The Pomp Podcast - How To Make Money While Holding Bitcoin | Charlie Hu

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Starting point is 00:01:02 but only as an expression of his personal opinion. This podcast is for informational purposes only. a major major value unlock or like clarity in regulatory rights or as a major catalyst for bitcoin defy what's going on guys today we got a great episode with charlie hu he is the co-founder of bit layer and in this conversation we talk all about bitcoin d5 and what is going on with all this innovation experimentation and people trying to build products and services on top of around and near bitcoin there's a lot of questions i have a lot of them too and i think a lot of people are trying to better understand what's going on in d5 what's going on with bitcoin d5 is this stuff real? Is it not? What metrics should they be paying attention to? What are

Starting point is 00:02:01 the metrics that are being gamed and what the heck is actually a product that's being used versus something that's just hype? Charlie's here to explain it all. I think he does a fantastic job of helping us get to what is the actual signal among all the noise. Here's my latest conversation with Charlie Hu. All right, Charlie, I thought a great place to start this conversation is you live in Singapore and there's this like what appears to be a dichotomy between Asian retail investors in Bitcoin and then Western financial institutions who are into Bitcoin. But because they both have this shared interest in Bitcoin, Asian retail, Western institutions, they're actually on the same team, on the same side of the table. Talk us through a little bit as to kind of this unique setup here of bringing together two different groups that people wouldn't think are working together, but actually are.

Starting point is 00:02:40 Yeah, great question to start with. First of all, great. Thanks for being here. And I think we look at the Bitcoin ecosystem, right? We start from two years ago. What happened was Autonos protocol came out, right? It was due to the fact Bitcoin has an upgrade in 2021, the BIP430, which allows people to create this inscription on sets. It didn't really drive the attention in the Western community due to various reasons.

Starting point is 00:03:05 I think a lot of people were still kind of in the initial NFT and a few other kind of use cases last cycle. And Bitcoin Audit Nodes was kind of really heavily picked up and adopted by the Asia retail community. So that was kind of the reason I got interested, you know, kind of orange peel myself to explore what kind of we can create use cases around Bitcoin, you know, even doing assets around Bitcoin and also doing DeFi, right? Now it's become more and more obvious. It's, there's an interesting adoption demand. So that was kind of the case.

Starting point is 00:03:35 80% of the auditors was created by the retail community in Asia. And, and also on the other spectrum, Bitcoin community, a lot of, a lot of them actually are miners. The Bitcoin mining community was heavily from Asia last time, last cycle, right? Before a lot of the Asian countries banned Bitcoin mining in 2021, almost 30% of the Bitcoin hash rate was from the mining pools and miners in Asia. So that was a lot of that. But obviously, as a lot of the network you know, the United States and maybe Western

Starting point is 00:04:07 communities, the ETF came out, right? The institution finally have a way, have a vehicle to come in. So it's very interesting, like two sides of the spectrum, because it's the same network. We're talking about the same thing and same assets, right? The principle is the same, but people comprehend it in a different way, right? So people who are very, very just pure digital goal-driven, they don't actually like any use case on Bitcoin network, but there's people actually want to create interesting things on top of that to even getting more value recruits and mechanism for Bitcoin, right?

Starting point is 00:04:38 So that's kind of the beauty part, I would say, for Bitcoin network. It's so decentralized. It's so liberal. Different people have different opinions, but it's serving the same purpose and serving the same goal for these interesting assets. When you think about the Asian retail community, what are the Asian institutions? Are they into Bitcoin as well, or it's pretty much retail? In the beginning, it definitely was retail. I think until the United States government actually approved ETF, and then Hong Kong approved last year. And now we're seeing Australia, and obviously you have Bitcoin treasury company like Metaplanet. There's quite a few new ones probably going to come out in Korea as well.

