ETHIstanbul Conference 2025 | Future of Bitcoin DeFi & Metaprotocols | Panel

Transcript

[Music] All right, guys. Hi. Um, my name is Isabelle Fox and Duke. Uh, I host a Bitcoin technology podcast called Bitcoin Rails. Um, I focus mainly on the new wave of uh, technologies that are being built on Bitcoin in a post ordinal universe. So maybe some of you are familiar with ordinals. Uh, ordinals are kind of akin to Bitcoin layer 1 onchain NFTts. They came about about maybe three years ago. They came on the scene and they just kind of blew the minds of some people in terms of sort of rethinking what's possible on Bitcoin and sort of reimagining Bitcoin uh as something

beyond just money, right? Which is I think what you know a lot of people think about Bitcoin, maybe a lot of people in this room. So yeah, so uh since then there's just been incredible development in Bitcoin DeFi, programmability on Bitcoin, all of these sort of uh new imaginations of what Bitcoin can do. Um and we have some really interesting experts on stage to talk about that and talk about what's been happening in ordinals in the past three years since then. Um and yeah, hopefully kind of uh get your guys' brains thinking about uh what might be possible on Bitcoin as well and sort of the implications of this for the DeFi space overall. So yeah, so I guess I'll start with just uh asking you each to introduce yourselves and share a little bit about uh what each of your

organizations are doing within the Bitcoin DeFi landscape in the last few years. >> Sure. So hi everyone. I'm Abdel. I'm working at Starkware as head of ecosystem. So Starkware is building uh scalability solutions using stock proofs. Uh right now we our main product is Starknet which is an layer two on top of Ethereum. It's a ZK rollup and our goal now is to expand it to also settle on Bitcoin. So this is actually our main focus. So this this is why we are really interested uh in this topic of Bitcoin finance in general. Um yeah, I'm um so right there it writes BRC20 and like founder of best and slot but

I've been in this crypto space for more than 12 years now. I started with Bitcoin and then moved on to Ethereum. Spent seven years on Ethereum and when ordinal happened I went back to Bitcoin and there are multiple reasons there but for the last three years we've been building uh open source tooling for the ordinal BRC20 runes protocols. Um we have an aggregator best in slot.xyz uh it's also a DEX on Bitcoin. It's the first one. Uh we are lead maintainers of the BRC20 protocol. It started with a joke, but it's a it's a joke to ERC20, but it's a token protocol on Bitcoin layer 1. This is these these stuff are all Bitcoin layer 1. There's no layer 2,

there's no bridge, whatever. These are called Bitcoin Meta Protocols. So, I've been doing a lot of Bitcoin meta things lately, and we launched the upgrade on Monday. It's called BRC 2.0. Uh it enables you to have EVM applications on Bitcoin layer 1. Uh there are already many uh EVM deployments going on. So um yeah, can't talk more later. Hey everyone, my name is Gabe Parker. I do business development at Citria, which is the first CK rollup on Bitcoin. The previous uh keynote um with Assad. So that's the same Citria. Um I don't have to give too much details because he kind of went

through that but uh essentially at Citria is just an extension layer of Bitcoin and that is secured by Bitcoin in the sense that we actually post all of our data to Bitcoin L1 and our goal is to be the programmable layer for Bitcoin to build DeFi products that actually center around BTC as an asset. And previously I used to do Bitcoin research at Galaxy. I actually did a lot of uh reports on ordinals in the early early stages and uh that's kind of what got me into this you know bitcoin as an onchain asset narrative and uh now kind of mainly just focusing on the programmability and the programmable layer side of uh bitcoin.

