**A** (0:01):
We are kicking off the next part of the day as we continue the discussion around the growth and expansion of the bitcoin ecosystem. And if you haven't done so already, you are on the main stage. But make sure you check out the technical silent disco stage for all the technical discussions. Throw on your headphones, hear everything about building applications or dapps and everything in between to the latest protocols and and defi applications as well. But here on the main stage we're going to continue today's discussion and head into Bitcoin's multi chain era. Ladies and gentlemen, a big round of applause for our next panel and their moderator, Ren Crypto Fish of Electric capital.
**B** (0:53):
Go for it. Thank you.
**C** (1:05):
Cool.
**D** (1:07):
Thank you so much for for being here today. We're going to be chatting about bitcoin going multi chain. A bit of a controversial topic. Also a very exciting topic. Excited to have some great panelists here today to chat with me about it. Maybe we can start off with a round of intros just going down the line here.
**B** (1:26):
Hi everyone, I'm Mikhil. I'm the co founder of PSTake. We do Bitcoin liquid staking. We've been doing liquid staking for about four and a half years now. We started off with Atom Cosmos and we've pivoted into Bitcoin recently as we saw an opportunity to do liquid staking for bitcoin for the first time. So very excited to be here. Talk about bitcoin going multi chain. Different forms of different versions of bitcoin going multi chain and yeah, happy to be here.
**E** (1:51):
Awesome. Kyle Langham, Director of data and analytics at Dfinity Dfinity foundation, is a major contributor to the Internet computer protocol. I just want to say, actually one of the exciting things is that the future of our industry is going to be shaped by the people in this room. So I just want to give you guys a thank you for letting us be up here and be with you all today.
**C** (2:13):
Hey guys, my name is Sunny. I'm one of the co founders of a Dex called Osmosis built in the Cosmos ecosystem and I was one of the original devs of Cosmos in general. And yeah, part of why I started working on Cosmos seven years ago was to build the side chain network for bitcoin. Blockstream came up with the idea, never really executed on it and we were like, all right, let's build this thing. And yeah, seven years later, still working towards that.
**D** (2:44):
Nice. Thank you so much. Maybe to tee things off, we're here at BTC Nashville. Maybe we can Start with the question, why should bitcoin go multi chain? Give the audience, I guess, your strongest arguments for why they should potentially lock up their BTC and what makes it worthwhile.
**C** (3:03):
I mean, I was surprised at the beginning. You said it's controversial. I mean, I'm not sure anyone would really find it controversial. I'm not sure if there's really anyone who thinks bitcoin shouldn't be multi chain, like, even the hardest core, like, you know, bitcoin chain minimalists. I think the idea behind bitcoin chain minimalism was the premise that, like, hey, bitcoin, the asset will go multi chain. That's why we can keep the bitcoin chain minimalist. So, you know, the reason bitcoin has go multichain is that the bitcoin blockchain is. And, you know, you can debate on whether it should be, but the fact of the matter is that it is a minimalist chain right now. It's really designed for, like, you know, being as, you know, decentralized as possible, just, you know, serving the purpose of mainly payments. But if you want bitcoin to be like the digital money of the world, you need to be able to do more with it than just payments. Right. And that's why, you know, we need to bridge it onto other blockchains that give it more applications that you can do with it. Usually financial applications, like, you know, Dexs or lending or collateral systems.
**E** (4:18):
Yeah, I think. I mean, Sonny, you nailed it. In terms of it. It doesn't matter whether it should or shouldn't go multi chain. It's a free market, and the market's going to decide whether it does is kind of how I view it. I would also say when you think about from a market perspective, bitcoin as an L1 has, or maybe bitcoin as a community has three options. One is go minimalist on the number of protocol updates, which is the path it's taken. The second is, well, I'll just say that option has significant market drawbacks in terms of competitiveness in this marketplace. Number two is it could start rapidly development. Right. And start doing a lot more protocol upgrades and stuff that has significant technical risk. The third option is go multi chain, in which case I think it has the minimalist risk from both of those market and technical perspectives.
**B** (5:11):
Yeah, I think Sunny and Kyle, you guys cover pretty much everything. The only thing I would add is if you look at everything in this space today, most blockchains exist as pure chains. They launch their own native token and they do everything around Their own native token. Right. All of defi. You see, you can borrow against that native asset, you can lend it out, you can do 20 things, but all with that native asset. And that is what defi looks like today. But that is not what most people care about in the world. Most people in the world care about using an asset that matters, that really matters and doing things with it. And that cannot happen in the bitcoin network. It has to happen somewhere else. Because of the state of the bitcoin network today, which is it's a minimalistic chain. There's not much that can happen on the network. So how do we make that happen? One of the best ways to make that happen is to actually take bitcoin to chains that have these existing primitives, money markets, you know, Dexs and doing 20 other things that we talk about. So that is the reason why I believe bitcoin should and will go multi chain. And that is something I'm excited about.
