The Next Big L2 Runs on Bitcoin
The fulfilment of a decade long dream.
We claim that the existing bitcoin network can be used as a protocol layer, on top of which new currency layers with new rules can be built without changing the foundation.
–The Second Bitcoin Whitepaper (by “dacoinminster”)
The path to running smart contracts on distributed state machines began over ten years ago.
Long before crypto was making its way into government reserves there was a thriving community of tinkerers exploring ways blockchains could do more – such as how different currencies could co-exist as applications on the same blockchain.
That blockchain was Bitcoin of course.
EARLY EXPLORATIONS
The smart contract idea maze was really difficult to navigate at first.
The concept of creating transactions that operate in an enshrined virtual machine seems obvious now.
And while there are some degrees of freedom – whether state is stored in the applications or attached to user wallets, for example – they aren't material deviations.
But it wasn't obvious, you just have to study some of the early proposals on extending Bitcoin to realize that Ethereum was a conceptual leap.
There were proposals for coins built on “MasterCoin” yet economically tied to it.
And even Colored Coins while simple in name had more enshrined functionality than memecoins do today.
The crypto industry is still excellent at making things sound way more complicated than they are but both of these proposals are irreducibly complicated.
Easy, but complex is how Rich Hickey would put it.
While being involved in both (and other) projects in various capacities, Vitalik was arguably even more limited by Bitcoin’s social layer at the time, not the technology itself.
And while he had found one of the exits in the maze, it wasn't clear even to him that it was.
BITCOIN ALWAYS HAD MULTIPLE NARRATIVES
Alex Danco correctly pointed out that the technology for Bitcoin was merely a starting point for the “crowd” to form.
The crowd is more important that the technology and a core reason why Bitcoin is still the leading cryptocurrency.
The “Bitcoin crowd” has been pretty aligned on two things:
That this technological starting point is really valuable;
That changes to it should be very limited.
But it would be a mistake to consider Bitcoiners blindly aligned on everything as the words “Bitcoin maxi” may seem to imply.
In Visions of Bitcoin, Nic Carter highlighted how many different narratives have been developing in parallel from the early days of Bitcoin.
Out of those visions, programmable shared database stands out as closest to what we see as describing a modern smart contract chain.
Of course it’s also clear from the chart that this vision never really enjoyed majority support.
It's rare for Bitcoin advocates to admit any value in what Ethereum or related networks are trying to do.
And until recent, there wasn't a way to deliver it without that support.
The idea that the permissionless nature of Bitcoin itself is what will allow rollups to be built on it is creating major narrative confusion.
And yet it makes sense.
Ironically, the network that most violently rejects other smart contract platforms may very well have an unfair advantage in becoming one.
Zeneca’s tweet from 2023 still reads pretty well:
IF WE COULD GO BACK IN TIME
It feels like we’re arriving at an inevitable destination, but not in the way we expected to.
In retrospect, Bitcoin was a lot closer to hosting smart contracts than originally thought.
Last June, we surveyed that only a few key protocol updates contribute to making rollups possible on Bitcoin:
But the architectural insight wasn't there.
It took a lot of learning and experimentation developing Ethereum, figuring out different scaling paths, embracing the L2 scaling roadmap, learning how to remove trust assumptions and developing Zero Knowledge technology.
Both recent evolutions in Bitcoin capabilities and the accumulated technical learnings of the Ethereum community are now converging to make rollups possible on Bitcoin.
TIME TO HAVE SOME FUN
Admittedly, many of us joined crypto to study and enjoy what felt like alien technology at first glance.
All we used to talk about was the tech and it was glorious.
It’s worth remembering one of those conversations from 2013 which will turn out to be quite impactful.
Get ready anon, Bitcoin is finally getting a trustless general purpose L2.
Disclaimer: This research is supported by a grant from StarkWare. The views expressed are solely those of the author and do not represent the views of StarkWare or their employers, clients or affiliates. This report does not constitute financial advice. Peteris and Auditless are $STRK airdrop recipients.
Thanks to the StarkWare team for providing valuable research input for this article.