>> So just a small distinction layer two layer two layer one stuff. Okay. >> Well, we are going to get into the definitions and sort of the distinction between meta protocols and L2s. That's on my list, so don't worry. But before we do that, I think that it would be nice to just sort of ground this conversation, especially for this audience uh on why Bitcoin in the first place. >> May I add a small comment if we want to make it spicy at some point, I will call it layer one, >> okay, >> with some with some quotes. >> We're gonna get into it, you guys. >> Let's keep the popcorn for later. Yeah. >> Yeah. Yeah. No, I have a whole section dedicated to this topic. Um but yeah, but but before we do that, I do wanna I do want to give each of you an

opportunity to share why Bitcoin, right? I mean, we were just chatting with somebody outside and talking about programmable Bitcoin and the immediate question is but like why, you know, like 10-minute block times like why wouldn't you just use Ethereum? Why wouldn't you just use Salana? Why why is it important to develop Bitcoin, excuse me, DeFi on Bitcoin? >> Yeah. So, for me, why Bitcoin? uh when I think about it uh I try to see what are the most important properties when it comes to a settlement layer in the case of building a layer 2 on top of Bitcoin. As we all know there is this uh trilemma in blockchain about decentralization security and scalability and usually you can only have two of those and we believe that

the way to solve this is actually using layer two so that you can fully inherate the security properties of the layer one and have the scaling and programmability to come with the layer two and then in my opinion there are only two u layers that could fit this function and those are Ethereum and Bitcoin for different reasons. But you want something that is extremely resilient, decentralized and everything in Bitcoin particularly has some interesting properties that make it that makes it a very interesting settlement layer. First of all, it's way simpler than Ethereum and being simple for a settlement layer is a good property.

Also the fact that it's proof of work is also an interesting property because you have something external to the network that secures it and not only the asset itself in the case of Ethereum proof of stake and in general it's also about the resilience of Bitcoin and the maximal level of decentralization and censorship resistance. This is something that is really important when you build a layer 2. >> I'm going to come from like a business perspective in the sense like yes it's more secure. It's amazing like all this kind applies and I'm I'm not going to repeat but I'm also an entrepreneur and I've been building a lot of companies in the last like couple years. So we started on the Ethereum building

Ethereum products and right now like when you want to build a new product you have a lot of competitors in bay in Solana it's like there's a lot of competitors on Bitcoin right now it's pure blue ocean that's one thing there are many many small amount of builders that are aware of what's been happening on Bitcoin this is not going to be like this in the six months or like in a year it's going to get saturated very fast but it's like a alpha of this talk because there are many builders that I know already. Um, so it's like we're gonna have a Bitcoin native asset class creation. So this is another thing. Um, like on Ethereum there's like 350

billion worth of assets as tokens on Ethereum. So these are like Ethereum native assets, let's call them. And then on Solana this number is like 150 USD dollar uh in Solana. And we're talking about Bitcoin here. You do are you aware how much money is in the Bitcoin ecosystem and the Bitcoin native asset market cap right now is around $3 billion. So this number is expect to 100x at least okay in the coming like couple years in the future. So as a builder I love building products. I have built a lot of products that no one used or cared or made zero revenue. But right now there is big opportunity here. It's fun to build things especially using EVM. By the way, BRC20 uses EVM, so it's

easy to build for Ethereum people as well. Um, it's very fun to build and it's very fun to make money while you're building things. So, there is a business case to be made here for all the developers or people who want to launch their small applications and like whatever you want to build. So, I think it's it's very simple, right? Like, Bitcoin, it's the most valuable asset in our industry, right? in terms of market cap. It has the largest holder base and actually you know Bitcoin DeFi does ex it's existed for a few years now. um I think approximately about 1.5% of BTC supply is wrapped and deployed into smart

contracts mostly on Ethereum, right? And that's the that's the big problem here is that like Bitcoin DeFi does exist today even though it's a small percentage of the total supply but all of this activity is on Ethereum apps like Ave is probably the largest application that has Bitcoin that in there as def for use for DeFi. Um, and one thing is clear is like Bitcoin is pristine collateral, right? Like you can talk to any institution that does lending, right? And everyone will tell you that like Bitcoin is has is way higher quality of of collateral than like Ethereum or Salana. Um, so I think like that like those two things alone make this exciting because this market

