Interviewee | Faust, co-founder of Geek Web3 & BTCEden
Editor | Defioasis
Statement: This article does not provide any financial advice. Readers are advised to strictly abide by local laws and regulations. The views of the interviewees do not represent the views of Wu Shuo and the interviewer. Readers are advised to distinguish clearly.
Microcosm: https://www.xiaoyuzhoufm.com/episode/6624dca8c3e09d8f3772f096?s=eyJ1IjoiNjJmOGI3MmZlZGNlNjcxMDRhYTBhYTQxIiwiZCI6MX0%3D
Youtube：https://youtu.be/dSWcUhD6y8o
On April 20, Bitcoin completed its fourth halving and Runes went online. Once launched, the minting and new issuance of Runes brought high congestion to the Bitcoin network, and the network transaction fee once exceeded 2,000 sat/vb. According to glassnode data, on April 20, Bitcoin miners' income in US dollars reached 107 million US dollars, of which 75.444% came from network transaction fees, both of which set a record high. On the eve of the halving, Bitcoin Layer2 Merlin Chain, which has the highest TVL, also released tokens and went online for trading on OKX.
This is a 45-minute interview with Faust, co-founder of Bitcoin L2 rating website BTCEden. It includes sharing of technical architecture and opinions on Bitcoin primary asset issuance protocols such as Runes, Ordinals and Atomicals, and Bitcoin Layer2 such as Merlin. This interview was conducted at 20:00 on April 20th, Beijing time.
Briefly introduce yourself
Faust: Hello everyone, I am Faust, the co-founder of Geek Web3 and BTCEden. Geek Web3 is now working on a technical research and media platform that is comparable to Messari, and we also have our own technical community; while BTCEden is comparable to L2Beat in the Ethereum community, aiming to become a technical evaluation and risk visualization website for the Bitcoin ecosystem.
My personal experience is interesting, but also tortuous. Compared with most Web3 entrepreneurs, I am relatively young - I have only been working for less than four years. I did not originally have a computer science (CS) background, but I have a strong interest in computer technology and wanted to be a first-class programmer. However, during the 2020 epidemic, I started writing in my spare time. I soon realized that writing was the greatest pleasure in my life, and my entire career plan changed.
I have worked at OKX, BlockBeats, and Bobcat Miners. During this period, I realized that Chinese Web3 lacks a platform with great influence and focuses on technology popularization and technology education. Although there are many professional media and Web3 education communities in this circle, there are only a handful of platforms that are truly influential and focus on technology and underlying principles.
After leaving the last company in May 2023, I made up my mind to officially start my entrepreneurial journey. This is the earliest origin of Geek Web3.
At that time, I paid more attention to Ethereum Layer2. When I was learning about Ethereum Layer2, I was amazed by the website L2Beat. In this one-stop Ethereum Layer2 information library, whether it is the technical solutions of major Rollups or the visualization of security risks, there are very detailed, systematic and clear presentations.
L2Beat showed me that the Web3 rating agency is feasible. In 2023-2024, the Bitcoin ecosystem is booming and various projects are mixed. The Bitcoin ecosystem is in great need of something like L2Beat.
In March of this year, I cooperated with a technical expert in the industry to officially launch the L2Beat of the Bitcoin ecosystem - BTCEden, which is aligned with the Ethereum community L2Beat. This website focuses on Bitcoin Layer2's technical rating, security risk assessment, and risk visualization functions. It will also display key data such as TVL, TPS, fee, and will also launch various functional completeness evaluation indicators.
Bitcoin has completed its halving, and Runes were born. What do you think of Runes, a new asset issuance protocol, and how is it different from the original Ordinals and Atomicals?
Faust: From a technical perspective, BRC-20 assets such as inscriptions and ordinals are different from runes and atomics. From the perspective of the existence and transfer of assets on the Bitcoin chain, Runes and RGB are closer in terms of asset parasitism and transfer, Atomicals are more like dyed coins, and Ordinals are more unique.