Starting point is 00:05:18 It's just following up. I think that the momentum, the velocity of following up on this is getting higher and higher. But I will say a lot of the builders, a lot of the actual users in the Bitcoin network, in the Bitcoin ecosystem are still more or less retail, who are interesting to see what are the interesting use cases for the Bitcoin assets. They are using all these kind of Web3 wallets such as OKEx, Binance, or Coinbase wallet to try new things. I think the level of curiosity and also the speed of adoption for new use case on-chain, it's pretty high in Asia. When you think about the folks that are in Asia, how many of them are Western citizens that have have moved there versus are native to the geography?

Starting point is 00:06:05 I mean, I haven't done too thorough quantitative research about this. I would say definitely quite a lot of them actually expect the people who live in Singapore, which we're based there as well, like huge community right there, Western community. They travel a lot. People in Japan, in Hong Kong, even in Vietnam. We were just there two weeks ago in the GM Vietnam conference. So a lot of expects are there, right? They mingle with local communities, but they stay online.

Starting point is 00:06:31 They do things online. They explore on-chain opportunity globally, right? So geographic location is not the hurdle for them, right? And I mean, because it's DeFi, it doesn't really need too much like KYC. You know, you don't need a bank account for that, right? So it gives you this kind of a digital nomad kind of liberty, right? And I think that's kind of the majority of the early user base, right? In these communities, like take Vietnam as an example, I think that the Western perspective

Starting point is 00:06:58 of Vietnam may be different than the truth on the ground. What did you take away from being there in terms of adoption of Bitcoin? Are people using it to buy things? Like just walk me through kind of what are some of the lessons learned from a trip to Vietnam? Interesting. Yeah, I think it's a very great question. First of all, I've been to Vietnam many times. It's in Bel Air, Vietnamese community is one of the most active retail community. We We try to engage, we're getting quite a lot of interesting demand and inquiry, and also even builders wants to build things with us. So Vietnamese community is definitely one of the...

Starting point is 00:07:30 First of all, as a country, Vietnam has highest crypto penetrate rate. They were multiple times number one in the world. So people actually use crypto in various kinds of cases, stable coins, payments, all that. And DeFi was pretty early. I remember one of the most OG DeFi protocols called Kyber Network. The founder called Roy Lu, great OG in the DeFi builder, he's also our Andrew investor. So he told me a lot of things like they have a very interesting builder base who build interesting tooling in the Bitcoin space, in the DeFi space.

Starting point is 00:08:03 So I think people over there, there's a lot of interesting builders that have been very quiet and they just heads down building. Because of the fact, the opportunity for jobs and also for career-wise, crypto become a a very important alternative solution for them. So I think it's getting very high penetrated market retail-wise. There's a lot of people actually at very high knowledge level about the on-chain opportunities, DeFi use cases. The education level, just learning by doing, is pretty high. Yeah. So we're talking about Bitcoin. Let's talk about just DeFi in general. I always joke, it's a little bit of a jab towards the non-Bitcoiners where I say Bitcoin was the

Starting point is 00:08:43 first decentralized financial product versus DeFi product, true product market fit, very big scale, decentralized money. We now have seen a lot of other use cases around decentralization that's come to, we've got decentralized exchanges, we've got lending pools, all these different components. What is the current state of DeFi in your mind? Forget about on Bitcoin, but just in general, is it working? Is it not working? Is it still cautiously optimistic about the future? How do you see the existing DeFi landscape? Yeah, great question. So first of all, I'm very, very bullish on DeFi as a trend, as an adoption category in

Starting point is 00:09:20 the Web3 space. I think this is one of the most battle-tested, almost user adoption-proven use cases among many other new frontier, like AI agents and some other new things. It started in Ethereum from 2020. I was quite early to get to know what is automatic market maker, like Uniswap, and obviously on-chain lending protocols, using smart contract to do a lot of the interesting things. And it's just keep innovating, doing the bear market as well. In the last six years, we see a lot of the interesting new primitive across perpetual

Starting point is 00:09:54 taxes, option trading protocol, leverage staking, liquid staking. Things go on. Something maybe not as successful as people thought, something was massively successful It just keeps sustainability growing with the momentum in terms of TVL, on-chain transactions. Aave, one of the leading lending protocol on Ethereum, just hit $50 billion on TVL, on the lending market. It's getting huge. The reason Ethereum with all this adoption, because they have the smart contract capability. We definitely see the huge asymmetric potential if we bring these programmability features and verification components for the Bitcoin network.