**D** (6:14):
Nice. Yeah, those are some great points about potentially increasing the amount of expressivity that users and builders have with bitcoin. So maybe some, some folks in the audience might be curious, how does bitcoin go multichain? Maybe touching on some of the technical details in terms of what it takes for bitcoin to proliferate across potentially some other networks, including. I'd also consider like the layer twos today as kind of like part of that whole multi chain expansion. How do we go about this or like how do builders go about this? How do you think about this problem of locking up BTC and bridging it or moving it potentially to some other networks?
**C** (7:03):
Yeah, I mean typically you have to have some sort of bridge that moves it. And I think the goal is that you're like, you want your bridge to become as trustless as possible. You know, the most popular bridge bitcoin is wbtc which is bridged by a single centralized entity. But it's still a type of bridge. Right. But then from there then you want to shift into like more decentralized, you know, still sort of multi sig style bridges. But that's where you have like, you know, CKBTC does this, where it has a set of like large, a large set of nodes that like use NPC to custody. Bitcoin or Nomic does something similar using like bitcoin script. So I think that's like with the current set of what's there on bitcoin today, it's probably like close to what, close to optimal. From there you can go into like even More improvements. Whether you're using like bit VM style stuff to like, okay, can you make it like reduce the trust assumption in that multi sig set or you can go down like the direction of like drive chains which are saying like hey, let's actually make it so that the miners of the bitcoin network are your multisig set. So there's a lot of like how do you. The goal is basically how do you get the trust assumptions as low as possible or as close to the trust assumptions of Bitcoin mainnet as possible.
**E** (8:29):
Yeah, it's such a phenomenal answer. The, the idea of just understanding what your trust assumptions are is incredibly important and Right. And so I know one basic principle is just remove the intermediaries. Right? That's where you end up having all the hacks. But that's also where you introduce unknown trust assumptions that you don't, you can't quantify. So I know within our approach for CKBTC for stacks with what they're doing for sbtc, it's basically the trust assumption should be what the, what the main layer is. So bitcoin combined with what, what the, what the other, you know, with ICP or stacks or whatever other blockchain that the combination of those trust assumptions should just be the totality of your trust assumptions. I think just having having a wide marketplace where people, you know, when you're a developer and you have a product in mind, having a wide marketplace of options that you can sit and pick and choose your balance of scalability versus security and build the product that you actually want to build. I think that's a key aspect to Bitcoin going multichain.
**B** (9:34):
I think you guys again cover all the points which are what most people are concerned about the trust assumptions. That's the most important bit, right. You don't want your bitcoin going from one chain to another through a multi sig in most situations. But that's the state of, of the situation we are in. I think we saw this so early on like defi Summer last cycle is what WBTC came out and did a phenomenal job. What we see today is kind of an extension to wbtc. There are a few projects that are trying to make some waves on this front where they actually want to decentralize the bridging of Bitcoin. But I think the bigger problem with Bitcoin going multi chain is essential in today's context is all these different versions of RAB Bitcoin. Right. So far we had just wbtc you could Take WBTC to Ethereum, you have WBTC in osmosis, you have WBTC on a bunch of other chains. But what happens when you have mbtc, you have sbtc, you have bbtc. So many different versions of bitcoin all having different trust assumptions. And I think that is the bigger problem and probably something we'll discuss as we go on, which is the problem of fragmentation. And I think that's the biggest problem with bitcoin going multi chain that we need to look to solve in the future.
**D** (10:53):
Maybe I'll point it straight back to you and then for fairness we can go down the line this way. There's been an explosion of L2s. There's probably dozens of L2s that have received funding over just the past year alone amidst other efforts to increase the amount of bitcoin adoption on other networks. How do you deal with this potential fragmentation problem, as you mentioned, as you have different versions of BTC potentially on the same network, and also different versions of BTC issued potentially by the same issuer, like in the case of wbtc.