Ordinals, Runes, and RGB all send transaction data generated off-chain to the Bitcoin chain. The former uses taproot, while the latter two use the op_return opcode. Anyone who runs an indexer client can retrieve and parse this data and know which Ordinals or Runes protocol-related transactions have occurred now or recently.
Atomicals is different from Ordinals, Runes, and RGB. Atomicals assets have a colored coin binding relationship with UTXO on the Bitcoin chain, which makes it very different from several other asset protocols.
For example, if a user wants to trigger an Atomicals transaction, he only needs to transfer the Bitcoin UTXO with the Atomicals asset to someone else. The client can identify who the Atomicals asset is transferred to and how much the transfer amount is by monitoring the transfer of Bitcoin UTXO. However, Ordinals and Runes work differently. Compared with Atomcials, Ordinals and Runes may rely more heavily on the indexer.
We can think that Runes, Ordinals and Atomcials each have their own characteristics, and Runes itself is an upgraded version of the Inscription Protocol given by the founder of Ordinals, which is superior to Ordinals; Atomicals has more diverse gameplay and more applicable scenarios.
Will Runes replace the more common Ordinals and BRC-20 to become the final stage of Bitcoin asset issuance protocol? Or what do you think the asset protocol pattern on the Bitcoin layer will be like in the future?
Faust: This is the view of some people. They think that after Runes and Atomicals become popular, Ordinals may become unpopular, because runes are actually the evolved version of inscriptions.
As for Ordinals, it has been half a year or more since Ordinals became popular last year. During this period, you can see that after BRC-20, there has not been much noise about Ordinals. Now most people are paying attention to Runes or RGB++.
In the future, the popularity and limelight of Ordinals may be overshadowed by Runes. Whether from a technical perspective, the current market popularity, or the narrative, I think Ordinals has no advantage over Runes. Runes, Atomicals, and RGB++ may be the inevitable trend of Bitcoin derivative asset protocols in the future.
Is it possible for Runes to take on other narrative capabilities, such as games?
Faust: I think it is entirely possible. Related games or similar things may not be particularly related to technology, but more to ecological construction. For things like runes, you only need to design your own asset circulation and asset issuance protocols and handle the business logic of the assets.
With the current popularity of Rune, it is entirely possible that blockchain games or some phenomenal applications will appear in the future. Vitalik explained the "low-hanging apple" theory. If something becomes popular and attracts enough attention, then people will inevitably explore the surrounding things around it. If someone develops a game related to the Rune protocol, someone will definitely do it, but I don't know which one will succeed.
Bitcoin Magazine defines Bitcoin L2 standards as using BTC as the native asset, using Bitcoin as the settlement mechanism to execute transactions, and the need to demonstrate dependence on Bitcoin functionality. What do you think of Bitcoin Magazine's definition of these Bitcoin L2 standards? Does BTCEden have some of its own defined standards?
Faust: The Bitcoin Magazine standard is quite interesting, but it is very ideological. As you can see, the use of BTC as a native asset, the use of Bitcoin as a settlement mechanism to execute transactions, and the dependence on Bitcoin functions are actually the characteristics between Ethereum and Ethereum Layer2.
I think Bitcoin Magazine seems to have summarized the coupling relationship between Ethereum Layer2 and Ethereum, and then said that this set of relationships should also be satisfied by Bitcoin Layer2, and it is considered to be a necessary condition for Layer2.
I personally think that saying that there is a functional dependency between Layer2 and Bitcoin is nonsense. Now anything that has anything to do with Bitcoin Layer2 has a functional dependency on Bitcoin.
Then it is important to use Bitcoin as a transaction settlement mechanism. What does settlement mechanism mean? First of all, this Layer2 should be able to inherit the security of Bitcoin, just like Ethereum Layer2 inherits the security from Ethereum.
Taking Bitcoin as a settlement platform, the security of this transaction is ultimately guaranteed by Bitcoin. The logic of this is actually similar to Ethereum Layer2. The Ethereum Foundation has a clear definition of which technical solutions and product types belong to Layer2. For example, they believe that from a security perspective, state channels, Plasma, and rollup are all Layer2, and these three technical solutions can theoretically ensure that user assets are always safe.
