Geek Dialogue: How do you view Bitcoin Magazine's "Three Chapters" on Layer2?

Guests: Kevin He, former Web3 technology leader at Huobi Group

Faust, founder of Geek Web3

The two guests discussed the current industry status of the Bitcoin ecosystem, their views on Bitcoin Magazine's definition of Layer2, and their own criteria for evaluating Bitcoin Layer2 in their minds. (Note: These remarks represent the personal opinions of the two guests and do not involve the values of Geek Web3 as a media organization itself)

Introduction: The beginning of 2024 can be described as the Warring States period of Bitcoin Layer2. In just a few months, at least 60 project teams claiming to be Layer2 have emerged in the Bitcoin ecosystem. Due to the lack of authoritative voices in this field, there is no clear and systematic judgment standard for what should be considered as Layer2 and what should not.

This ambiguity and disorder provide absolute freedom for developers and entrepreneurial teams, but also allow various narratives to ride on concepts to spread unchecked.

(The text in the image is machine-translated from the original English text of Bitcoin Magazine)

In this chaotic and impetuous time, Bitcoin Magazine, relying on its relatively authoritative status within the Bitcoin community, has put forward a simple set of Bitcoin Layer2 definition standards.

It is not difficult to see that this standard has a strong "Bitcoin characteristic," which is very different from the mainstream understanding of Layer2 in the Ethereum community. Bitcoin Magazine's main points mainly cover three aspects, including:

1. Using Bitcoin as its native asset: Bitcoin Magazine believes that Layer2 should use Bitcoin as its primary token or account unit (Native Token), as well as the currency for measuring gas fees.

If a Layer2 project issues its own tokens, they should be backed by Bitcoin. (This explanation is somewhat vague, and some people think that Bitcoin Magazine seems to be referring to assets like BRC-20).

2. Using Bitcoin as a settlement layer: Layer2 must reserve an exit mechanism for users, allowing them to withdraw their assets to Layer1. This withdrawal mechanism can be trustless, or it can involve certain trust assumptions.

(It seems to be saying that there must be a bridging relationship between Layer2 and Layer1, or there must be a mapping relationship between assets in L1 and L2. The way of cross-chain bridges or asset withdrawals can be non-trustless, but they did not clearly state what level of trustlessness should be achieved. According to this standard, protocols such as the inscription protocol or off-chain indexing protocol, and the original RGB protocol may not be included in the category of Layer2.)

3. Dependence on Bitcoin: If Bitcoin completely fails, Layer2 should also "suffer." If Layer1 shuts down, so-called "Layer2" should still be operational, then such a project is definitely not a Bitcoin Layer2.

In addition to the above "three chapters," Bitcoin Magazine also mentioned CounterParty and Ordinals, pointing out that asset protocols that are attached to Bitcoin and do not have independent blockchain structures do not belong to the scope of Layer2; at the same time, some "parasitic layer" protocols do not meet certain conditions of Bitcoin Layer2.

However, Bitcoin Magazine did not provide a clear explanation of which protocols belong to the so-called "parasitic layer" (which may include the RGB protocol), leaving everyone in suspense about the point that Bitcoin Magazine wants to convey.

After the introduction of this set of standards by Bitcoin Magazine, it quickly sparked discussions among many people, including the founder of the Stacks sidechain, who also expressed his views. Onekey's official Chinese account observed these influential Western KOLs, and it is obvious that people have mixed opinions about Bitcoin Magazine's views, and even the majority expressed opposition.

Setting aside the subjective positions of the public and the rationality of the above Layer2 definition standards, Bitcoin Magazine, as an influential media and research institution in the Bitcoin ecosystem, has taken a historic step—triggering a large-scale discussion of the Bitcoin Layer2 definition standards in public, and sparking support or opposition from people with different stances.

It feels like in August 2023, Dankrad of the Ethereum Foundation made a high-profile declaration on Twitter that "if it's not using Ethereum as the DA layer, it's not considered Layer2." It is not surprising that the public discussion on the definition of Bitcoin Layer2 will become more intense in the future, until a consensus is reached by the majority of professionals.

Based on a strong interest in Bitcoin Layer2 and even modular blockchain technology narratives, Geek Web3's Research Lead, Yuki, invited Kevin He, former Web3 technology leader at Huobi Group, and Faust, founder of Geek Web3, to conduct an online closed-door exchange. This article will provide a textual summary of the results of this online exchange to help everyone understand the definition standards of Bitcoin Layer2.

Main Text:

1. Yuki: In fact, the current Bitcoin ecosystem is very much like the Wild West of the United States in the 19th century. Many people regard Bitcoin Layer2 as gold, and major entrepreneurial teams are like enthusiastic gold diggers, holding onto Layer2 as a means of wealth creation. In the eyes of the two guests, what is the current industry status of Bitcoin Layer2? What are your views on the current Bitcoin ecosystem?

