Unlike Ethereum Layer 2, the mysterious founder of Bitcoin has not made a definition of Bitcoin Layer 2 before “disappearing.” In this mixed arena, what exactly is Bitcoin Layer 2? Currently, the community has not reached a consensus, and different researchers have different answers.

“Authenticity” by 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“.

In this, they outlined three defining points for Bitcoin Layer 2 that have sparked community discussions:

1. Use Bitcoin as Native Asset: Layer 2 must be fundamentally designed in Bitcoin units, using Bitcoin as its primary token or account unit, or as the mechanism for system fees. If it has tokens, they must be backed by Bitcoin.

2. Enforce Transactions Using Bitcoin as the Settlement Mechanism: Users at Layer 2 must be able to exit the system through a mechanism, whether trustless or not, returning control of their funds to Layer 1.

3. Demonstrate Dependency on Bitcoin’s Functionality: A system that continues to operate in the absence of the Bitcoin network or fails independently is not considered Bitcoin Layer 2.

Founded in 2012, Bitcoin Magazine is considered one of the oldest and most mature sources focusing on Bitcoin information. Many community members view the definitions provided by Bitcoin Magazine as “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.”

Mindao, the founder of dforce, 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.”

In response to Bitcoin Magazine’s stringent definition, some community members expressed dissatisfaction, asserting that the influence of Bitcoin Magazine, no matter how significant, represents only the magazine and editorial committee’s opinions and cannot represent the final authoritative definition of Layer 2.

For example, GP of AC Capital, Crypto V (加密韋馱), sharply commented, “Seriously no one cares; Bitcoin Magazine has been around for a long time and does not have the same influence on Layer 2 in Bitcoin as it does on Ethereum.”

Dozens of Bitcoin Layer 2 VCs: How to Define Them

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

He believes that in a broad sense, any BTC Layer 2 that consumes BTC as gas or has BTC as the underlying asset and serves as a DApp platform, with performance far superior to BTC Layer 1, qualifies as Bitcoin Layer 2. This includes but is not limited to applications based on Indexer, EVM rollups, EVM crosschains, sidechains, Lightning Network, RGB, etc.

In a narrow sense, BTC Layer 2 needs to meet at least the following two conditions simultaneously:

1. Whether it shares security with BTC.

2. Whether it is resistant to censorship.

In more detail, 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.

DaShan also mentioned that BTC Layer 2, which conforms to Ethereum community standards, requires two additional criteria: whether Layer 1 can verify transactions on Layer 2 and whether Layer 1 assets can smoothly escape when Layer 2 collapses. However, he emphasized that this is just his personal opinion, and discussing “what the ideal BTC Layer 2 is” is meaningless. Satoshi Nakamoto is not expected to personally come forward to tell the community what his ideal BTC Layer 2 looks like, and no organization has the right to define this orthodoxy.

Early Bitcoin ecosystem KOL xiyu also stated, “Now is the chaotic stage. The definition of who is the real Bitcoin Layer 2 should not be fixed but should be determined by the market. This is what I learned on brc20.”

Chaos isn’t a pit. Chaos is a ladder.

The current landscape of Bitcoin Layer 2 solutions is diverse, with particular enthusiasm around concepts involving Zero-Knowledge (ZK) technology, reflecting the disorderly nature of the Bitcoin Layer 2 space.

Projects Grappling for Attention in the Chaotic Race

In January of this year, the Bitcoin ZK Rollup Layer 2 solution, SatoshiVM, sparked discussions on Twitter, and its native token, SAVM, saw a nearly 50-fold increase on the first day of trading. Many individuals made substantial profits by selling SAVM, totaling millions of dollars.

SAVM increased nearly 50 times in one day. Who developed SatoshiVM?

However, amidst the fervent promotion by prominent Key Opinion Leaders (KOLs), SatoshiVM faced scrutiny from community members who revealed potential connections between the SatoshiVM team and Bool Network. Bool Network had previously developed an AMT bridge contract called TokenBridge.sol, which shares similar function names and events with SatoshiVM’s version, suggesting a direct implementation.

Bool Network, established at the end of 2020, has long been dedicated to Bitcoin Layer 2 solutions. In 2022, they published a paper on the topic, and their Github can be found here.