already exists. There's huge demand for it. The issue is that it's not really being built in the right place and it may be the right asset as well. Like a lot of it is wrapped Bitcoin and we can kind of get into the flaws of that in my opinion. But yeah, that's that's why like Bitcoin DeFi is exciting because the answer is there. There's a lot of evidence, right? And we're still very early. Like I said, 1.5% of the supply is actually in DeFi smart contracts. Okay, that's a really great opportunity I think for us to talk about uh both layer twos and meta protocols which are kind of like I think the core two types of technologies that Bitcoin DeFi right now is sort of revolving around where the building action is happening. Uh

show of hands and I expect most of you to know the first one but maybe not the second one. Show of hands. Who feels like they could give like a reasonable definition of a layer two? Oh, okay. All right. How about meta protocol? Does anyone in this room know what a meta protocol is or think that they could potentially know what a meta protocol is? Okay, cool. Yeah. So, I think that we should define these two things, right? Because when we think about like technically what's happening on Bitcoin, these are sort of the two categories of technology that are really being developed here that are changing the properties of how Bitcoin works such that DeFi is possible on Bitcoin in a way that it wasn't before. Um, I have some kind of specific questions for you

sort of based on your individual expertise. Abdal, I'm actually wondering if you could maybe share a little bit about why like we have been using wrapped Bitcoin all up until now and why L2s so to speak or sort of trustless bridges have been so difficult to pull off in Bitcoin and how that's sort of changing. >> Yeah. Right. M so Bitcoin unlike Ethereum um um does not embrace a rollup ccentric road map which is the case of Ethereum. Ethereum basically the approach is saying okay we give up on trying to scale the layer one not we don't give up but we believe that the the path to mass adoption will come from layer 2s and hence we make the changes

in the base layer to make it more suitable for layer 2s. This is not the case for for Bitcoin. So it was more or less trying to see what we can hack in a way to be able to mimic those properties that Ethereum layer tools have on Ethereum and to reproduce this on on Bitcoin. Today the best that is possible to do is called BitVM. So this is for example Citria is one example of that. So this will be a huge improvement uh over the status quo on Bitcoin which is right now unfortunately multisig. So for example, you have side chains like liquid um but the trust assumptions are very bad because it's a honest majority assumption. So um it's it's not ideal

and bitvm reduces this to one out of an assumption. So which means that you need only one honest operator for the system to be secure. So this is very good. Uh so for us specifically we believe that this is not the endgame vision but we really like the fact that there are so many people trying to push the limits of what is possible today without changing Bitcoin but at the same time we want to see more discussions about what kind of changes could make sense on the base layer to make it more suitable for layer 2. Um and about layer two there this there are so many different definitions of layer 2 but to me a layer 2 is something that inherit fully the properties of the the layer one and it means that you can only move the state

of the layer two but by submitting a valid proof to the layer one that's one then you need to also submit the data to um to bit to the layer one which is what Citra is doing this is to about what is called the data availability issue because the goal is that you want anyone watching only the layer one to be able to reconstruct the state of the layer 2. And the final elements that is really important is the ability to unilaterally exit from the layer one directly in the case of the L2 operators being um not live. Yeah.

>> Awesome. Yeah, actually I think I'll take it to Gabe here from now just to add on a little bit to that. So Abdal basically explained right these sort of Bitcoin L2s specifically ones that use BitVM are sort of radically changing the trust assumptions associated with Bitcoin L2s substantially minimizing the trust associated from something like wrapped Bitcoin. You brought up that wrapped Bitcoin right now is where most of the Bitcoin DeFi action is really happening. Do you have reason to believe like you know or why do you have reason to believe that it is the trust assumptions that is like the problem potentially or that you know if we are able to have these trust minimized bridges demand will move to places like Citria. I think improving the trust assumptions at first is going to target

more Bitcoin and native people that maybe they're too afraid to just wrap their Bitcoin and trust Bitco and Justin Sun which are they run the two companies that basically control the mint and redeem of rap Bitcoin. Like I I think like a true Bitcoiner that's a bit more moderate will still not really want to touch that. Uh but I think if you can explain clearly that like the trust assumption is just one event and this Bitcoiner is more moderate and willing to bridge their Bitcoin to a more programmable layer. I think that is a very good selling point. Now the question of like all that wrap BTC supply on Ethereum will that automatically all go over to like Citri for example of course that is like my