Of course, this is from a theoretical perspective. If it is put into practice, the current Ethereum Layer2 basically has various risks. I think Bitcoin Magazine is right to use this as a necessary condition for Bitcoin Layer2. At least I personally do not oppose this approach. Of course, I do not support it, but I certainly do not oppose it.
What BTCEden is doing now is to evaluate each Bitcoin Layer2 from the perspective of security risks. I personally attach great importance to security. Many Bitcoin Layer2 project owners are not very responsible now. They are very perfunctory about asset security and don’t even have a reliable technical document or a decent white paper.
Bitcoin Magazine may want to change the chaos of Bitcoin ecology through its so-called "three rules". I personally have no objection to the three standards they proposed. But I think if we want to rigorously define what is Bitcoin Layer2 and what is not, the simple three definitions of Bitcoin Magazine are definitely not enough.
Proposing a truly Bitcoin Layer2 standard framework would be much more complicated than what Bitcoin Magazine said.
Of course, this may be beyond our capabilities, so what BTCEden is doing now is that we don’t consider what is Bitcoin Layer2 and what is not. As long as a project claims to be a Bitcoin Layer2 and has even the slightest functional dependency with Bitcoin, we will publish the project’s information and security risk assessment on our BTCEden website.
We are now very open-minded. But back to the original question, what is and how to define Bitcoin Layer2? This may be decided by the market and the community. I think it will take at least another year for most people to reach a consensus. It is too early to discuss this issue now.
What is MerlinChain's technical architecture?
Faust: The technical architecture of Merlin Chain is relatively clear. I think Merlin is similar to some current Ethereum Layer2. They clearly emphasize on their official website that they have a "decentralized oracle". In fact, this decentralized oracle, to some extent, is a new name for the so-called data availability committee, that is, what Merlin is using now is actually a "decentralized data availability committee."
Let me first explain what a data availability committee is. Many Layer2s will not send all their complete data to the Ethereum or Bitcoin chain, as it is too costly. So they publish the data off-chain on the Layer1 chain, which is to create a so-called DA layer off-chain.
The Data Availability Committee is a way to implement the off-chain DA layer. It has an abbreviation called DAC (Data Availability Committee). The DAC committee acts as a guarantor. They have to check whether the Layer2 sorter has published the complete DA data off-chain. If they detect that the sorter has indeed published the data off-chain, the DAC members will generate a multi-signature and upload this multi-signature to the Ethereum or Bitcoin chain. This is equivalent to telling the outside world that we have checked the sorter and it has indeed published the data off-chain on the Ethereum or Bitcoin chain.
However, many Ethereum Layer2 data availability committees use KYC, and must be officially selected before joining the data availability committee. This is essentially no different from the official setting up a few nodes, and is a complete alliance chain.
There are only a few DAC nodes in many Ethereum Layer2s, and every time they perform multi-signature, they always use 3/5, 2/5, or 2/4, which is very unreliable.
There is another more terrible thing, many Layer2 DACs have monopoly power. What does monopoly mean? The sorter only sends DA data to this DAC node, and other people can't see this data at all. If anyone wants to obtain the latest data released by the sorter, he must first apply to the data availability committee node.
If the committee node does not allow you to obtain DA data, then you get nothing. This is a naked degeneration into the alliance chain. Dankrad of the Ethereum Foundation is deeply disgusted by this. In August last year, he criticized many projects on Twitter for having problems with DAC.
Of course, Merlin also uses DAC, but they are decentralized DAC, that is, the access rights of its data availability committee are open. As long as you pledge assets, you can become a member of DAC. By staking a certain amount of assets in the form of PoS, you can join the DAC, making DAC highly decentralized.
This is the biggest difference between Merlin's data availability committee and some Ethereum Layer2 data availability committees. This form is equivalent to me making a chain under the Bitcoin chain, and this chain is dedicated to receiving DA data released by the sorter. Anyone who wants to obtain data can ask for data reading permission from the chain made by Merlin itself, or run a node to join the Merlin Chain data availability committee group.