Starting point is 00:10:39 And then we're sitting on these massive assets, right? It has been not underutilized, has been idle in the last 10, 15 years. And I think this big amount of assets can be used with all these proven use cases, then it's like massive value unlock. So yeah, I mentioned Bitcoin is the most decentralized, successful, winning assets. It's incorruptible, it's censorship resistant, it checks all the boxes to be the right assets for on-chain decentralized finance. But due to this lack of programmability and all this infrastructure limitation, we can't really do all these interesting use cases around Bitcoin assets yet.

Starting point is 00:11:22 We had a payment, that's pretty much it. Lightning had an alternative Plan B solution through State Channel, actually serve certain category of user base. But I don't really see too much on the mainstream yet. So I think that's kind of why we want to jump on board to building the infrastructure for Bitcoin DeFi. So you mentioned that Bitcoin layer one has a lack of programmability compared to some of these other L1s. There are people who are building the lightnings to the world and things like that. I think a lot of people will hear about Bitcoin DeFi. And if I say that to 10 people in the Bitcoin community, I'll get very different reactions. Some people are very excited about

Starting point is 00:11:59 this. Some people think that it is all a scam and it's never going to work and it's just hyperware or whatever. Walk me through, when we talk about Bitcoin DeFi, what does that mean? Are we actually building on top of Bitcoin? Is it a layer two, a side change? Kind of just walk me through. And again, not so much just like what you guys are doing, but just maybe understand the market first and then we can dig into what you guys are doing. Yeah. So there's two category of things to understand. Bitcoin DeFi means Bitcoin assets, but serving, being provided as liquidity assets for DeFi use cases, and also using Bitcoin network as a settlement layer, things like that. So when we know DeFi, it's serving a lot of, covers a lot of the primitive. We have stable

Starting point is 00:12:43 coin, we have lending, we have all these new frontier assets, kind of use cases. But pretty none of them are actually happening on Bitcoin network. It had some small use cases in the past in the sidechain space, but I think after all those and now with big demand, also attention back to Bitcoin assets, we're looking at Bitcoin serving as one of the most important assets are coming into all the DeFi use cases, right? So the two categories to look at, the reason why WBDC started in 2018 was because they want to unlock the Bitcoin liquidity, right?

Starting point is 00:13:24 To provide the new liquidity source to the DeFi space in Ethereum. It's using the centralized custody, right? The multi-sig approach to wrapping the BTC assets, right? To the WBDC through the WBDC DAO. So we call this the first generation Bitcoin bridging. I know after you bridge over to Ethereum, you have this wrapped version of a BTC token and assets that you can enter all these lending, borrowing, decentralized taxes, all kinds of use cases. So that's that. And then people

Starting point is 00:13:56 want to try a more decentralized way or trust minimized way to bring the BTC assets to all this new layer one framework. So that's that. But if we talk about the ultimate definition of Bitcoin DeFi, there's a few principle we need to follow, which we believe that's the standard. One, the transaction needs to settle eventually on Bitcoin network. We call this Bitcoin finality. So it's not just only on some side chains, which is completely side system, has nothing to do with Bitcoin security. In a way, we believe Bitcoin is the most decentralized network. So we trust Bitcoin. We trust the security level of Bitcoin. But if the transaction, the DeFi transaction happened outside of the Bitcoin network, and it's not actually settled on Bitcoin block,

Starting point is 00:14:44 it's not Bitcoin security. That's quite different. So that's how we see the differentiating between some side chain, completely side systems, to the real Bitcoin security equivalent row up or layer two, kind of how we see the new paradigm of infrastructure. And the second thing is, does this infrastructure use Bitcoin as gas fee? And a lot of the use cases, no matter it's liquidity pool on AMM, DEXs, or other things, is using Bitcoin as liquidity assets. If the Bitcoin is not being utilized in the use case of DeFi, it doesn't really fit into the category of a Bitcoin DeFi. So our definition of future Bitcoin DeFi should should be. Bitcoin as a gas fee, Bitcoin as liquidity assets, and being utilized by other

