The Weekly Reorg: Bitcoin Fashion Week

In case you missed it, Bitcoin Season 2 released part of its Spring/Summer collection last week.

Amongst other things, Mezo, a “Bitcoin economic layer” came out of stealth with a $21 million fundraising round. Alpen Labs announced a $10.6 million bankroll to bootstrap a Bitcoin-native zero-knowledge infrastructure.

Another posse of blockchain designers, including the folks at Starkware, got together and launched the L2O Consortium “to set standards for trustless applications and Layer 2s.”

Of course, nobody knows what this all means, but it’s provocative. It gets the people going, the capital frothing, and the industry buzzing. Eight-figure seed rounds are getting thrown around and some pretty major venture players are making a comeback. Almost every day, a new layer is announced or some “Bitcoin-native” protocol you’ve never heard about announces that its users have locked a bazillion dollars worth of bitcoins into their “trustless” multi-sig protocol.

So it goes in a bull market, I guess. Curiously, some of the people involved will admit it feels more like performance art than legitimate engineering. Remember the Rick Owens freak runway shows? It’s flashy alright but who’s going to wear this stuff?

Keep in mind most of the new gadgets being proposed have yet to take off their training wheels anywhere they’ve been implemented. Rollups on Ethereum, for example, are still just dressed-up multi-sig. Similarly, this new crop of Bitcoin-adjacent protocol seems content launching with no products or “decentralization on the roadmap.” Under the layers of vapid marketing and technical mumbo jumbo, it’s hard to find a trust model that is much better than the simple and often maligned Liquid federated sidechain.

Forget unilateral exit, most of the “Layer 2s” on offer today can hardly qualify for the term under our admittedly loose policy here at Bitcoin Magazine.

To make matters worse, variants of proof-of-stake have crept into the design space despite Ethereum’s abysmal performance since its transition. Not surprisingly, the conversation has already devolved into ponzinomics to bootstrap the speculative flywheel. Colloquially styled “points,” a new token contraption has burst onto the scene and is all the rage amongst the designer crowd. This new liquidity farming fad requires users to deposit their bitcoins (and those of friends and family) somewhere in exchange for, you guessed it, yield.

They’re calling it gamification this time around. I think it’s peak crypto nihilism. Fast fashion has officially made it into Bitcoin!

The Emperor Has No Clothes?

Speaking of catwalks and clownishly dressed individuals, the crew at Taproot Wizards recently unleashed pandemonium on the aspiring Layer 2 community by going at its most prized science project, BitVM.

My esteemed colleague Shinobi put together a decent recap of the event. I wont bother you with the technical details but, of course, the claims remain hotly contested to this day. At least a dozen new companies’ fate hangs in the balance here so you can imagine the smell when they were publicly outed to the fashion police.

Although I’m partial to the wizards’ arguments, we should probably hold off on writing the obituary for BitVM. Jumping through liquidity hoops appears to be one of the pervasive tradeoffs one has to make when designing trust-minimized protocols on top of Bitcoin. Lightning has given us inbound liquidity headaches for years. Proposals like Ark have been dismissed because of the massive UTXOs operators have to fund. Maybe BitVM bridges can be designed to mitigate the upfront liquidity requirements of operators. At least, the issue is probably not enough for everyone to drop everything and go home.

The unfortunate takeaway from this saga is that everyone involved comes away looking a bit amateurish. Despite claims to the contrary, some due diligence was clearly skipped. The issue could’ve been run through a bit more collective brain cells before publishing and you can tell the targets all felt pretty blindsided by the announcement.

To tie this all up, the wizards have just come out with their derivative proposal. It’s hard not to get the impression that this was a bit of a setup motivated by marketing purposes. Then again, they’re grown men wearing wizard hats, what do you expect?

On the other hand, it is a valid issue and the response from “team” BitVM hasn’t been exactly gracious either. You’d expect thicker skin from researchers who have been around the block. Liberally banning people from a Telegram working group and hand-waving away the entire premise does not serve the interest of the community they are building for. They can disagree with the conclusions but the obvious outcome is that the audience and interest in BitVM have now grown beyond the small engineering circles where it was fomenting. Many have suggested it was probably the first time the mechanism was communicated in an accessible way. It was a missed opportunity for its advocates to leverage this attention and steer it their way if they thought the project was misrepresented.

Hopefully, this is all just a failed dress rehearsal because I don’t see how this is very inspiring for anyone seriously interested in contributing to this space. 

A grand finale

Of course, a circus show isn’t complete without the clown act.

The hottest protocol designer in town is preparing to showcase his latest line just in time for the halving this Friday. Runes, a protocol for fungible tokens, is probably the most anticipated drop since the Jordan 1s. As we speak, hundreds of users are syncing up Bitcoin nodes for the first time in their lives in preparation for the festivities. The blockchain is expecting a record crowd for this event so be advised that tickets could get expensive.

As for myself, I’ll probably just watch from my balcony in the comfort of my safe and ever-reliable Bitcoin jeans. Tick tock, next block.