a new “digital terrain” will have a strong local color, such as UTXO assets that are completely different from ERC20’s cash-like properties, client side validation, UTXO sharing protocol, etc.wait.Bitcoin’s own status is enough to support the growth of an independent ecosystem.So I think it’s only a matter of time before more masterpieces appear, and the flexibility provided by L2 will speed up the process.

3. Lack of money and resources to drive——Obviously not true, the Bitcoin/Lightning Network ecosystem has enough investment.

Lack of consensus may be the biggest problem.First of all, from the perspective of the entire crypto industry, no understanding and consensus on the UTXO architecture has been formed. “There is no smart contract on the UTXO chain that cannot be developed” is still a common misunderstanding.If there is no smart contract, how to do L2? It is easy to conclude that Bitcoin L2 is all scam.

Second, even within the Bitcoin ecology, the view is very divided: fundamentalists believe that we only need BTC, the rest are scams, and no changes to the Bitcoin chain are necessary.Progressives believe that it is necessary to improve the Bitcoin chain, which can at least make BTC more powerful, but there are huge differences on “how much improvement is reasonable?”The most radical progressives believe that more asset and even contract capabilities should be supported through soft-fork, while conservative progressives believe that only minimal changes should be made to enhance BTC itself without causing unnecessary scenarios (such as new ones).Assets, MEV) pollute Bitcoin chain.L2 progressives believe that soft-fork should be used to make Bitcoin L2 safer and make L2 possible.

Third, there is no consensus on how “Bitcoin L2” should be defined.A strict definition will require that L2 cannot have its own tokens, and L2 transactions should ultimately be subject to Bitcoin L1.More relaxed definitions such as sidechain will relax the requirements for L2 consensus and only hope to achieve a secure 2-way peg (aka cross-chain bridge).In fact, no matter which Bitcoin Script capability is limited, it cannot be done today, and it cannot be ensured that L2 users can safely withdraw to L1.A further loose definition only requires a safe BTC->XXX 1-way peg. Under this definition, Ethereum may be the largest Bitcoin L2 in TVL (I’m not sure but I’m too lazy to check the data. If you want to analyze it carefully, you have to take some time, becausewbtc is not a safe 1-way peg that matches this definition).The definition of progress + easing will relax your horizons – if there are not only BTC on Bitcoin L1, but other UTXO assets, then is the chain that can achieve security for UTXO assets issued on Bitcoin L1 Bitcoin L2?The loosest definition is to completely abandon the idea of ​​L1 security as anchor. Starting from the BTC currency attributes, treat the Bitcoin chain as M0. Anywhere that uses BTC is M1, M2,… Then CEX is also Bitcoin L2., this definition is surprising and even ridiculous at first glance, but I think it makes a lot of sense – at least it reminds us that if we can’t create a better use and more decentralized Bitcoin L2, then CEX will be de facto.Bitcoin L2, which future do you prefer to see?

Perhaps for these reasons, the industry’s views on how the Bitcoin ecosystem will develop is very divided.But this division may be just a normal phenomenon in the early stages of the ecology and Bitcoin’s bottom-up culture.I believe that as time goes by, consensus will slowly emerge and form because we believe in rough consensus and running code.

I personally prefer “moderate” progressiveism – the Bitcoin chain needs to enhance contract capabilities through soft-fork, and the purpose of the enhancement should be to facilitate the implementation of CSV assets and Lightning Networks.The reason is very simple:

1. L1 needs to serve L2, whether it is a programming model or an economic model;

2. Bitcoin L1 is a very good asset issuance/storage platform. This scenario can not only maximize the benefits of Bitcoin chain security investment, but also a way out to solve the L1 economic model bug based on handling fees.The CSV asset protocol occupies the least space on the chain, which is the most economical and healthiest for Bitcoin L1;

3. Lightning Network is the most mature Bitcoin L2 at present, and other Bitcoin L2s are just assumptions.Any modification to the Bitcoin protocol for a hypothesis is irresponsible for Bitcoin’s $1 trillion market capitalization.At this scale, the improvement of mempool is appropriate, OP_CTV may be appropriate, OP_CAT may be over, ZK primitive or covenant that needs to be added for rollup is obviously over.

This is why CKB chooses to extend the UTXO model, introduce state and RISC-V virtual machines, and bind UTXO assets on CKB to Bitcoin L1 UTXO via RGB++.For Bitcoin in a moderately improved manner, CKB can be a good complement to Bitcoin, enhancing the capabilities of UTXO assets on Bitcoin, enhancing the capabilities of the Lightning Network, replenishing liquidity for the Lightning Network, and fully leveraging the potential of the UTXO model.I hope that through CKB, we can accumulate more experience in the UTXO L1/L2 protocol, and ultimately contribute these experiences back to Bitcoin, helping Bitcoin protocol improvement find a safe route.