Starting point is 00:15:30 proven DeFi use cases. And eventually, the transaction settles back through their recursive proof or verification component, which a lot of teams, including us, are building. And then transactions settle on Bitcoin block. So we don't have to put all the data to make it congested to put on the Bitcoin network. It's pretty expensive. And Bitcoin network, each block is only four megabytes, right? You can't really fit in everything there. But if it's just like the final proof data, right? Which is like pretty optimized and, you know, in a minimum way, but it still can represent

Starting point is 00:16:04 all the transaction proof happening on the true roll-up kind of model. I think that's kind of the best design choices, which we can keep the principle of decentralization, Bitcoin security, and using Bitcoin as an important asset to the DeFi. So I want to run through a couple of different components as we do rapid fire, right? The first is you're talking about speed of transactions. If you do it off of the layer one, then you should be able to do it much faster. You write to the finality of layer one. Is that true?

Starting point is 00:16:31 Is the idea of Bitcoin DeFi being structured in this way should provide more speed? Yeah, I think at the end of the day, if we want to provide assets which can potentially get a mass adoption, Bitcoin currently is in the layer one, only have seven transactions per second. That high throughput level is not enough. if we talk about millions of users using that for on-chain trading or like lending or whatnot, right? It's not the best use case, right? We don't want people to wait for 20 minutes for the settlement, right? Which takes that for the finality, right? It happens in two years ago,

Starting point is 00:17:06 three years ago, during the Audino season, right? People had a hard time to really verify when they were inscribing some BRC20 or some kind of Audino's assets on Bitcoin. They have to pay a huge amount of gas fees with the hard-earned Bitcoin they had, right? So that was the issue. That was a pretty bad kind of user experiences, which we don't believe that's going to be sustainable in the long run, right? You know, it's going to hit like certain plateau pretty fast, which happened kind of at the end of 2023.

Starting point is 00:17:34 And I think when we talk about like importance of, you know, speed, right? We need to have an infrastructure in which Bitcoin is serving as the kind of settlement layer, right? It keeps the highest level of decentralization and security, but letting all these heavy lifting transaction throughput work handled by this new layer of infrastructure. So I think that's kind of the best way to keep the balance. Cost in terms of more expensive or less expensive doing this with Bitcoin DeFi? We need a definitely less expensive kind of way for users to pay transaction fees, but

Starting point is 00:18:10 getting their transaction processed, right? So currently, if we talk about some crazy mint happening in the autumn season, people have to pay tens of even crazy times, like hundreds of dollars worth of BTC as a gas fee. It's kind of anti-human. You don't want to spend too much of the gas fees to process some transactions. So it will be a hurdle. We saw that coming for use cases to really build. It's like the minute you get bigger and you get a lot of people who have interesting demand at the same time, it becomes unusable because the fee is getting too high, right?

Starting point is 00:18:46 And then if we talk about certain low value, kind of highest transaction, kind of, you know, transactions, it doesn't make sense, you know, because the transaction fee is actually higher than the transaction itself, right? So that was kind of the hurdle for a lot of the user, you know, especially the retail users to enter that, right? So I think that's kind of the problem we want to solve and make it much cheaper, still keep the similar level of security.

Starting point is 00:19:12 And also, as I said, high throughput, right? So high speed. So you mentioned security. That's another one. I think there's speed, there's cost, then there's security. Bitcoin obviously being the most secure computer network in the world.

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Starting point is 00:21:14 IRA team is here to help you get access to real crypto in your retirement account. And here is the best part. As a Pomp podcast listener, you can earn up to $1,000 in rewards when you add funds to your account before tax day. Search for Bitcoin IRA in the app store or visit BitcoinIRA.com slash Pomp to join 200,000 Americans on their journey to upgrade their retirement. That's BitcoinIRA.com slash Pomp to upgrade your retirement today. So you mentioned security. That's another one. I think there's speed, there's cost, then there's security. Bitcoin obviously being the most secure computer network in the world, People are really excited about that.