This method is more decentralized. B^Square is actually using the same idea to some extent, but the method they use is not called DAC. It is more like Celestia.
In summary, you can understand that the general structure of Merlin is similar to some Ethereum Layer2. I don’t need to introduce it in detail, everyone is already familiar with it.
The architecture of Merlin and B^Square is similar to some Ethereum Layer2. Why don’t they support LST/LRT on Ethereum? What is the reason?
Faust: I think this involves that they belong to different systems, they belong to different infrastructures, or to put it bluntly, they are in different ecosystems, which especially rely on the full-chain interaction of various assets. At present, the underlying infrastructure of the full-chain interoperability between Bitcoin and Ethereum is very imperfect. For example, if LST wants to support multiple chains, such as Merlin, B^Square, and Ethereum Layer2 or Avalanche, all of these must be compatible with each other. First of all, there is a necessary condition, which requires the scenario of full-chain interoperability to be relatively mature. But as you can see, the Bitcoin ecosystem is just starting out, and its related infrastructure is still very imperfect, which may be a very important reason.
What problem does RGB++ solve and what is its relationship with the original RGB
Faust: RGB++ is actually an improved version of the original RGB protocol implemented by CKB official, which is compatible with CKB. Let me first explain what RGB is. Although RGB is also a Web3 infrastructure, it is actually a network without consensus and is a pure P2P thing.
You can think of it as the era of Web1, when the Internet first appeared, and different hosts and computers all communicated with each other in a P2P manner. RGB has no consensus protocol, and everyone is independent and it is a loose P2P network.
What if you want to ensure that the asset exchange between any two people is reliable? This actually goes back to the most primitive asset exchange scenario of mankind. As the asset recipient, you have to find a way to verify the asset status of the asset issuer and whether the asset history source he shows you is correct.
RGB's P2P network has no consensus, and you cannot see strangers' data. For example, in a vegetable market, many people exchange goods and money for money. If someone takes out a stack of banknotes and tells you that these are real money and not counterfeit, how can you believe him?
One way is to ask him to explain where the money came from, which bank issued it first, who printed it, and how many people the money passed through. If you can find out the whole story, you can determine whether his money is counterfeit or printed by himself.
RGB is similar to this to some extent. When you don’t know other people’s asset data, asset status and source, you need to find out where his assets were first issued, where they were circulated, and how many people they passed through. When it is finally presented to you, is his asset valid and is the asset balance really as he said. He said he has 5,000 BTC, but it is possible that he made up these 5,000 BTC out of thin air. You need to ensure that this situation does not occur. This is RGB.
RGB++ is actually an improvement made by CKB on the original RGB protocol. I mentioned earlier that RGB is a P2P thing without consensus. If someone wants to transfer money to you, you have to verify it yourself, which is a very troublesome thing; if the money passes through millions of people, you have to check it one by one, and you don’t know when you will find it, which is very slow.
The RGB protocol has many other problems. It cannot support DeFi and some complex smart contracts well. This is all due to one reason: it has no consensus. Consensus will ensure that the same data will be received by many members in the network. If a contract is deployed on Ethereum, the code of this contract will be propagated to all Ethereum nodes at the first time. But if the consensus is removed, as a smart contract issuer in RGB, there is no way to require other RGB users to back up all the data of a smart contract locally.
What to do? Then RGB officials did something ridiculous. They asked the issuer of the smart contract to find a platform, such as Twitter, Github, or any forum, to tell everyone what the smart contract is going to be designed to be, what functions it should include, and let everyone download and back it up. If someone wants to use a function of the smart contract later, he must first find someone who also recognizes the smart contract and downloads it locally before he can interact with it later.
Everyone will find this nonsense. Obviously, the above method is not conducive to the promotion of smart contracts. Moreover, if it is something like a public good, such as Defi smart contracts, how can you maintain its operation without consensus protocols? For example, Ethereum aggregates all the data in all accounts, and then copies and backs them up to all Ethereum nodes. By using this consensus method, many complex smart contracts can be backed up on the entire network. Every time this smart contract changes, everyone knows it.
