Original Title: "Shuidi Capital Dashan: The Beginning of the Blockchain World is Bitcoin, and the End is the Bitcoin Ecosystem"

Original Source: "Bailu Clubhouse"

On December 20th, the Hong Kong Web3.0 Entrepreneur Summit was held as scheduled at Cyberport. As a media support, Bailu Club attended the event.

During this period, the founder of Waterdrop Capital, Dashan, shared his insights on "the beginning and end of the blockchain world" regarding the development of the Bitcoin ecosystem, the second growth curve of miners, important upgrades to Bitcoin, the evolution of blockchain technology, Ethereum and RWA, Lightning Network, and the Nostor protocol.

The Bailu Salon has carefully sorted out the full text of the speech and organized this article to share with readers.

Essential Content:

1. The total computing power of the Bitcoin network has grown from 10 billion in 2010 to 50 billion today, a five-fold increase in just over two years.

2. The Lightning Network may potentially realize a global settlement network. The data on the Lightning Network is packaged and placed on a layer, which can also increase the income of miners to a certain extent. This is also the second growth curve for miners.

3. In the blockchain world, there are two paths of evolution: one is the asset path, and the other is the technological evolution path.

4. The market value of the Ethereum ecosystem is similar to that of Ethereum itself; the market value of Bitcoin itself is three times that of the market value of Ethereum, so there is a huge alpha, and the market value of the Bitcoin ecosystem catches up with or even surpasses that of the Ethereum ecosystem.

5. The advantage of Ethereum is its account model, which is suitable for the development of RWA.

6. It is expected that potentially up to 10% of Bitcoin, which equates to millions of Bitcoin, will be locked on the Lightning Network or Bitcoin's second layer network.

7. If Bitcoin is the first time in human history to ensure private property is not violated by technological means, then Nostr is the first time in human history to ensure personal speech is not violated by technological means.

Below is the speech content of the founder of Shuidi Capital, Dashan, with some deletions.

The beginning of the blockchain world can be summed up in three words: Bitcoin. In fact, before 2014, the entire blockchain world equated the term "blockchain" with Bitcoin.

In 2013, if you wanted to create your own project in the cryptocurrency industry, you would first need to find a group of miners or community nodes. Then, you would need to post a notice on Bitcoin Talk to announce your project. Everyone would start mining at the same time, similar to how ZKS, STARK, and SCROLL projects are launched today. The project team would not have any other advantages.

The only advantage is that the early community is not so big, so as a part of the community, the project party may participate more, but he also has to pay the cost and money. This is just a Bitcoin Next Page at the beginning.

Bitcoin Ecosystem Development

Now let's take a look at the current development of the Bitcoin ecosystem. Bitcoin itself has a history of 14 years from 2009 to now, and the ecosystem has more than 16,800 full nodes, which is very, very important.

Remember this number, it may not seem like a lot with just over 10,000 nodes, but behind it are millions of mining machines. These 10,000+ nodes are mainly maintained by mining workers in the mining field, who need to forward transactions. Of course, there are also many projects based on Bitcoin, such as those focused on inscriptions, that require a full node to read data more quickly.

You can see that the nodes are already distributed globally, so the Bitcoin ledger is the safest ledger in this ecosystem, or the entire blockchain world, consisting of more than 16,800 full nodes to maintain.

Bitcoin miners are all very clear about this. It can be seen that the growth of computing power has been continuously increasing, and the growth rate is very, very fast.

Take a simple example, our Shuidi Capital also started with mining in the early years. Of course, we haven't invested more money in mining after 2021, and some old mining machines continue to mine. In 2021, due to the green carbon emissions problem in the mining industry, the National Development and Reform Commission banned mining in mainland China, so everyone went overseas to do it.

When it was banned in 2021, I remember very clearly that due to the bull market of that year, the total network computing power reached a record-breaking 10 billion. And now, how much is it? In just over two years, it has already surpassed 50 billion, increasing fivefold in just over two years.

In other words, with the same mining machine, you are now only mining 1/5 of what you were mining two or three years ago, so it is very competitive.

Not to mention, Bitcoin is expected to undergo its next halving in April next year, after which the amount of Bitcoin mined may only be 1/10 of what it was in 2021 in theory.

This is not a good thing for miners, nor is it a good thing for the network. If the income of miners decreases, the willingness of this node to mine may not continue to grow, or if it decreases, the Bitcoin network may become less secure.

So how to increase a miner's income is actually to a certain extent equivalent to how to make this network more decentralized and secure.

Miners are looking for the second growth curve

除了每个区块的固定区块奖励之外，矿工也想寻找第二增长曲线。

In addition to the fixed block rewards for each block, miners also want to find the second growth curve.

Now we have found a way, which is the thing about inscriptions. Recently, the mining income of each block of Bitcoin has basically doubled, or at least increased by more than 50%.

Ethereum Layer 2 is actually centralized, as most people should know. It does not have a blockchain or consensus, but rather a centralized sequencer that sorts and packages some transactions and interacts with Layer 1. Layer 1 nodes verify this, along with a 7-day challenge plan.

Although it seems like it can solve the trust issue, it is very inefficient and the sequencer is prone to crashing. That's why Arbitrum and zkSync both experienced downtime in the past few days. It was caused by a simple inscription task that overwhelmed the system with traffic. If a sequencer goes down, the entire network goes down with it.