Starting point is 00:21:50 How do these Bitcoin DeFi projects or technology stacks kind of compare? Exactly. So I think that's the most important kind of parameter among the three, right? Speed, people can wait a bit. There's a way people call it, kind of even called a slow fire. The people were joking about it. But I think security is the most important thing. One of the key principles, right?

Starting point is 00:22:13 People want to make sure their transaction is secure. They're not being hacked, right? You know, there's no vulnerability issues on their liquidity pools and so on. So on a smart contract layer, it's pretty much the same. We want to keep the design choice. What we think is best is, you know, same as Ethereum, like the most battle-tested kind of smart contract infrastructure with EVM, Ethereum virtual machine.

Starting point is 00:22:37 But then the transaction eventually needs to settle on Bitcoin block, right? So that's kind of the key difference between the true Bitcoin security equivalent roll-up model compared to the sidechain, right? So the sidechain, in case people don't know, transaction doesn't really settle back to Bitcoin network. It's settled within their own validated sets. So it's sidechain security, right? So sidechain security is fundamentally different compared to Bitcoin security.

Starting point is 00:23:02 So how to have the speed and the low cost kind of infrastructure, but still have the similar level of Bitcoin security. I think that's kind of the breakthrough we need to actually build, right? and actually get that kind of infrastructure to the market. So the verification components become one of the key solutions. So if the transaction is now verified and settled back to Bitcoin, then it's essentially just settled on the sidechain system, right? So let's take an extreme example.

Starting point is 00:23:35 If there's a vulnerability hack, right, issues in the sidechain, and users actually cannot withdraw their assets, which they bridge over from Bitcoin Layer 1 to the sidechain, they cannot withdraw back seamlessly. So eventually, if the sidechain, you know, get issues when it's security hacks, then your assets get lost, right? So this is kind of the most important thing

Starting point is 00:23:56 people try to avoid, right? It happened in quite a lot of sidechain systems in Ethereum and other ecosystem before. And I think we don't want to see that happen in the Bitcoin space, right? So I kind of want to say, if we want to say like, if we want to build a true mass adoption,

Starting point is 00:24:12 high potential infrastructure, the Bitcoin settlement or Bitcoin finality, I think that's one of the most important principle we need to keep. All right. Explain a little bit more about what BitLayer, what you guys are doing, how this works, what's live, what's not. Sure. One of the aspects that, as I've gotten to know you and we started to do some work together,

Starting point is 00:24:31 I think I found most interesting is you guys, I think, have Franklin Templeton as investors, but also Polychain. And there was a completely different end of the spectrum, right? You got hardcore crypto native type investor, and then you basically have as TradFi as they become as they come right all invest in the same thing so describe a little bit just like how this is working and and what you guys are seeing so far sure so bit layer started in at the end of 2023 right kind of right before or right between this kind of all those uh craziness season um network in bitcoin in the mempool was very congested uh people were paying crazy amount of gas fee right

Starting point is 00:25:07 to inscribe creating all these unchained assets that's kind of the you know the kind of the macro contest why I would start doing research about how to scale Bitcoin with the principle I was just explaining. At the landscape, at that moment, there was no best design choices. I was looking at Lightning Network, RGB, Nostra, a few other very exotic, not well-adopted, well-built solution. And it was kind of coincidental, like right after the Arduino Summit in Singapore, like October, that event happened. I saw on the white paper that BVM came out.

Starting point is 00:25:50 So since then, me and my co-founder, Kevin, we quickly aligned on the technical vision. We started working and doing research about BVM. It's basically using the existing Bitcoin script without actually depending on any Bitcoin network operation to build this like on-chain, verifiable, fraud-proof component to verify malicious potential transactions that can serve for two products.