dream and that's like the main goal. But I think you know it it is true that like a lot of institutions that use rap bitcoin like for example my old company galaxy they that that doesn't really matter to them because they have a direct relationship with bit go themselves they can mint and redeem and they just want to post the bitcoin as collateral get cash and go lend out the cash and that that's all they care about right so that I think there's there is a subset of institutions that are just going to stick to the old ways but I think it is our job to educate them on Okay, these are the risks, right? I don't think there's been a massive blowup with WBTC, but we'll see, right?

It's still fairly new if you really think about it. Um, I don't know if that clearly answers it. Yeah. >> Yeah. Yeah. I mean, we'll see. Time will tell, but it's interesting. I mean, this is like I think a core part of the thesis for a lot of Bitcoin DeFi is if you minimize the trust, then you know, there will the demand will come basically. Um, so it'll be interesting to see what happens there. Um, speaking of trust, obviously meta protocols have completely different trust assumptions than L2s. You may or may not want to comment on that, but I think before we even go down that rabbit hole, do you want to just share a little bit about what a meta protocol on Bitcoin is and how it works and like what's special about it in your opinion?

>> Yeah. So, a Bitcoin meta protocol, let me tell you, let me tell you something. um the the what like ordinal protocol the ordinance protocol opened that door on Bitcoin. It's a like a new way of building things and ordinals started with um NFTs on Bitcoin basically but it's not NFTs. It's like a a very different way to build nonfgeible tokens. In this case, what you do is you write the data onto Bitcoin block. Okay.

Um, but there is no code. Bitcoin doesn't know what it's written on. If it's like a code, if it's a JPEG, if it's a JSON, like whatever. You can just like it's an empty book that you can write whatever you want to write on it. So, it started with ordinals and it became like a okay art on bitcoin, collections on bitcoin. And how it works is that you have an indexer which is like a simple calculator. And what it does is like it it you run it and it looks at the Bitcoin blocks and uh makes sense of the data in this sense. Okay.

And and it's not a an indexer is not a node or it's not a validation node. It's just a calculator. It's and I'm going to move on and then like there is BRC20 came which was one of the it's a second meta protocol. I say what BRC20 did is that you literally write let there be 10 ord coins. Okay. And like at a JSON file like it's not it's not code. It's a literal text of like Ariel Sans Isabel 10 tokens like you literally write that when you're writing it. So you write all these onto pages of the Bitcoin blocks

and then the the indexer comes the BRC2 indexer in this sense is like comes and looks at it and does the addition and subtraction um so to calculate the balances. Okay. So and we've been working on BRC 2.0 the upgrade for this protocol. Um, yep, we became like lead maintainers of this protocol because we did a lot of work on this protocol and then anyway, I'm not going to go into those. So, um, so basically what BRC 2.0 upgrade does is that it takes this indexer concept from a simple calculator and basically embeds EVM into the indexer and takes out all

the other Ethereum related stuff in the sense that there is no again like there's no nodes the nodes don't talk to each other indexers don't need to talk to each other so I've been in the space for a long time and it's like a ne design space it's a ne way of doing things basically because it's like the the data is on Bitcoin blockchain and the data is ordered on Bitcoin with the blocks and how they're um ordered by miners in the single block. And then an indexer does is like an indexer is like a glasses, okay? It's like if you don't have the glasses, you look at the Bitcoin blockchain and it's gibberish like like you don't understand what it

writes. You put the glasses on and everybody's like, "Hey, if you want to read this, this is the open- source canonical glasses, the indexer." When everybody puts the same open-source thing, you read the same thing. So you don't need to talk to each other because EVM is deterministic as well. Um, so that's how meta protocols work and it has a lot of advantages like there's 10-minut block time disadvantage. Yes. But doing things in this specific way has quite different advantages. Like one advantage is on Ethereum um you have this gas limit right gas limits comes from like some limitations

