Victoria d’Este
Printed: February 14, 2025 at 8:48 am Up to date: February 14, 2025 at 8:58 am
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February 14, 2025 at 8:48 am
In Transient
Charlie Hu, Co-founder of Bitlayer, believes Bitcoin’s Layer 2 evolution holds untapped potential for programmability and scalability regardless of its cultural resistance to alter.
What if Bitcoin, probably the most safe and decentralized asset on this planet, might lastly unlock its full potential? For over a decade, Bitcoin has been the muse of digital worth, but it has lacked the programmability and scalability that Ethereum has embraced. However in keeping with Charlie Hu, Co-founder of Bitlayer, that’s about to alter.
On this dialog, Charlie shares how his journey—from Ethereum’s early days to Polkadot and now Bitcoin—has led him to a daring realization: the largest untapped alternative in crypto lies in Bitcoin’s Layer 2 evolution. He discusses the challenges of scaling Bitcoin, why its cultural resistance to alter is each a power and a hurdle, and the way Bitlayer is paving the best way for yield technology and monetary innovation on Bitcoin’s rock-solid basis.
Charlie, are you able to please share your journey into Web3?
My journey with Web3 began in 2015. I first discovered about Ethereum whereas I used to be in Berlin. At the moment, I used to be doing my grasp’s diploma in Amsterdam and spent about six years in Europe. Whereas in Berlin, I met the core crew constructing Ethereum Pockets and Ethereum Core. It was the early days of Ethereum’s improvement.
By 2017, throughout the massive ICO summer season, I bought to know Polkadot. That was my first main journey. I used to be an early-stage investor in Polkadot and performed a task in bringing it to China. I turned deeply concerned within the Polkadot ecosystem, serving to with its improvement. When the Web3 Basis got here to China, I served as an interpreter and related with builders, builders, and market makers. That interval noticed lots of hype and progress for Polkadot in Asia.
Between 2017 and 2020, DeFi summer season began. I began to yield farming and studying about DeFi protocols throughout Uniswap, Wi-Fi, Compound (which later turned Aave), and others. I did lots of on-chain buying and selling and began educating communities about DeFi.
In 2021, I formally joined Polkadot, main Enterprise Improvement and Developer Relations for China and South Asia. We targeted on consumer-facing functions and gaming metaverse initiatives.
Then, in 2023, I got here throughout Ordinals. That was my first deep dive into the Bitcoin ecosystem. I bought concerned with BRC-20 and Ordinals, the place I met Casey and Domo. That pivotal second led me to appreciate that the Bitcoin area wanted higher options for yield technology.
After the convention in October 2023, we began as a analysis group. Then, my co-founder Kevin and I made a decision to launch a full-time venture, which led to Bitlayer. That’s how we began Bitlayer and the way I bought concerned in analysis.
What are the largest challenges in scaling Bitcoin in comparison with Ethereum? And the way does Bitlayer sort out them?
The principle distinction is that Ethereum’s Layer 1 is already programmable with sensible contracts, whereas Bitcoin shouldn’t be. Bitcoin depends on proof-of-work and a UTXO-based mannequin, which means there’s no native yield or sensible contract framework on Bitcoin Layer 1. You possibly can’t actually do DeFi on Bitcoin natively.
Bitcoin additionally has very low throughput, round seven transactions per second. Bitcoin Script is sort of restricted, making it technically difficult to scale Bitcoin with Layer 2 options. Nevertheless, Bitcoin has a a lot bigger asset base than Ethereum, particularly with Bitcoin ETFs and institutional adoption. Many Bitcoin holders are in search of methods to earn yield, which hasn’t been out there within the final 15 years.
This demand creates a large alternative regardless of the challenges. Constructing Bitcoin Layer 2 options requires sustaining Bitcoin’s core safety whereas discovering methods to optimize scalability.
One other key distinction is tradition. Ethereum has a robust developer and innovation-driven tradition, whereas Bitcoin has been extra targeted on mining and economics. Bitcoiners are extra sensible and belief Bitcoin as a safe asset, usually resisting modifications.
With rising curiosity in Bitcoin-native functions, do you foresee a DeFi explosion on BTC that’s just like Ethereum?
Some similarities exist. Many Ethereum builders at the moment are getting into the Bitcoin ecosystem, bringing new concepts. Nevertheless, the dynamics are completely different. Ethereum doesn’t have miners concerned anymore because it moved to proof-of-stake, whereas Bitcoin’s governance is extremely decentralized, with no central basis dictating path.