But in RGB, ownerless contracts similar to public goods are prone to degenerate into private goods. This is because there is no consensus protocol, and only a few nodes may store the core data of Defi ownerless contracts. If only a few people have control over public goods, or only a few people can synchronize changes in public goods in a timely manner, such things are no longer called public goods, but more like private goods.
If RGB wants to implement DeFi in the future, it will be a bit troublesome, and it is easy to make it look like there is no decentralized infrastructure. This means that RGB is not conducive to the DeFi scenario. It has not developed many real users so far. The narrative looks interesting on the surface, but from a product perspective, it will face many problems.
RGB++ publishes RGB asset data and asset change records to the CKB chain. In this way, every time RGB assets are transferred or data changes occur, the CKB network will automatically back up and automatically synchronize all nodes, which is similar to the method in most public chains.
RGB++ and RGB have a common feature. RGB is equivalent to issuing an asset similar to a rune. If the newly issued asset wants to obtain the security of Bitcoin, it will bind this asset to a UTXO on the Bitcoin chain to establish a one-to-one mapping relationship. If the UTXO on the Bitcoin chain is not consumed, then the RGB bound to this UTXO will not be consumed out of thin air. In this way, double spending (double payment) is prevented, and the security of Bitcoin is partially inherited.
RGB++ also has such a property. Bind an RGB asset container on CKB to a UTXO on the Bitcoin chain. If Bitcoin UTXO is fine, then the assets in the bound CKB asset container will also be fine. In this way, Bitcoin's security is partially inherited.
The relationship between the two is generally like this. RGB++ has greatly improved on RGB in terms of product usability and contract support. However, the ecological construction of RGB may be very slow in the future.
Which one do you think will have a greater impact on the respective ecosystems: Bitcoin Core or Ethereum Foundation?
Faust: This is a very interesting question. Let me first talk about the Ethereum Foundation. I think the current Ethereum ecosystem is shaped by the Ethereum Foundation to some extent, a bit like the relationship between Constantine and the Catholic Church. In fact, someone has said before that the Ethereum Foundation is more like a church, like the Catholic Church. The entire Ethereum ecosystem is shaped to some extent by the Ethereum Foundation, especially Vitalik and his group.
What has emerged in this ecosystem is largely in line with the ideas of Vitalik and the Ethereum Foundation. Of course, things like Restaking and EigenLayer actually exceeded the expectations of the Ethereum Foundation.
Back to the above question, how much help the Ethereum Foundation has provided to its own ecosystem? I think we should not use the word "help", but rather "influence". The current state of the Ethereum ecosystem is largely created by the Ethereum Foundation. Perhaps in this process, many things have been excluded, while many things have also been encouraged. It is difficult to say whether this kind of thing is a big or small help to an ecosystem.
However, the Ethereum ecosystem we see today is so large, and it is definitely closely related to the Ethereum Foundation. I think they must have a huge impact on their own ecosystem.
Bitcoin Core's attitude towards the Bitcoin ecosystem is more like laissez-faire, and its influence on the Bitcoin ecosystem is much smaller. Unlike the Ethereum Foundation, it does not often interfere in some things in its own ecosystem. It only provides a technical platform and is responsible for improving the Bitcoin client code and helping the Bitcoin network to operate better. But when something happens on the network, the influence of Bitcoin Core is far less than that of the Ethereum Foundation. One advantage of this is that it is more free.
Everyone should understand one thing: more freedom is often required to bring about more innovation. Although the Ethereum ecosystem has also seen a lot of innovation, everyone will probably admit that the current Bitcoin ecosystem is far freer than the Ethereum ecosystem.
A free and open world will definitely help the construction of the ecosystem. To some extent, I think the Bitcoin Core model and the current Bitcoin ecosystem operation method may be more preferred by many people. This is why many people believe that the opportunities, vitality and prosperity of the Bitcoin ecosystem may be better than the current Ethereum ecosystem. I personally prefer the governance method of Bitcoin Core, or the Bitcoin ecosystem model, rather than the Ethereum Foundation.