Starting point is 00:26:15 BVM has a very key, interesting technical mechanism to build this new generation Bitcoin bridging solution. We call this BVM Bridge. So currently, BitLayer already launched our BVM Bridge mainnet last month. We've fully finished auditing. It's in production mode. small users in the Bitcoin space, even in the future, the institutional clients actually can use our new generation Bitcoin bridge solution in a more trust-minimized way to bridge the Bitcoin

Starting point is 00:26:47 and lock the UTXO and mint on the destination chain to get the bridged version of BTC, which is one-to-one packed. That's kind of the key first product that's fully already live. The second product I mentioned is the BVM-powered Bitcoin security equivalent roll-up, right? So it's not a sidechain. So the key components in infrastructure-wise BVM solution is trying to build is this verification component, Bitcoin Verifier. So for the people who understand Bitcoin network, right? Bitcoin in the layer one, it doesn't really have this built-in smart contract, right?

Starting point is 00:27:25 There's no verification component. So Bitcoin network cannot actually read and understand and verify certain things you send to them. It's not the case in Ethereum. Ethereum or any other layer ones actually have their programmability, so they can verify things. Verification is one of the key missing gaps we see in the Bitcoin space. If we're trying to build this Bitcoin security roll-up system, we need to have this verification component. So currently, Billy, one of the key BVN Alliance members, doing the research and working on engineering solution and optimize this verification module. And it's actually getting close, I think we are weeks away, getting close

Starting point is 00:28:12 to finish the fully audit, finish the bug fixing, and then we can launch the verifier. So that's kind of the key missing gap, we say, okay, between the Bitcoin sidechains and Bitcoin true rollup. The Bitcoin verified is a key infrastructure piece we've been working on. And I think teams like us, we are very excited. We, weeks, not even, not mentioning years, we're not even months away to get this launch. But we want to make sure this is secure, So this is battle tested. So it will be like a period of launching. It's not like a fee switch. It's not a switch on off. It will be probably two or three months of gradually test out stuff from alpha beta, alpha and then beta and then public beta, and then actually getting more and more

Starting point is 00:29:02 use case on board. Yeah, I think the actual Bitcoin security equivalent is coming to life to the market very soon. What's the biggest risk here for people? Is it the security stuff or is there something else? The risk, I think for any use cases in the Web3 space, if we talk about infrastructure, the risk is people actually don't know how to use it. So misuse of the smart contract, You know, people actually, in theory, every day there's people sending, you know, their funds or assets to the wrong address and so on, right? So that's not certain things like we actually can't avoid as an infrastructure builder, right? The second thing is when we look at this solution, I think it's just lack of knowledge, lack of education.

Starting point is 00:29:54 So it's not a risk. It's more like it would take a while for a lot of people get to know this and jump on board. So we might need quite a few interesting catalysts to really trigger the adoption, right? And one of them, in the macro perspective, I believe I've been talking across many different events and also podcasts, is the Bitcoin ETF staking approval. Explain this. What's that? Yeah.

Starting point is 00:30:18 So right now, Bitcoin have the ETF, right? Which is tens of billions of volume already. But all these ETF companies are not supposed to use their Bitcoin exposure to have a proper official yield strategy. But if we have the ETF staking approval on Bitcoin, I think more and more companies will be like, okay, having the Bitcoin exposure, let's explore a proper DeFi yield strategy. So just to repeat back to you what I'm hearing, which is ETH, Solana, many other altcoins, they have the ability to stake. If they stake, they can get yield. In the United States so far, they've not been allowed to do that inside the ETFs.

Starting point is 00:31:03 Outside the United States, there are certain ETFs around the world where you buy the ETF, they take the capital, they go, they buy the asset, then they stake. Sometimes they give you a percentage of the stake back. Sometimes they buy back share. There's all kinds of different ways to pass it back to the holder. What you're saying is you believe that there will be US-based ETFs that get approved that are Bitcoin, but then Bitcoin is used inside the Bitcoin DeFi spaces like a BitLayer to actually get yield on top of the Bitcoin.