that we need to complete the blocks in 12 seconds. So you need like you need to index everything then you need to talk to each other then you need to validate the state you need time for that. Um so when you have 10 minute block time and when it's then you can say okay let's complete the indexing in 15 seconds and we don't even need the notes to talk to each other. So when you do it like that you have like forgive me if I butchering 50 51 billion gas limit per bitcoin block. This means you can do almost like 50 times it's a big number like not exactly 50 but like let's say 50 to 100 times more

computation leveraging this meta protocol indexer way of building things than on Ethereum in 10 minutes to make it simple uh in human time not block time in 10 minutes we can do more computations on Bitcoin because we have more time to do the indexing and other stuff. So, these are like some perks. There are many other perks that we can talk later, but it's a weird way of doing things, but it works and it's kind of beautiful. Uh, it's simple and beautiful and it works.

>> Ju just to quickly like touch on something that I think comes up a lot. You're kind of bringing up this this cost uh challenge, right? I think a lot of people think about meta protocols like those folks who are familiar with meta protocols and they think about like oh gosh you're putting all this data for every transaction actually on the chain that's got to be so expensive if this really takes off fees are going to go through the roofs h how would you you know respond to that >> of course the more usage will increase the gas like it's it's the nature of it however for example I don't know if you gone through that but you know when like you have a loan on a and then like the market is tanking and you need to pay $500 $100 gas to execute because it's

already expensive and when the network goes expensive, it becomes even more expensive to pay the loan or like whatever you need to do fast. So on Bitcoin um the because the gas limit is huge um you can execute this complex smart contract logic you're not you're not exactly priced in the computational power that it's going to take but you're priced how much bytes you occupy on Bitcoin blockchain. Um, so there is still a cost to do function calls and stuff, but you're not paying gas in this case. There's no gas token here as well. It's just Bitcoin

you pay because you basically pay like a postage fee, let's say, you know, like you notoriize the data on Bitcoin blockchain. So there will be cases when it's like, oh, a simple transfer takes like $10 or like $30, whatever. But again, it can be like you can close a loan position in like a complex DeFi application again with like $20, $30 because it doesn't scale with the computation cost. Um, >> makes sense.

>> So, pros and cons. Do >> you want to respond? >> Yeah. I mean, just for people that don't know, like Bitcoin blocks are empty right now. I mean, except pervy levels. I don't know if you guys know what that is, but like essentially like there's not a lot of activity happening on Bitcoin L1 right now, which is why meta protocols I think are really needed. And also layer 2s that actually use the L1 for DA, right? I mean just because the reality is like if blocks are empty for the rest of Bitcoin's life, the security budget problem becomes real because when blocks are empty, miners don't get fe as many fees as they would like. Um yeah. Yeah. So like um what I'm saying

is that yes, so maybe there are a lot of these types of transactions going on chain and maybe some of them are expensive but this is actually a good thing in my opinion. >> Yeah. I mean yeah Bernari go ahead. >> I mean we launched on Monday Chinese people are like Chinese community is for very fee sensitive for example. They don't want to pay. They don't want to care about the miners. So from like a user perspective which you have like you have $3,000 to gamble on shitcoins and that's like millions and millions of people of crypto users they don't want to pay fees but it's good for bitcoin of course so it becomes another you know like a um balancing game another kind of

thing and I want to add on to this in the talk of like meta protocol and layer 2s so meta protocols especially In this case BRC20 it opens a a new door again like ordinal BRC20 the 2.0 upgrade opens the doors to have basically rollups on Bitcoin that leverages uh these meta protocols. So, it's another way of building things and it's pretty much similar to the relationship between Ethereum and an optimism, Ethereum and Arbitrum. You have prover contracts on BRC 2.0 So um and um yeah it's a different way of building things like

BitVM it's a very advanced deep tech that I don't understand how it works. Um it's a beautiful technology and it works and this is a totally like amazing way to build layer 2s for Bitcoin. Um, and this is another way of also like we can have rollups that scales Bitcoin native assets. I just want to underline this doesn't scale Bitcoin itself. This scales assets that are issued on Bitcoin.