Faust: In my personal view, the current Bitcoin Layer2 track has a tendency towards chaos and disorder, meaning that there is a lack of consensus on the definition of Layer2 and objective evaluation criteria for Layer2. Taking the overall impression in the Chinese community as an example, there are significant differences in opinions among VC investors in the Bitcoin ecosystem, project teams involved in Layer2 development, and OGs who have experienced multiple bull and bear markets. Some technical geeks believe that only the UTXO programming model can be considered as inheriting the "orthodoxy" of Bitcoin, and the EVM is heretical; there are also those who believe that if it does not highly inherit security from Bitcoin, it is not considered Layer2.

Of course, traders who are keen on trading and geeks who focus on technology have vastly different ways of looking at Bitcoin Layer2. Previously, some KOLs believed that exchanges also count as Bitcoin Layer2, and Sun Ge directly shouted: Tron is also a Bitcoin Layer2. Some KOLs believe that the evaluation criteria for Bitcoin Layer2 should be different from Ethereum Layer2, and even claim that Bitcoin Layer2 will surpass Ethereum Layer2, and then use this opportunity to promote a set of subjective theories.

These phenomena are just the tip of the iceberg in the current Bitcoin ecosystem, and the phenomenon of setting standards and self-promotion is widespread among most people. Of course, all so-called "theories" ultimately have to be judged by professionals. Currently, many statements about Bitcoin Layer2 are not logically reasonable.

In addition, there is also a clear gap between the Eastern and Western communities, especially between practitioners in Western countries such as Europe and the United States, who have direct and frequent communication, and the technical atmosphere is much stronger than in the Eastern circle. More importantly, Bitcoin community OGs, the Ethereum Foundation, the Celestia Foundation, and other professional individuals or organizations have a huge influence in the West, much more than in the East, which to a large extent has led to differences in values between the Eastern and Western communities.

In comparison, the Chinese community has generally formed a certain closed loop, with everyone doing their own thing and busy with their own affairs, and has not yet formed one or a few organizations with strong professionalism and strong promotional capabilities as the radiation source of unified values, which has brought both freedom and chaos.

Of course, this situation is inherently both good and bad, but when it comes to the technical understanding of Bitcoin Layer2, we can clearly feel the differences between the Eastern and Western communities. However, "technology is valuable, and creating wealth is also valuable." Technology is one aspect, and the wealth creation effect is another aspect. Since so many people can accept Blast, I think that even if some Layer2 technologies are insufficient, we cannot arbitrarily deny them. In the end, we still need to see what kind of value these projects can bring to the market and the entire industry.

Kevin He: Thank you for the question, the points Faust made are quite clear. I will add some personal views: the current Bitcoin ecosystem can be described as a situation where all flowers bloom. As for Bitcoin Layer2, it is a stage where various forces contend and numerous boats vie for the current.

In the context of the continuous halving of Bitcoin, the Bitcoin ecosystem has emerged. Various asset protocols based on Bitcoin have been launched, breaking the inherent concept that Bitcoin cannot easily issue assets, leading to an explosion of assets. The prosperity of assets will inevitably generate application demand, and Bitcoin's unique technical conditions (expensive and slow) urgently require BTC Layer2 to accommodate the application demand for these assets.

From a market perspective, several projects have been running relatively fast, attracting the attention of both Eastern and Western communities. At the same time, from a technical perspective, the definition of Bitcoin's Layer2, or security standards, is currently lacking and requires more like-minded individuals to come together to promote the formation of consensus.

2. Yuki: Thank you for the wonderful sharing from both of you. What are your thoughts on the recent widely discussed "Bitcoin Magazine's Three Chapters on Bitcoin Layer2"? Do you think the standards proposed by Bitcoin Magazine are reasonable? Many people in the Western community seem to hold a critical attitude towards this matter.

Faust: In fact, the three major standards proposed by Bitcoin Magazine are not very precise, and some key points are based on ideological perspectives rather than technical perspectives. They have not gained community consensus and are difficult to serve as objective criteria for judging Layer2.

I personally think that they originally wanted to propose some strict standards, but they found that different Bitcoin Layer2 projects have significant differences, making it difficult to quickly generalize a universal evaluation framework. Yet, they wanted to implement a custom standard at this particular time, just with a simple "three chapters" (Bitcoin Magazine stated at the beginning of the article that their purpose in promoting standards is to resist some chaos in the Bitcoin ecosystem). However, this simple and crude method may not objectively measure Bitcoin Layer2.

In this regard, the approach of the Ethereum Foundation may be more rigorous. They are taking a technical approach, distinguishing different technical solutions, categorizing state channels, Plasma, Rollup, and other specific technical solutions as Layer2. Many people in the Ethereum community also include Validium and Optimium, which are outside of Rollup, in the Layer2 category.

This method of first classifying from a technical perspective is clearer and more specific. For example, state channels and Rollup have significant differences in their working mechanisms, and many features are not interchangeable. The Ethereum community first categorizes both into the Layer2 category and then proposes a series of evaluation criteria for Rollup as a subcategory. This method is more mature.