**B** (11:31):
A very difficult question to answer, but I think it's a very interesting one. Personally. I think first of all there won't be 12 or 12, 24 or 50 Bitcoin layer 2s in the future, will narrow down to 5 or 6. Most of these are scams. Sorry if I offend anyone, but being more direct here, I think pretty much half of these Bitcoin L2s are just pure money grab plays. But the reality is that we've seen a lot of interesting things happen in the Ethereum ecosystem with intents and bridges. I think we'll see something similar with intent based bridging solutions that come about to allow people to move from one wrapped bitcoin version to another on a different layer too. And I think that could be a very interesting way to solve this fragmentation problem.
**E** (12:20):
Yeah, I was gonna ask if you wanted to name those scams.
**B** (12:24):
I would rather not, man, I would love to, but probably if this wasn't recorded, I would have gone for it.
**E** (12:31):
Yeah, no, it's such a great answer, Mikaela. The only thing I would add in my mind there's two stages that need to happen to reduce the fragmentation because we are in a state where there's a lot of different synthetic bitcoin or bridge bitcoin or whatever you want to call it. The ultimate stage that you want to get to is probably like you're saying there's maybe just a few versions of an L2 Bitcoin and then you want to abstract that away. Because the truth is, maybe we care about which token and we all have our favorite token and, you know, your camp this or you're in that, that other camp. And, you know, but for the 99.5% of people who are not into crypto, they aren't going to care. Just as the same way you don't care when you go to, you know, whatever your favorite website is, you're not like, well, this is built on aws, it's not built on Google Cloud. So I don't really, I can't use this website anymore. Like, that's not a thing that users do. So ultimately what we get to is a point where all of that is abstracted away. You're not maybe even aware what token you're using. The question is, how do you get to that? And I think, like, osmosis is doing a phenomenal job. It really falls at the Dex level to reduce the friction of moving between tokens. That is what fragmentation comes from, is that friction of going from one token to another. And so I think Sunny has the control over how well we reduce this fragmentation.
**C** (13:57):
Yeah. So we're working on a solution for osmosis. We call it Alloyed Assets, where basically on our chain, the canonical version of an asset is actually a basket of underlying variants, we call them. So what the canonical BTC on osmosis is, it's a basket of wbtc, nomic, btc, ckbtc. Eventually, when stacks were connected with stacks, it'll include sbtc. And the goal of this is that on different chains there's, you know, SBTC will have a lot of adoption on stacks, while WBTC has a lot of adoption in the Ethereum ecosystem. Right. But we want to make it so you can deposit from, you know, Osmosis is supposed to be this interchange Dex. We want to make it easy to deposit and withdraw from any ecosystem you want. So similar to like, you know, you go on Coinbase today and you want to deposit ETH or usdc, it actually lets you deposit not just on Mainnet, Ethereum, it also lets you deposit on Arbitrum, Optimism, Polygon, a bunch of like a couple of L2s. Right. And what they're doing is they're basically Coinbase is just holding a basket of different versions of Keith and then they're rebalancing it internally. We're kind of doing the same thing, but in a more transparent and decentralized way on chain where anyone can go and see, hey, look like this on osmosis like of the BTC currently, you know, 60% of it is made up of CK BTC and 40% of it is made up of Nomic BTC. I understand the risk that's involved when I deposit on osmosis. And as part of these baskets, we've built all of these caps and rate limits and safety controls where it will say like, hey, you know, any one version of BTC can't exceed more than 50% of the basket, or the proportion it makes up can't more than double in one day. If something goes from like 10% to like 50% in one day, there might be like a hack or something going on. So it knows how to cap these and like prevent these, you know, losses. So that's kind of how we're going about taking these ideas that exist on centralized exchanges and building them in a transparent way on chain.
**D** (16:17):
That's a really cool mechanism. Do you expect within that for, let's say the deposit fee to vary over time depending on the trust assumptions and demand for the different types of synthetic bitcoin within the Cosmos ecosystem, for example?
**C** (16:33):
Yeah. So I think different bridges will have different fee mechanisms, right? Some, some bridges say, oh, here's this like capped fee. Some will make it scale based off the amount that you're trying to deposit. Some will, you know, charge more for faster deposits than slower deposits. And by giving users the ability of saying like, hey, you have BTC on mainnet Bitcoin, you want to get it to osmosis, how do you want to do it? Here's like two, two options you can use, right? And they, they, you know, ideally competition will actually make it so the fees will go lower for the users. Another cool thing that we can do as an app chain that that's worth mentioning is something that we've done with one of the bitcoin bridges we work with. Nomic is actually, we've struck an agreement. The two, the two DAOs basically agreed that Nomic will charge 0% bridging fees to and from Osmosis. But in exchange, the Nomic Dao will receive a portion of all the trading fees of Bitcoin on Osmosis. So, you know, earlier, before this sort of agreement, there's this like weird tension where Nomic needs to charge fees, but that like increases friction for onboarding onto Osmosis. By doing this sort of deal, we are like, we both have the same incentive now. Maximize volume on Osmosis.