Reviewing Bool Network’s documentation, they provided the address of the AnchorFactory contract on Sepolia, indicating the system’s deployment in May 2023. Strikingly, the address deploying AnchorFactory is the same as the one deploying SatoshiVM Anchor: 0x66feD255e376c5E5495384A8aBc01a1AA65aFE8a.

While Bool Network may have provided a technical solution to SatoshiVM, it remains plausible without more direct evidence. Bool Network is currently focused on Bitcoin verification layers, potentially serving all Bitcoin Layer 2 solutions.

But the confusion doesn’t end here.

On January 25, the platform Ape Terminal, responsible for SatoshiVM’s Initial DEX Offering (IDO), engaged in a public dispute with the SatoshiVM team due to “conflicts of interest.”

Leading the promotion of SatoshiVM and claiming to be an advisor, well-known KOL MacnBTC, with over 500,000 followers, confronted Ape Terminal, accusing them of deceiving everyone and conducting an unfair sale. Despite 200,000 wallets applying for IDO participation, only 10 winners were chosen each time, all of whom were members of the Ape Terminal team.

Although Ape Terminal reimbursed some IDO fees to the SatoshiVM team, they allegedly earned millions by selling pre-allocated wallets.

SatoshiVM and IDO platform clash: What is the truth behind the 10-day wealth creation myth and ‘flash crash’?

Faced with accusations, Ape Terminal issued a counterstatement, claiming that SAVM was a project founded by the well-known KOL MacnBTC. Ape Terminal expressed mixed feelings about SAVM, as Mac and his KOL friends profited over $20 million by selling in their own communities. Ape Terminal provided detailed information about their interactions with Mac and records of token liquidation through a Google document.

In Ape Terminal’s view, they became the scapegoat for Mac.

In response, Mac asserted that he was an advisor to the SatoshiVM team and worked closely with them. He introduced Ape Terminal to the SatoshiVM team, but after SatoshiVM’s success, he faced partial and misleading attacks. Mac denied frontrunning liquidity and emphasized that someone else was responsible.

Chaos is actually a good thing

The recent controversy surrounding SatoshiVM is viewed by many as a symbol of chaos. However, in reality, such chaos may be the prelude to the flourishing development of the industry.

The Bitcoin Layer 2 space is currently in a state of chaos, reminiscent of the tumultuous period in 2013 when numerous altcoins forked from Bitcoin. It was during this chaotic community atmosphere and the years-long block size war that Vitalik founded Ethereum as a staunch supporter of large blocks. This laid the foundation for the subsequent prosperity of the public blockchain era.

As stated in “Game of Thrones”: “Chaos isn’t a pit. Chaos is a ladder.” Chaos itself does not imply a lack of control or disorder; on the contrary, it is a process of exploration and experimentation, a prelude to constructive development.

In any emerging technology or industry, the establishment of consensus typically requires navigating a period of chaos. This is because, at the inception of something new, various parties have diverse perspectives and understandings that need time to integrate and unify, forming a more widespread consensus. The Bitcoin Layer 2 space is no exception, and the current discussions about its definition may seem chaotic but are part of the community gradually converging through active exploration. This chaos is a necessary path for development, refining a more comprehensive consensus from diverse viewpoints.

Currently, the cryptocurrency industry is deeply engaged in a profound discussion about the Bitcoin Layer 2 space. This chaos is not negative; rather, it indicates that the community is actively reevaluating this space, reflecting on potential “hype” and inaccuracies. This self-reflection and in-depth discussion drive the industry forward, seeking to identify projects with genuine potential and create a more favorable development environment for them. It is through such deep dialogues that the industry can stand out in a competitive environment, moving towards a healthier and more sustainable development.

Different participants have expressed their unique viewpoints in this discussion, including investors, media, project teams, and the broader community. This diversity of voices enriches the discussion, allowing various perspectives to contribute to a more comprehensive understanding. While there may be debates and differences in this process, it is precisely this diversity and conflict that sparks innovation and progress. This is a battle of ideas where minds collide, a process in which various parties gradually form a shared understanding through communication, debate, and cooperation.

In this chaos, it also signifies that industry participants are reflecting on their roles and responsibilities. Investors contemplate how to make more rational investment decisions, the media examines its objectivity in reporting, and project teams reassess the true value and feasibility of their projects. This is a necessary condition and a crucial step for industry progress.

Just as chaos isn’t a pit but a ladder, the chaos in the Bitcoin ecosystem will be a path leading to higher-level development.

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