>> I I think it's actually a really good point. So, I mean, we sort of alluded earlier in this talk that maybe there's this like L1 verse L2 like competitive like spiciness thing, but also all of you are kind of working together. I mean, there's like mostly a lot of partnership action happening between these L1's and L2s. I'm wondering actually if each of you could maybe touch on, you know, when would somebody want to use an L2 versus an L1? You know, like what are the use cases for each of these? When do they work best together? Like what are your thoughts on these? And maybe Abdal, we'll start with you because Starbur is really doing the partnership thing here.

>> Sure. Um so yeah um as you mentioned it's true that there are many benefits of using a meta protocol. I won't deny it. The the main difference is about security and trust assumptions. Um but it's true that it depends also on the nature of the use cases. Maybe you you don't want this the maximum level of security for everything and it maybe it's fine for some more DJ use cases. Meta protocols are completely fine if people are fine with the trust assumptions. At the end of the day, it's really about the optionality for users to choose what they want. Uh, and there are trade-offs in terms of UX, in terms of cost, in terms of security. Um, so I would say when would you want to use the Nell2 is maybe if you want the maximum

level of security like for maybe serious defy stuff like lending borrowing with big amounts or this kind of stuff. And if you want more dig use cases and you are fine with the trust assumptions of meta protocols then maybe it's completely fine to use them. Um also in terms of scaling um I think that uh meta protocols have some limits there even if what you said is true because you don't have to have the overhead of the P2P communication and so on. It's true that you can go way higher in terms of the gas limits. Um but there are some problems maybe in terms of incentives for the indexers to main to to to be able to support this kind of uh big computation and also it makes it less accessible for people to run indexers if

they want and stuff like that. So there are trade-offs but at the end of the day it really depends of the on the risk profile of users and what they want to do. Yeah. >> Yes. I mean yes it's uh one thing was amazing for us is that like when BRC20 happened for the first three days we were shocked that the market accepted this because we were also like because spending seven years in Ethereum and I'm like of course you're going to have nodes talking to each other what the like >> right it's it's weird but like the more time we spent in it it became

We we loved it more. It's like a you know like Ethereum you have a spec sheet and all the like the clients need to follow the spec sheet but because you also have validation the clients if something goes wrong it's going to be it's going to be checked at the validation level. So in the indexer realm um there is no validation um and that's like where things start to get like where where that's where you start questioning things that's where the canonical indexer topic comes in. So instead of taking the spec sheet as the ultimate thing to follow like in

Ethereum world in the Bitcoin world you have canonical indexers which basically says look you're welcome to build your internal indexing engine like whatever um but whatever that other indexer uh says computes it needs to match the canonical indexer. So if you're like a company um you run both indexers. I mean we we run both for example with the runes and like with some other things because you need to follow it. Um but we also have our custom solutions because the canonical ones is not well optimized or like they're not uh built for like millions

of users etc. But it's a it's a very simple and legit way of building protocols and then building applications on top of these protocols. So I agree this is a point that we can just like discuss more but I also agree like with like yes like from the security perspective like because starket has the like the they're very well advanced in the stark technologies and like provers etc.

They're like they're very good. Um, so I think like both has places to feel. And you also said like for more DJN use cases. That's because like up until now on Bitcoin, we only have like meme coins and collections because we didn't have a way to build more um application logic on Bitcoin. So with BRC 2.0 to changes that there are now like we can have dexes, we can have swaps, we can have sequencer powered applications like app chains and that's when we started to blur the line between like a layer two and like a meta protocol and something in between let's say so that's what we've been talking about like it's