Starting point is 00:31:33 And then same mechanism is that people will be able to buy the ETF and get Bitcoin yield essentially inside of these wrappers. I think we'll start from a Europe or other jurisdiction first, and eventually come back to the United States. But I think that will be a major, major value unlock or clarity in regulatory rights as a major catalyst for Bitcoin DeFi. We start from all the early adopters, the active native users, the DeFi users, the retail. I think that's kind of what's happening. For the people who actually haven't really touched anything with Bitcoin DeFi use cases, it's already kind of there in the market.

Starting point is 00:32:09 A lot of people have been using that. we have around 3 million daily active users or at least unique wallet addresses that have been used on our network more than 10 times.

Starting point is 00:32:21 We have around 20 very active fast-growing use cases on DeFi space that build on our network and over 70 million transactions happen. So I think

Starting point is 00:32:32 among all these things that happened we're getting retained users who are actually kind of building the habits to use their BTC to do all kinds of things. Yeah. Talk me through Bitcoin as an asset that is non-productive versus productive. What are

Starting point is 00:32:48 some of the other changes that you expect to happen in the world? You mentioned the ETFs will offer this to people. Are there other things that we should start to think about in terms of how people think about Bitcoin, use Bitcoin, hold Bitcoin, anything once there is maybe more widespread ideas around yield? I think, yeah, there's definitely some work to be done and improve in terms of yield products for BTC assets. Different yield with different APY, with different underlying risks. So we're seeing a lot of yield protocol builders that want to utilize our infrastructure in terms of BVM bridge and roll up to build interesting yield component. And I think the next wave of BTC yield product needs to be serving with very good

Starting point is 00:33:33 user experiences. Some of the underlying assets can be stored in a centralized way, like in the custody and also decentralized way in some vaults. And it could be multi-chain. So with our BVN bridge, it can be one-to-one packed, seamlessly bridged to other infrastructure layer ones. So the programmable BTC can be entered all the DeFi use cases to access to an APY from, I don't know, 4% to 10% depends on the actual use cases on top of some kind of certain incentives. And eventually, I think we will hit some equilibrium. On the DeFi builder side, they find a sweet spot. They can sustainably provide yield with certain APIs that actually have a customer demand. On the demand side, I think people will be getting more and more practical

Starting point is 00:34:28 or realistic. If you want to put that Bitcoin to use, they can't really expect, let's say, crazy high APY, like 20% in a sustainable way. It doesn't really work in that way. I think we're going to hit some interesting equilibrium in the supply demand once we get more and more products out and also more and more Bitcoin users from the retail to the liquid funds, even the institution actually come into place. Right now, it's a lot of moving parts still figuring out the product market fit, it's still kind of a lot of the dynamics moving at the same time. But I think you mentioned about some interesting new use cases, right? I'm very excited and also very looking forward to see the kind of high-frequent on-chain protocols

Starting point is 00:35:17 will be built on the Bitcoin roll-up, a scalable roll-up. So it's not just staking, not just lending, which is relatively we call this low-frequent. So low-frequency meaning the time you need to interact. The infrastructure is fairly low. You maybe do that once a week or even once a month. We might see some interesting Bitcoin-based use cases, which is high-frequency, such as perpetual DEXs, even on-chain option protocol, like prediction market for price prediction. That actually doesn't require rigorous KYC in a DeFi way to do that, but it focuses on Bitcoin assets. We might even see a Bitcoin version of hyperliquid type of protocol coming along the ways. Describe that. What would that look like? Basically, the transaction eventually will settle

Starting point is 00:36:06 on the Bitcoin block in the lower model. The underlying assets on the hyperliquid, most of the liquidity assets will be BTC or different version of BTC, and obviously have the stable quant as another counterparty in a counter side on a trading pair, users can actually do native on-chain perpetual trading on that kind of protocol. HyperLiquid is a very good example. It's a scalable infrastructure. They're doing okay. They're doing very okay in terms of trading volume. People can actually, in an on-chain way, decentralized way to do buy, call, and put option, and also doing leverage trading. I think that's