**D** (17:56):
Nice. Maybe moving to another consideration. What are some of the social impacts of new users, new developers, coming to the bitcoin ecosystem and in terms of what does it mean for I guess like the social impact, for the social consensus, potentially even for the values of what bitcoin has stood for.
**C** (18:26):
I would say ever since ordinals there's been the bitcoin renaissance or Bitcoin 2.0. I think different people have different names for it, but I don't know. This Satoshi roundtable that I was at this year felt very different than the last one I was at, which was two years ago. There was actually discussion of what is going to be the next soft fork or like what version of covenants are we going to implement? Not like are we going to do covenants. Right. There's definitely been this like shift towards like bitcoin progressivism where like, okay, there will be more soft forks coming in bitcoin to improve the protocol. Now it's a question of which one.
**E** (19:06):
Yeah, kind of talking about the values of bitcoin, one of the, I mean it can't be stated enough. We've been talking about it since 2010. Right. Is that the fact that Satoshi is not known still at this point means that you don't have a founder who gets to define what the values are of bitcoin as it evolves. It's really us, it's really the free market that gets to decide what I loved about what you're saying, Sonny, about the fee mechanism and everything and competition between tokens, that's exactly what the free market is. And so it's really every single person who, who leverages a bitcoin app, who, who does some sort of activity, they get to define what the value system is and what is important of that. And the free market will end up deciding what those values are and what people value.
**B** (19:59):
I think we are in a different world today. A few years ago, what people cared about, they probably don't care about it today as much as they did in the past. They probably still hold those values. A lot of people want to generate yield on their bitcoin. I think three of the top four mining pools are actually running finality providers in Babylon today, which is one of the yield generating platforms for bitcoin through bitcoin staking. That is something that most people would have not anticipated in the past. Miners getting involved on the staking side with btc, not just with any other asset. So that's a huge development. I think most people who were very firm and rigid about their views on how bitcoin should should be utilized have toned down and changed Their views as time progresses. And I think we'll continue to see that new entrants in the market care about yields. They don't care about, you know, going to get bitcoin through an etf, which is something, you know, as a lot of Maxis like to say, you know, it's not, not ideal, but people today care about that. So we'll see new market entrants, we'll see older ones kind of like understand that miners can't make enough money if there's no yield on bitcoin. To be honest, as, you know, halving, every halving, you're going to get lesser and lesser rewards, which is going to be a problem. So how do you still make enough money to survive and sustain as a miner? You want to have to, you know, you want to generate some yield on your bitcoin, you can do that. So I think consensus is that or we are getting towards this point where we have to experiment to get bitcoin to be a more active asset, generates a meal and, you know, do interesting things with it. So that's my view, that's an interesting.
**D** (21:42):
Point that maybe we can dig into. So bitcoin has this very unique balance of constituents where the holders, the holders of BTC are like a separate class than the miners of BTC who provide the security to the network. Whereas within a proof of stake world those two are combined. So as yield opportunities are being offered to BTC and if those yield opportunities potentially aren't on the bitcoin network, how do you align the miners in that path of the world? Because a good portion of the value of BTC is kind of like the tremendous hash rate that underpins the security of the network. So how do you balance, I guess providing to the holders of BTC as well as making sure that the miners are also properly incentivized such that their hash rate price doesn't keep going lower.
**B** (22:41):
For instance, I think miners, they only have one incentive, which is to make money and that's the most important thing for anybody. So I think they see enough value in. I also believe miners are the largest holders of bitcoin. They've been mining for years and they hold thousands of bitcoins, if not hundreds of thousands of bitcoins. So there's enough incentives for them to take action with their bitcoin. And I think money is the biggest aligning force. There's nothing. Of course, you may have a different view than me, but I do believe money is a very big factor in aligning incentives and it works Very well for miners and holders alike.
**C** (23:24):
Was that a sneaky way of asking the forever taboo question of what happens when the block subsidy goes to zero?