Bitcoin had meme coins and collections first it started at the beginning of 2023 so like let's say two and a half Um, but now like the things are getting even more serious. That's why I'm saying like if you're building something on Ethereum, if if it's not like a like a DeFi app, because with 10-minute block time, you need to think about the the economic design of the DeFi protocol because the game changes with 10-minute block times. But if you're building something on Ethereum and you don't have a go to market strategy, come talk to us like we can help you to uh deploy whatever you're building on Bitcoin. Um because like there are millions of users

that are hungry for Bitcoin applications. Um there's a lot of demand from user perspective. You would be amazed the like the quality like the it's crazy like the level of applications we have on Ethereum world. Let's put it there. Right now on Bitcoin it's here like the the barrier is super low. So whatever you build you're going to have users right away. You're not going to fight for attention like you're doing on the like the other chains. And there's a lot of liquidity. there's a lot of money like to um to be used in these because like he says like bitcoin has been dormant for a long time and people want to do stuff with their

bitcoin. So that's another argument. >> So to rehash your question of why use an L2 versus metal protocol, I'll just hit on like why use an L2 in a really simple way. Um I think if if you want access to you know um more traditional style DeFi activities, right? like stuff you see in Ethereum for example, I think that's where like an L2 comes like handy in the sense where you know you can't build a on Bitcoin L1. I mean for Bitcoin back lending on the L1 we've had this thing called DLC's which I won't really get into and I think DLC's are really innovative but it it's really hard to build this. So, AB is a peer-to-pool

model, right? Which is really good for um capital accumulation and it's been proven like this is a really good model for lending on chain, right? This peer-to-pool model, you can't really do it in a clean way on the L1. So, if you are a builder, for example, right, you're going to most likely just go build on some EVM compatible L2 that inherits security from from Bitcoin, right? So as a user, right, if you wanted to use something similar to a but it's actually secured on a layer that inherits security from Bitcoin, that's when you use the L2. Another thing too is I think when you have an EVM compatible layer, like you can build things like vaults, which is something that we're really interested in, and

vaults exist in the Ethereum world. Essentially, you just pull together assets in a contract and then an asset manager uses that those funds and then they do, you know, off-chain yield strategies that retail can't get access to like you can't do that really. I mean on the L1 they would be very difficult to to kind of do that. So I think for more like traditional DeFi activities like you would as a user you will be more gravitated to go towards an L2. Now the question of like which L2 is like a big debate. Um but in simply put like you wanna you want to use an L2 that uses a trust minimized you know wrapped version of BTC and trust minimize bridge. That's uh that's my take >> just to add add like I'm going to add a

little bit to that when it's like a businesses and banks. Um it's like this matters a lot. Um but like if you're building a consumer application, a social fi or like a something fi whatever then um then the logic changes like you want users you want user attention. So that's another answer to like when to use a layer two when to use a layer one etc. Okay, so we have a few minutes left and I have kind of I think for me it feels like an important like spicy question as an investor um which is that uh where is all this liquidity going to come from

right I mean you mentioned it being a 100x opportunity there's you know all of this like you know assumption that like Bitcoin is this like big opportunity one thing I think was sort of like a myth with ordinals or sort of something that didn't pan out with ordinals that I think was a big disappointment if we're really being honest with ordinals is that there was this assumption that you know maxis and all of the huddle money, all the bitcoin hutddle money would like pour into ordinals and that did not happen. Um, >> it did happen and they lost money. >> There are many many large whales.

>> The maxi hodlers did not pour into ordinals. Small number mo the reality of the situation is that with ordinal specifically most of that liquidity came from Ethereum and Solana. Um, most users of ordinals were NFT holders, not uh actual Bitcoin maxis, which was the thesis, right? The thesis was that we would get all this new money coming in from Bitcoin maxis who love JPEGs, they just didn't want to do it on Ethereum. So, um, I guess my question is like, you know, if it's if you're if we're making this assumption of this like huge opportunity, all this money is going to flow into Bitcoin, like where is that coming from? Who is the user of these DeFi Bitcoin DeFi products? Who are you targeting? Yeah, it's a very good