Starting point is 00:36:44 Let's clearly say there's an interesting demand on that in trading perspective. I think a lot of interesting decentralized Bitcoiners probably wants to do that as well. That might be an open up more on-chain use cases. I think I forgot to mention one point. The reason we build this infrastructure actually can have value for the Bitcoin community is we can generate more verification back to the Bitcoin network. So there will be a new revenue stream for the miners. I think what we want to do is to make sure

Starting point is 00:37:21 Bitcoin network is being utilized by people. Manpool is not going to be empty. I think after Arduino season, the Bitcoin network in the manpool has been pretty empty. There's not too much transaction happening on the network. If we talk about upcoming tens of trillions of major well-adopted assets, financial assets, if the underlying network, nobody actually uses it, all the assets have just been idle as a network, I don't think it's actually really good in the long run.

Starting point is 00:37:53 The miners were having a hard time to justify a couple rounds of halving down the road. They can still keep the good profits, maintain the hash rate to provide security for the network. So we've been talking to quite a lot of mining pools because we want to serve as like a new revenue stream to provide new transaction on the network. And so miners actually can get in the fees on that. Let's talk about TVL.

Starting point is 00:38:18 I saw recently that you guys hit number one on TVL for I think Bitcoin DeFi. Yeah. Is that a good metric? Like I see people sometimes yell and scream and say that it's like kind of a nonsense metric. How do you guys think about that? What does that mean?

Starting point is 00:38:31 Talk through a little bit. The popularity of what you're doing. Yeah, I think, I mean, on-chain TVL, called a total value locked, right, it's still one of the most used metric if we talk about what's happening in the DeFi space, right? Like, obviously, the other important metrics is on-chain, the number of volume, right, and the number of transactions have been on-chain. We hit over 70 million now, recently. The TVR on DeFi Lama, which is one side of aspects we're looking at, okay, is there any real assets on your network? I think that's very important.

Starting point is 00:39:08 We wanted to make sure there's enough assets and enough liquidity in our network so more traders can come in, more builders want to come in. One of the most important kind of way to support the DeFi protocols is actually support liquidity. Right. And I think without liquidity, you can't do too much as a DeFi builder. So I think that's important. But I think TVL is not the only metric, people just tunnel vision, right?

Starting point is 00:39:36 There might be some controversial case, certain protocol, in the liquid staking space, they just double count, even triple count the sum of the assets, which is like same underlying assets, but we count multiple times, right? So when we talk about TVL, we're back to number one on the DeFi Llama ranking. We also need to look at number of use cases and also number of transactions happening on chain. So for us, the reason we have quite a big growth in the last two months was because of the Bitcoin DeFi education campaign we did with Binance Water, which I think we drive

Starting point is 00:40:09 interesting amount of retail users came over to our ecosystem and actually started actually provided their BTC liquidity to our DeFi use cases and protocols. Obviously, those growth sometimes is temporary. We want to educate the users. Eventually, some of them will here to stay, and they will become and retain active users. Obviously, by doing those campaigns, we can support and help those protocols built on top of us to grow further. And I think that's very important to build a healthy, sustainable, strong ecosystem on

Starting point is 00:40:45 there. That makes sense. Where can we send people to find you online or find out more about BitLayer? The best way to follow us and see what we do is follow our Twitter. It's bitlayerlabs. On our website, bitlayer.org, we kind of cover all the fundamentals, you can find our white paper there, and also our ecosystem leaderboards, which we sort out all the top TVL, top transaction, popular protocols. And we have the user center. People can play around with different interesting

Starting point is 00:41:14 on-chain tasks to earn some of your rewards. And yeah, we try to bring the best use cases in our ecosystem to the right users. I think that's the best way to follow us. Amazing. Well, thank you so much for taking the time to do this. It's pretty incredible to see how much innovation and I think experimentation is happening on top of and around Bitcoin. And Obviously, the principles of decentralization, I think, are very unique to Bitcoin. And so seeing more services and products built on top of and around it, I think, is a worthy cause. So thank you so much for all the work you guys are doing.

Starting point is 00:41:47 And we'll do it again in the future. Yeah, looking forward. Thank you very much.

The Pomp Podcast - How To Make Money While Holding Bitcoin | Charlie Hu

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