Share some Bitcoin ecosystem projects or BitcoinLayer2 that you are optimistic about and willing to invest in, and why
Faust: Let me talk about the ones I am more optimistic about. I am more optimistic about Bitcoin Layer2, BitLayer, Merlin and B^Square, which are actually good; and Citrea is also very good.
I personally think that in the future, only a few projects in the Bitcoin ecosystem will be able to really succeed. This is a bit like Ethereum Layer2. There are only 5-6 or less than 10 projects that can really succeed, are very large, and have many real scenarios. The rest may not succeed at all.
Why am I more optimistic about the Bitcoin Layer2 projects mentioned above? First of all, Merlin already has its own ecosystem. Regardless of whether it relies on the wealth effect or some so-called narrative, at least it has an ecosystem and real users. It is not like many projects that have very complex, awesome, and superior technology, but in the end have no users.
Merlin has already used practical actions to tell everyone that this thing has been launched. Then, they can slowly fill in many technical gaps step by step. This is why I am optimistic about them: they are the first Bitcoin Layer2 that has been launched in the true sense.
B^Square is also performing well in terms of data, which is one of the reasons why I am optimistic about it. I personally know BitLayer and Citrea better. From the perspective of technical implementation, team member resumes, financing background, their technical solutions, and the completeness of their white papers, Citrea and BitLayer are among the most technically hardcore teams. At least in terms of the completeness of their technical routes, the seriousness of Bitcoin Layer2, and the importance they attach to security, they can at least rank in the top ten or top five.
This is why I am more optimistic about them. Their attitude is more serious and they really want to do something, unlike many Bitcoin Layer2s now who just want to take advantage of the hype and make some speculation.
I think that if a project party cannot even produce decent technical documents, does not even have a white paper, and is slow to issue a yellow paper, and does not have an in-depth interpretation of its own security and technical solutions, then the attitude of such a project is very perfunctory.
We see a lot of such projects in the Bitcoin ecosystem, and some of them are star projects that have raised a lot of money, but their official websites don’t even have technical documents or white papers.
I personally think that the attitude of the founder is very important to whether a project can succeed. If a founder does not have a vision, then the entrepreneurial project itself will not have much vision.
Easter Eggs
Faust: My personal investments now are all about investing in some currencies listed on major exchanges, or in other words, investing in some blue-chip assets on Binance and OKX. My holdings include: CKB, Merlin, OP, Worldcoin, STX, SUI, TIA, Arbitrum, Starknet, and BTC.
I hold all of these for a long time. I basically don’t interact with the chain now, and my main energy is on my daily work. I have a characteristic when doing things. As for investment, if there is no preparation, I simply don’t do it. I won’t rush into something I don’t understand at all.
For assets on the Bitcoin chain, I haven't made any preparations in this regard, and I don't have that much energy to collect intelligence all day. I haven't touched any runes until now, and I only spent 2000U on inscriptions in December last year, which is basically a drizzle.
Advice for newcomers
Faust: I suggest that more young people or those who have just joined this industry should have less of a mentality of getting rich quickly by taking shortcuts, and should spend more time learning various Web3 knowledge, especially deepening their understanding of technology, finance, and various products, including DeFi, asset protocols or other financial products, and the underlying technology of blockchain.
After entering this circle, many people spend their time speculating and profiteering, and do not study hard or improve themselves, just thinking about getting rich by luck. This mentality is very sick and twisted, don't do it. In the end, nine out of ten times, you will not make any money, and you will not grow at all. The safest, most reliable and most meaningful thing for yourself is to learn more knowledge, improve your skill tree, and make yourself stronger.
In fact, Web3 is a very suitable circle for entrepreneurs. No other circle has as many entrepreneurial projects as Web3, and many of them can be revitalized. The difficulty and threshold of starting a business in Web3 are actually much lower than those in traditional industries, and most people can live a decent life.
I would advise those who are new to this circle to spend more time learning, then find a decent job, hone themselves for a while, and then find a good opportunity to start a business. People must have a long-term vision and goals that motivate them at all times, otherwise life will be very boring, and that kind of boredom and fatigue cannot be solved by money.