question. Uh I will give you my honest u opinion on that. So the target you mentioned, I'm not sure that they will also bring liquidity to those new layer tools. Even for example, if BitVM is sexy on paper in terms of trust assumptions and so on, it's really not clear that people will have confidence to put liquidity because there are still new constructions that are not battle tested and so on. However, maybe the first target will be more institutions, Bitcoin treasury companies or ETFs and stuff like that because for them suddenly they have a way if they are part of the operators they have a way to keep full custody of their assets while benefiting from more opportunities to put their liquidity to work and stuff like that. So maybe this will be the

first target and then maybe it will get give confidence to the Bitcoin maxi holders to then put liquidity. But I guess for me in my opinion what will matter is to improve Bitcoin as a programmable money and then they will understand that it's not necessarily about bringing more use cases but also as a way to improve bitco bitcoin as p2p cash which is to me very important. It it cannot be only a store of value otherwise it has failed. So >> I have two answers so and two minutes. Um the first one is like yes it's going to come from the like the broader crypto ecosystem. Again, it's like speculators, traders, DGens, like there is money to be made here. So, the initial wave right

now, what we're observing is like people who don't care about the chain, but they're looking for the next alpha or next 100x or whatever. Um, so that liquidity kind of slushes it mean like like a like a bag of water in the like the to Ethereum to Solana to like Bitcoin. A little bit it came. So that slush will keep happening and um if you if you sometimes like that creates wealth actually because you know on like think about a token market cap like okay it starts zero you created it and then it goes to let's say 1 billion and then it crashes to 50 million and it stabilizes at 50 million but what that means is that like you created $50

million of wealth. It's more like liquid dynamics and like more subtle sciences, let's say. But you can create wealth with moving money around in a specific pattern, let's say. So that's what's been happening in crypto like the money gets created and moves around and then suddenly you have like a $3 trillion wealth created in the last 10 10 years. Um so that's number one like that that slush of money will come into Bitcoin again. That's number one. The second thing is like um Bitcoin is going through its institutional adoption age.

Uh it's it became a thing this like Bitcoin treasury companies and these companies are not buying like okay I'm going to put my salary into like $3,000 into it. These guys put like okay we're going to do $500 million purchase. So um and then there is a lot of uh interest in uh generating interest over these holdings like for example when you're holding gold um you can actually borrow against your gold in the like a normal financial system you can even do it with your equities like if you have stocks on your bank account you can like get credit money to use it. So this is like big boy tratfi games. It's not like

Ethereum building. I mean Ethereum has a lot of big boy trfy things happening as well. Um but the Bitcoin the level is like much more big. So all these money will be leveraging yield generation opportunities either on layer 2s either on meta protocols etc. So that's another thing. Maybe that's more long-term, but it's it's big enough that you want to stick around long enough to actualize that vision because we're talking about like maybe trillions of dollars of u money amounts.

>> I'll be quick because I know we're probably out of time, but um one one thing's for sure. So, we're actually talking to a couple smaller treasury companies that are very open to deploying some of their treasury on chain. And the reason for this is because if you look at the B BTC treasury companies balances like as a chart ranked it's you have strategy which is the largest and then the gap between strategy and the mid-level and smaller level treasury companies is huge. So the and and you're not no one's going to beat Michael Sailor. I think that's very that's like guaranteed. But these smaller treasury companies, how do they stay competitive while they deploy some of their treasury on chain? And even if they're getting 2% on their Bitcoin, that's enough to be a

differentiator. So if you're actually thinking about, you know, buying shares of one of these treasury companies, you either have the treasury company that's, you know, big and just doesn't do anything with the Bitcoin or a mid to smaller level one that actually is more comfortable doing things on chain. And this market alone, I mean, treasury companies I think hold 4% around it like Bitcoin supply. I'm not saying all of that will be on chain, but even if like half of it does, that is a win. And to your point of like where does all this liquidity come? It's like little buckets of players like that, like treasury companies, miners, right? But it's going to take some time. And if I had to predict, I think the first bucket is these treasury companies that are really trying to compete for mine share. Like this is like we we know this, right?

This is like a fact. I'm not like speculating here. So, >> it's happening. It's happening, you guys. I think that's the TLDDR.