However, if one were to define the entire Layer2 track with a macro, universal indicator like Bitcoin Magazine, it would be difficult to come up with a set of granular and universal methods. So, if it were up to me, I would first declare:

Which types of technologies, such as sidechains, sovereign Rollups, independent public chains (PS: there is a difference between independent public chains and sidechains), ZK Rollup, and OP Rollup, should be considered as Layer2, and then proceed to different sub-concept evaluations.

Of course, if a less granular and somewhat vague evaluation scheme were to be directly proposed for Bitcoin Layer2, it is not impossible. For example, I would be more inclined to evaluate from the perspective of censorship resistance, DA implementation methods, and verification methods for state transitions, which are basic industry consensuses. Because the evaluation methods involved in this have already matured, there is already a basic consensus in the industry.

The views proposed by Bitcoin Magazine have not been agreed upon by the industry and are mixed with strong ideological orientations, especially the first point: Layer2 must use Bitcoin as the native token. Even the Ethereum Foundation, which has the goal of maintaining the ETH price and has a centralizing tendency, does not dare to express it so bluntly. Perhaps Bitcoin Magazine does not want to see too many teams rushing to issue tokens, so they have proposed this point. However, in fact, even if Layer2 issues tokens, it does not affect what its Native Token is, and the phrase "backed by bitcoin" is even more puzzling.

In conclusion, my personal stance is very clear: standards should be proposed as much as possible from a technical perspective, with less interference from purely ideological perspectives. In this regard, the Ethereum community's L2BEAT has done a good job. They conduct scientific evaluations from the perspectives of censorship resistance, DA reliability, verification methods for state transitions, and control of Rollup contracts. This set of standards can be slightly modified and applied to many modular blockchain modules in the Celestia ecosystem, and of course, it can also evaluate the security of Bitcoin Layer2.

However, defining Layer2 from an ideological perspective is too subjective. This is like evaluating which political system, the United States or the Soviet Union, is better, and it can easily degenerate into mutual labeling by people with different political views. But judging everything from a technical perspective will be much easier.

I think it is better to first focus on areas with less controversy and easier consensus, such as evaluating the security risks of Layer2, the completeness of functions, and the potential hazards of different asset protocols. Starting from these perspectives will be more objective and rigorous. Trying to define from an ideological perspective is not something that Bitcoin Magazine or anyone else or any organization should do (except for Satoshi Nakamoto).

Interestingly, the CEO of Bitcoin Magazine mentioned that they plan to recruit an employee from L2BEAT to research the evaluation methods for Bitcoin Layer2. It is estimated that they will soon cite some of the work results from L2BEAT.

Kevin He: First of all, I highly appreciate the courage and responsibility of the editors of Bitcoin Magazine in proposing and implementing standards in such a contentious world, which is bound to attract criticism, and it also requires a lot of effort to implement. However, a healthy community inevitably needs someone to do this, just like we tried to promote discussions on classification standards and security standards in the community several months ago.

Secondly, returning to the standard itself, personally,

1) It is based on the innovation of Ordinals and BitVM (without these two innovations, the Bitcoin ecosystem might still be stagnant)

2) I think it belongs to a relatively broad standard (they have made great efforts to unite as many forces as possible)

3) I think it lacks discussion on more fundamental security standards (that is, the underlying principles of why these three standards are necessary)

Considering that we have had quite a bit of thought and discussion in this regard before, mainly focused on the Chinese-speaking community, we will now promote our draft to a wider audience and welcome more forces (including Bitcoin Magazine) to work together to build and promote the formation of community consensus on classification and security standards.

3. Yuki: The sharing from both of you is excellent. Next, I would like to ask the most crucial question: How do you think objective evaluation criteria for Bitcoin Layer2 should be defined?

Faust: As mentioned earlier, it should start from a technical perspective, focusing on security, the completeness of Layer2 functions, and other technical aspects, and less from a subjective ideological perspective. It should refer more to industry consensuses and avoid inventing new concepts and ideas. Bitcoin Layer2 is essentially an extension of modular blockchains, state channels, and derivative off-chain asset protocols. Just follow the existing research conclusions on these three aspects.

Elements that have not been included in the evaluation criteria for Layer2 by industry predecessors have not been included for a reason. We should avoid these minefields and try to follow the path that predecessors have already taken, rather than forcibly opening up new paths in marshy areas, which will only lead to deeper trouble.

Kevin He: I believe that to promote this set of standards, at least two basic points must be adhered to:

1) Respect Bitcoin's traditions and incorporate the latest developments (such as Ordinals/BitVM)

2) Absorb the exploration and practical experience of other ecosystems in Layer2 (such as Ethereum Layer2)

Based on these two basic points, form several universal/objective/security-focused standard definitions, undergo thorough discussions, and ultimately form community consensus.

All theoretical frameworks must undergo several discussions and revisions before they can gradually take shape. For the establishment of standards for Bitcoin Layer2, it may still require a lot of exploration by many individuals and organizations, and the market will gradually select the most reasonable standards that can be accepted by the majority of professionals and even common-sense individuals. This process should be left to the free choice of the market to know the final answer.

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