**D** (23:34):
I think that's a very deep rabbit hole and we can kind of punch into the future. I guess what I was kind of curious about and would love your take on this is there are kind of like a few effects here where a lot of the larger miners, they do have massive inventories and balance sheets of btc, potentially some of the newer miners don't have have that same balance sheet. If you get substantial yield on btc, does that kind of cause consolidation on like the miner front and does that allow miners with that balance sheet to be able to like compound their advantage? They're kind of like there's certain trade offs on that side. And then maybe like another point we can kind of dig into is like what do you expect, like a risk free rate or kind of like the base rate of yield for BTC to even be.
**E** (24:28):
I think just first I would say we might be. We as an industry might overthink this. There is an incentive structure embedded into Bitcoin that basically answers this question for us. There's no point in there being any Bitcoin L2. If the hash power of Bitcoin L1 goes to zero, that just, that's in nobody's advantage. I mean, so there's this incentive structure that Satoshi set up right from the get go. It just aligns incentives so that any kind of excess or depravity gets taken away by the market. And quite honestly, it's the miners, it's the node operators, and then it's the marginal mempool contributor, the person who's added the last transaction to the mempool. Those are really the only three parties who get any say in what bitcoin does. If you've been hodling Bitcoin since 2010, the fact is unless you're in the mempool, you still don't have any say in the protocol. You maybe can dump the price, but you don't have a role to play in terms of directing which direction the protocol goes as well. So I think just the miners having such a big impact is going to make sure that Bitcoin L2s are going to align to the miners needs because there's such an incentive based structure.
**D** (25:47):
Got it. As we're, as we're kind of wrapping up, I would love your take on one prediction for the next year or two years that you think the industry is sleeping on.
**E** (26:04):
I think this Epoch is all about the epoch that just started in April. I think it's all about getting to a billion bitcoin users. Now that's maybe not native chain, it might be a Bitcoin L2, but I think by the end of this epoch we'll be to a billion daily active users for bitcoin.
**D** (26:19):
A billion daily active.
**E** (26:20):
A billion daily active.
**D** (26:22):
Okay.
**E** (26:23):
And I will just say, I'll say when you look at the last epoch, you would have never guessed that you'd have nation state adoption and Wall street adoption. And so it just has this. There's a. Bitcoin has a way of surprising us to the upside. And I think that we're still, we're still on that.
**B** (26:41):
I think bitcoin has already gone multi chain, but outside the chain world where you see it in the form of ETS today, my prediction would be that there'll be a lot better opportunities with Bitcoin primarily around yields. Where those yields would come from is a very tricky part. Whether it's like inflationary yield or actual real value yield. I'm not sure about it. Most likely going to be inflationary yield to begin with, but over the course of time I believe with restaking and staking of bitcoin to secure other chains, especially with the experiment Babylon is running, I'm not sure if Babylon is going to do this, but somebody down the line in the future is probably going to use Bitcoin to secure a blockchain like Ethereum or Solana, where. So it's more than a two year outlook. I would say it's a five, ten year outlook where everything that happens in Defi happens on Solana or Ethereum and it makes absolute sense for those two chains to be as secure as possible. And that can happen through leveraging Bitcoin's economic value. So my view is that in the future, five, ten years from now, we'll see Bitcoin being utilized to secure chains that have real utility, real value flow and real revenues and yields.
**C** (27:56):
I would say, I think the biggest challenge that bitcoin is facing, like the biggest challenge right now for bitcoin that isn't, I feel, being addressed, I think covenants and stuff are being addressed is the block times. I think the block times is something we used to care a lot about back in 2015, 2016, but kind of like no one has really focused on it much. But today if you're trying to bridge Bitcoin off of main net onto NEL2 or onto osmosis, trying to put it into a lightning channel, trying to do anything with it. You're trying to buy an ordinal, you have to wait 10 minutes before your transaction even makes it into the block. And that is just terrible. UX and I know, like, when I stopped using Bitcoin for payments on a regular basis and switched to using Ethereum, I think this, like back in like 2017, part of it was the fees. But I think the bigger thing was it was like fast. You know, if you're waiting 15 seconds to get one versus waiting 10 minutes, it was like a day and night difference. Right. And so I think someone, you know, I think we need to get back to trying to figure out how do we get some sort of preconf network on Bitcoin or something that like gives faster confirmations to users.
**D** (29:13):
Yeah, that's a really interesting topic. Happy to dive into that a bit later. I think there could be some interesting, like hash rate, kind of like credit type system that could be built there. Awesome. Thank you so much, panelists, for your time today. It's been great chatting about Bitcoin potentially going multi chain. Most likely going to go multi chain. Yeah.
**E** (29:33):
Thanks.
**D** (29:33):
Thank you.