One other key issue on this cycle is Bitcoin ETFs, which have added substantial purchase strain. Institutional traders like BlackRock are accumulating Bitcoin through ETFs, which is why Bitcoin has outperformed the remainder of the market. These establishments are shopping for Bitcoin, not altcoins, resulting in a Bitcoin-led bull run.
The rising Bitcoin ecosystem is attracting new members, and we’re seeing extra DeFi-like improvements emerge. Nevertheless, it is going to take time for Bitcoin-native DeFi to develop absolutely.
What are the largest technical challenges your crew has confronted whereas constructing Bitlayer?
Bitcoin’s Script is tough to work with, has low throughput, and is pricey to confirm transactions. Our problem was discovering a steadiness between safety and value effectivity. One answer we developed is chunking the ZK-STARK proof into a number of items and settling them on Bitcoin’s taproot construction, which considerably reduces prices.
One other problem is schooling. Many Bitcoin holders resist innovation. They see Bitcoin as one thing that shouldn’t change. Educating customers about the advantages of yield technology and new functions on Bitcoin has been a sluggish course of, however we imagine it is going to acquire traction over time.
Do you imagine Bitcoin will finally develop into the dominant settlement layer for all crypto exercise?
Bitcoin already dominates by way of asset worth, however I don’t assume all crypto exercise will decide on Bitcoin. Bitcoin’s block area is restricted, making it costly. Not each kind of transaction must be made utilizing Bitcoin. Some actions, like meme coin buying and selling, don’t make financial sense to decide on Bitcoin.
The actual query is whether or not Bitcoin-native use instances like lending, decentralized exchanges, or real-world property will discover product-market match. In the event that they do, Bitcoin’s function as a settlement layer might increase considerably.
How do you see Bitcoin scaling sooner or later? Will Layer 2s be the final word answer, or will different improvements take over?
Layer 2s are probably the most promising strategy, as Ethereum has demonstrated. Bitcoin L2s can protect Bitcoin’s safety whereas bettering scalability and value. We’re additionally seeing momentum in meta-protocols, which depend on social consensus, however L2 options are our major focus for now.
May AI play a task in Bitcoin Layer 2 improvement?
I don’t see that but. Web3 AI continues to be in its early days. AI tooling might assist with Bitcoin yield methods and investments, however AI-driven sensible contracts for Bitcoin will not be a serious focus but.
If you happen to might change one basic factor about Bitcoin’s base layer to enhance scalability, what would it not be?
The following Bitcoin Enchancment Proposal (BIP) might be vital. Any important improve might unlock new potentialities. Nevertheless, these selections are exterior our management and rely upon the Bitcoin group’s consensus.
Do you see Bitcoin L2s getting used for real-world monetary techniques like remittances or banking?
Sure. We’re already seeing curiosity from monetary establishments trying to combine Bitcoin into their portfolios. ETF adoption has accelerated this pattern. Nevertheless, seamless fiat on-ramps and off-ramps are important for broader adoption.
What’s your tackle ZK-Rollups for Bitcoin? May Bitlayer combine zero-knowledge proofs sooner or later?
We’re already engaged on it. Our technical crew is concentrated on ZK-STARKs, collaborating with suppliers like StarkWare and RISC Zero. Nevertheless, native ZK-proof integration on Bitcoin stays technically difficult.
If Bitcoin L2 adoption peaks, will it change Bitcoin’s core financial mannequin?
It will depend on how a lot income L2s generate for Bitcoin miners. If sufficient charges are redirected to miners, it might assist maintain the Bitcoin community after block rewards lower. Nevertheless, we nonetheless want to check how viable this mannequin is.
How do you see the Bitcoin L2 ecosystem evolving within the subsequent 5 years?
Over the subsequent two years, we purpose to construct sturdy L2 adoption with important TVL and transaction quantity. In 5 years, we hope that mainstream monetary establishments may also use Bitcoin L2s for yield technology and different use instances. Nevertheless, mass adoption will take time.
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About The Writer
Victoria is a author on a wide range of expertise subjects together with Web3.0, AI and cryptocurrencies. Her intensive expertise permits her to jot down insightful articles for the broader viewers.
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Victoria d’Este
Victoria is a author on a wide range of expertise subjects together with Web3.0, AI and cryptocurrencies. Her intensive expertise permits her to jot down insightful articles for the broader viewers.