So when we talk about the ultimate blockchain 3.0, there are several directions that have not yet been determined, and these are some directions worth paying attention to, such as full support for layer one scalability, such as Ethereum sharding. If there is a technological breakthrough, I believe Ethereum still has the opportunity to continue to develop.

However, if we are only working on the current centralized L2, it is entirely possible to do it on Bitcoin. The user experience and the level of difficulty for developers are exactly the same. The only difference is that your layer is Ethereum, and you use Ethereum as gas; my layer is Bitcoin, and I use Bitcoin as gas. The solution for data availability (DA) may be different, but everything else is the same.

Of course, Bitcoin also has some native layer 2 solutions, such as RGB and Nostor, which are also feasible solutions.

Here's a brief description of the TVL of the Bitcoin ecosystem. The area of this block represents the market value, and we can see that the market value of Bitcoin is more than three times that of Ethereum. However, the market value of the Ethereum ecosystem is similar to that of Ethereum itself. The Ethereum ecosystem includes all projects on Ethereum plus TVL, which adds up to approximately $300 billion.

The current market value of the Bitcoin ecosystem is mainly dominated by Inscriptions, and there are several L2s in testing, which together add up to less than 5 billion US dollars. However, the market value of Bitcoin itself is three times that of Ethereum, so there is a huge Alpha here, which may be coming soon in this bull market, or we are already in the early stages of the bull market, and the market value of the Bitcoin ecosystem will catch up with or even surpass that of the Ethereum ecosystem.

RWA is still an opportunity for Ethereum

Of course, the great potential of the Bitcoin ecosystem does not mean that Ethereum has no chance to do RWA. Currently, many Defi projects are moving to layer 2 solutions, so it is foreseeable that many Defi projects will also move to Bitcoin's layer 2. Even many star teams in Ethereum's layer 2 are starting to work on Bitcoin's layer 2, such as Starknet.

Ethereum has an advantage over Bitcoin, or a feature, which is that it is an account-based model.

What is account mode? It means that you have one Ethereum address and you always use this address to interact with others. The downside is that it lacks privacy because when you interact with a front-end webpage, anyone with access to your IP, including Meta Mask, can easily track you down.

In other words, the addresses of various blocks in Ethereum or other public chains, or the POS account mode, are very insecure.

This unsafe in quotes means "you are not safe when you do bad things", of course you can choose not to do bad things, and not doing bad things is safe.

Because Bitcoin is UTXO-based, every time you make a transaction, you add several previous addresses, making it very difficult to trace and highly private. Of course, the downside is that it is very cumbersome.

As RWA stands for Real World Asset and is meant to be combined with real-world assets, it is suitable to be integrated with Ethereum since KYC is required.

Therefore, for those who do not like the Bitcoin ecosystem and prefer Ethereum, my personal recommendation is to definitely pay attention to the RWA track, which is a natural fit with Ethereum. However, apart from RWA, I believe that most Gamefi, Defi, and other native things should migrate to the Bitcoin ecosystem.

Endgame is the Bitcoin ecosystem

Just now we talked about the beginning, now let's talk about the endgame. In my personal opinion, or rather, in the opinion of Waterdrop Capital, the beginning is Bitcoin, and the endgame is the Bitcoin ecosystem.

The Bitcoin ecosystem, we believe, has a promising future in Bitcoin's L2, because we know that L1's capacity is too limited. The small inscription has already brought so much controversy and such high gas fees, obviously it is very difficult to enter the stage of massive adoption, and it is difficult to make everyone use it.

Whether it's voluntary or involuntary, or even if it's a necessity, you must go for L2.

You can see that there will be a Bitcoin L2 in January next year, which means that it will be exactly the same as the Ethereum experience in 1 month. For example, BEVM, the project party is testing the network, and TVL is growing rapidly.

The second one is Lightning Network and Nostr, which I think is more worthy of everyone's attention.

闪电网络

translates to

Lightning Network

.

Starting from Web2. There are two aspects to Web2: the first is the transmission of messages through the Internet, and the second is making a payment, such as purchasing a membership, and so on.

From a certain perspective, that is precisely the Lightning Network and Nostr. The Lightning Network is an asset transfer protocol; the decentralized Nostr is a decentralized messaging protocol. Both are at the level of 1 million TPS. If you look at any public chain, whether it is L2 or L3, it is impossible to achieve 1 million TPS.

Including RGB, it is a native off-chain calculation with client-side verification, so it is very fast and can be considered as an extension protocol of the Lightning Network, supporting complex smart contracts. However, RGB is still relatively early and may only be able to achieve a simple Token smart contract within six months.

Regarding the Lightning Network, all you need to know is that a piece of code was included in version 0.1 of Bitcoin's code, which is the prototype of state channels. Therefore, the Lightning Network is in line with Satoshi Nakamoto's vision and is known as the L2 of Bitcoin.

Technically, the Lightning Network only needs to remember two basics. One is RSMC, a revocable contract that expires: the Lightning Network opens a channel, and both parties deposit Bitcoin in the channel, allowing them to make such a large transaction.

For example, if you mortgage 10 bitcoins, you can do business with 10 bitcoins; if you mortgage 100, you can do business with 100 bitcoins. This is one of its core technologies. Of course, a network can also be formed through some shared relay nodes, so we call it the Lightning Network.

It can be anticipated that if the Lightning Network continues to develop, a large amount of Bitcoin will be locked in L2, which will further increase its scarcity and reduce the amount available for trading. Therefore, to some extent, it may also lead to an increase in value.

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