In a recent exchange on X (formerly Twitter), a debate developed between Charles Hoskinson, founder of Cardano, and Muneeb Ali, co-founder of Stacks, a project focused on enabling smart contracts on bitcoin. The discussion focused on the potential and limitations of bitcoin's layer 2 (L2) innovations, particularly compared to networks like Cardano and ethereum.
Can bitcoin L2 Never Be Like Cardano?
Muneeb Ali began by sharing insights from the Satoshi Roundtable in Dubai, highlighting the bustling activity around bitcoin L2 projects. He tweeted: “Quick thoughts from the Satoshi Roundtable in Dubai: Yesterday's bitcoin L2 session was the biggest session I've seen here. Packaging and 5 bitcoin L2 projects there.”
He added: “BitVM changes the game because you effectively get a trustless move of btc to L2 (1 of n honest guess). “The $100 billion bitcoin L2 market appears conservative given the potential here to truly (and finally!) unlock the btc asset via programmable L2s.” Ali emphasized the rapid growth of bitcoin L2 and predicted a significant increase in bitcoin dominance if these projects take off.
Brief reflections from the Satoshi Roundtable in Dubai:
– Yesterday's bitcoin L2 session was the biggest session I have seen here. Packaged and 5 bitcoin L2 projects there.
– Today, multiple parallel sessions are held on bitcoin L2, BitVM, peg security, bitcoin Defi, etc.
–BitVM…
-muneeb.btc (@muneeb) February 4, 2024
Responding to Ali's enthusiasm, Hoskinson presented a contrasting point of view, which emphasizes the architectural limitations of bitcoin. He argued: “Having been around for over ten years, I have seen this narrative three times. Halving follows. “Every L2 company will learn that it is impossible because bitcoin cannot change enough to support the things necessary for a vibrant L2 environment.”
Hoskinson explained the evolutionary nature of ethereum and Cardano, stating: “Both ethereum and Cardano are continually updated to improve your options as a developer to implement effective, efficient, reliable and secure L2.”
Furthermore, he criticized the practicalities of implementing L2 solutions in bitcoin. “This means that EVERYTHING is incredibly difficult to do with bitcoin L2 and typically requires CENTRALIZED or FEDERATED infrastructure to function. If it is CENTRALIZED or FEDERATED, then it is not bitcoin,” he stated, pointing out the fundamental contradiction with the decentralized spirit of btc.
Hoskinson vs. Ali
Ali responded by mentioning BitVM, a new technology that allows new functionality to be implemented at the L1 level, while additional updates are handled at the L2 level. He stated: “No changes are required in bitcoin. Read the part about BitVM. BitVM is how new things needed in L1 are implemented. Everything else runs in L2. The L2s can be updated as often as you need.”
Hoskinson, acknowledging his knowledge of BitVM, remained skeptical. He explained the practical limitations and security concerns associated with bitcoin L2s, arguing that they often end up relying on federated models that contradict the decentralized spirit.
“The issue is getting value in and out of L2, the security model, settlement latency and many other functional requirements for practical DeFi. It works until it doesn't and you need some bitcoin,” Hoskinson said.
Ali defended BitVM, stating that it solves the critical problems of transferring btc in and out of L2 with practical latency and an honest 1-of-n assumption. “The game has changed forever. I have seen the failed attempts of the last few years. This is different. “We have the key piece that was missing,” he argued.
Hoskinson, however, was not convinced and equated the new developments with “new paint on old ideas.” He expressed concern about long finality times and optimization tradeoffs when it comes to fraud testing in such systems.
“It is the same assumption of trust. MPC protocols typically operate with 1 of n honesty. Additionally, when it comes to fraud testing, you suffer from long finality periods and typically a lot of bad optimization tradeoffs,” said the Cardano founder.
Surprisingly, the last word still does not seem to have been spoken. It remains to be seen whether other voices in the bitcoin L2 community will contradict Hoskinson's claims.
At press time, Cardano (ADA) was trading at $0.4969.
Featured image from Medium/Cardaspians, chart from TradingView.com
