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Bitcoin Layer 2 chaos is actually a good thing

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Just as chaos is not a trap but a ladder for climbing, the chaos of the Bitcoin ecosystem will also be a road to a higher level of development.

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There has been a heated debate in the community regarding the definition of Bitcoin Layer 2.

From the beginning of last year to now, the Bitcoin ecosystem has experienced several downturns. After a year of hype, it seems to be at a critical moment. The undisputed consensus in the market is that the Bitcoin ecosystem will still be the biggest hotspot for a long time to come. Therefore, the market is now looking for new opportunities in the BTC ecosystem, and many users at home and abroad agree that the outbreak point in the later stage will be Bitcoin Layer2.

Therefore, in the past month, the escalation of Bitcoin Layer2 has become increasingly intense, with no less than fifty projects in the market. The competition for TVL, the stacking concept, and a fifty-fold increase in a single day have made Bitcoin Layer2 one of the most exciting and chaotic tracks today. One of the main reasons for this situation is that there is still no definitive definition for Bitcoin Layer2.

Who can define Bitcoin Layer 2?

Unlike Ethereum Layer 2, the mysterious founder of Bitcoin did not define Bitcoin Layer 2 before "disappearing". In this mixed race, what exactly is Bitcoin Layer 2? Currently, the community has not reached a consensus, and different researchers have different answers.

"Authenticity" of Bitcoin Magazine

The Bitcoin Magazine Editorial Committee recently clarified their position on reporting about Bitcoin Layer 2 in their article "BITCOIN MAGAZINE EDITORIAL POLICY ON BITCOIN LAYER 2S".

One of the topics that has sparked community discussion is their three-point definition of Bitcoin Layer 2:

1. Use Bitcoin as the native asset: Layer 2 must be designed from the ground up with Bitcoin as the unit of account, either as its primary token or account unit, or as the mechanism for paying system fees. If it has a token, it must be backed by Bitcoin.

2. Use Bitcoin as a settlement mechanism to enforce transactions: Layer 2 users must be able to exit the system through a mechanism, whether trusted or untrusted, to return control of their funds to Layer 1.

3. Display the functional dependence of Bitcoin: If the Bitcoin network fails and becomes ineffective, but the system continues to operate, it is not a Bitcoin Layer 2.

Bitcoin Magazine, founded in 2012, can be said to be one of the oldest and most mature sources of information focused on Bitcoin. Therefore, many community members believe that the definition given by Bitcoin Magazine is "authentic and reliable".

According to Bitcoin Magazine's definition, the various Bitcoin Layer 2 solutions currently available on the market cannot escape its scrutiny. Community KOLs and researchers have also expressed their opinions.

The well-known KOL in the Bitcoin ecosystem, 0xSea, said: "If we strictly follow this definition, it is difficult to say that most projects in the market are Layer 2, and most of them are 'sidechains'. The layer 1 protocol Atomicalsxyz's AVM (technology) meets the above three points, but there is no independent running chain, so it can be called Layer 1.5."

dforce founder Mindao also believes that "Bitcoin Magazine, as an important promoter of Bitcoin, has released its latest editorial policy, emphasizing the 'legitimacy' of Bitcoin Layer 2. They will not report on any Layer 2 that does not meet this standard. According to this definition, most of them can only be considered bandits."

Meanwhile, Mindao also stated: "This standard is not difficult to say, but in practice, it requires a lot of economic models and sacrifices in architecture. Most projects have no intention of doing so. Many people believe that the "ownerless" Bitcoin should not have the concept of orthodoxy, but orthodoxy is everywhere in ideology, regardless of whether it is "ownerless" or "owned". This emergence of "orthodoxy" is a very interesting phenomenon."

Regarding Bitcoin Magazine's strict definition, some community members have also expressed their dissatisfaction, believing that Bitcoin Magazine's influence, even though significant, only represents the views and opinions of their magazine and editorial committee, and cannot represent the final authoritative definition of Layer 2.

For example, AC Capital's GP, 加密韋馱, sharply expressed: "Seriously no one cares. Bitcoin Magazine is just old, and does not have the role of Layer 2Beat in Ethereum's voice."

Dozens of Bitcoin Layer 2 VCs: How to Define Them

The founder of Shuidi Capital, who has invested in dozens of Bitcoin Layer 2 projects, Da Shan, expressed his views on the definition of Layer 2 in a previous AMA here.

He believes that in a broad sense, as long as BTC is used as gas or as the underlying asset, it can be used as a DApp platform on BTC Layer2, which has much better performance than BTC Layer 1, and all of these can be considered as Bitcoin Layer 2. This includes but is not limited to application platforms based on Indexer, EVM rollup, EVM crosschain, sidechains, Lightning Network, and RGB, etc.

When it comes to the narrow definition of BTC Layer2, it needs to meet at least the following two conditions:

1. Whether it shares security with BTC.

2. Whether it is resistant to censorship.

Specifically, if BTC crashes, can Layer 2 survive on its own? The most that can survive on its own is called a sidechain. Are the nodes or cross-chain multi-signatures of Layer 2 decentralized enough? For example, in multichain, the multi-signatures are all in the hands of a few relatives, and if the user's assets are involved in a problem, they will be lost as well.

In addition, Dashan also mentioned that BTC Layer2 that meets the Ethereum community standards has two additional requirements besides the narrow definition of Layer 2: whether the first layer can verify transactions on the second layer, and whether assets on the first layer can escape smoothly when the second layer collapses.

However, at that time, Dashan also expressed that this was only his personal opinion, and in fact, discussing "what is the definition of Bitcoin Layer 2" is meaningless. He pointed out that Satoshi Nakamoto would not personally come out and tell the community what his ideal BTC Layer 2 looks like, and no organization has the right to define its orthodoxy.

Early in the Bitcoin ecosystem, KOL xiyu also stated: "Now is the stage of chaos. Who is the real Bitcoin layer 2 should not be defined by fixed standards, but should be determined by the market. This is what I learned on brc20."

Chaos isn't a pit. Chaos is a ladder.

Currently, the solutions and forms of Bitcoin Layer 2 can be described as diverse, with a particular emphasis on the concept of ZK technology. This also reflects the chaotic nature of the Bitcoin Layer 2 track from another perspective.