The Bull Case for zkBTC

today on this Alpha League episode we are exploring ZK Roll-Ups on bitcoin which I didn't even know was possible until I stumbled upon this website called bitcoinrollups.org which is a research Endeavor out of this man John light who got a grant to go research what can you do when you put a roll up on bitcoin is that even possible and so it turns out a lot is possible also in this episode I bring on Eric wall who's also a bitcoiner a technical bitcoiner to help me co-moderate this conversation because this is something that Eric Wall I know is just very interested in and wants to

see happen on bitcoin so we talk about Roll-Ups on bitcoin of course what that means for the lightning Network what a what you can do on a roll up on bitcoin is it just a payments Network that is a better lightning Network or is it the full Suite of smart contracts tokens uh what's it take to put Roll-Ups on bitcoin do we have to hard Fork is it just a soft Fork how like how complex is this how is the community going to receive this because the Bitcoin Community is generally resistant to change but we've kind of been seeing a tide shift in the Bitcoin Community lately maybe there's more bitcoiners

that are more interested in something like Roll-Ups on bitcoin and overall I'm just really fascinated about this concept Roll-Ups on bitcoin and it's kind of restored my interest in Bitcoin it's one of the most Innovative things I've seen out of the Bitcoin space in a really long time uh and so this is something that I hope to see coming uh for the future of Bitcoin so I hope you enjoy this exploration into the world of ZK Roll-Ups on bitcoin with my two guests John light and Eric Wall right after we talked to some of these fantastic sponsors that make the show possible if you've been listening to bank lists you know that we're fans of the modular blockchain thesis the idea

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IO welcome bankless Nation to a very special episode of alpha leak today I'm joined with John light and John light currently works at the head of product for Sovereign but also moonlights as a Bitcoin researcher in his free time and recently got a grant from the human rights Foundation to do research on how to do ZK Roll-Ups on bitcoin and this is what piqued my attention and why I wanted to do a show on this because ZK Roll-Ups on bitcoin I didn't know that that was possible but according to

John's research it is possible John welcome to bankless yeah thanks so much for having me and also because I am uh uh not the always the best person to ask Bitcoin questions we're bringing in some help we're bringing in Eric Wall uh who's going to be my technical co-host my bitcoiner co-host to ask me and ask John uh some more some better questions more than just a higher level stuff so Eric thank you so much for helping me do the show today thanks for having me having me David cheers all right John let's get into it

uh let's explain a little bit about yourself give yourself uh our bio uh and kind of how you came to be working on the intersection of ZK Roll-Ups and Bitcoin sure so I'm a long time bitcoiner Bitcoin is my first love you could say in uh cryptocurrency uh world and I have had a fascination with a cross-chain Bitcoin protocols um even before side chains the term sidechain was was even developed I've

been interested in in this idea of like you know could you move Bitcoin into other chains that have different sets of rules and the side chains white paper came out in 2014 I was really excited about that um years went by and the best kind of side chains we've gotten so far are like Federated multi-cigs um that hold people's Bitcoin um and I've always been interested to

know like can we do better than that can we have permissionless trustless side chains or at least Bridges to to other blockchains and um a couple of years ago I was working on a project in the ethereum world called Aragon and this is a Dao creation tool and it was also around the time of

like well first there was cryptokitties which kind of caused a lot of congestion on the blockchain and we were already starting to think about scalability around that time so like late 2017 early 2018 but throughout the that that um bear Market Gas fees started coming down and it became less of an issue but it was always something in the back of our mind so research was ongoing about how can we improve the scalability of this system

so that it doesn't cost like a hundred dollars to cast a vote or something like that um and eventually um you know ideas like plasma and state channels and eventually Roll-Ups um were invented in the ethereum community as ways to reduce congestion move transactions off chain make transactions cheaper more scalable so on and so forth and and so that's how I first became familiar

with roll-ups and um eventually these two interests of mine kind of converged where you know I realized okay Roll-Ups are basically like trustless Bridges um that you can use to transfer coins to other blockchains this is like you know kind of the original side chains vision of like having you know trustless uh Bridges to other blockchains and you

can move your coins between different blockchains and I thought you know wouldn't this be uh cool to bring to bitcoin John I think the the most interesting thing about this for me is that uh ZK Roll-Ups are a technical technology that just makes sense to me in the ethereum ecosystem it's the it's a the logical progression of like State channels to plasma to Roll-Ups uh has always felt a very like a natural progression of scale for a blockchain and so then uh when we talk about using this which is just an

inherently neutral technology ZK roles are just a neutral technology the fact that we can uh allegedly which what we're going to unpack today that we can apply a ZK roll up to bitcoin gets me excited it's one of the first things I saw a lot of potential out of out of the Bitcoin Bitcoin space in a in a long time like lightning has never really interested me liquid has always been a joke but ZK Roll-Ups seem like uh if we can apply them to bitcoin it can open up a brand new world and that's really what has gotten me excited here is it and so

really just to Define these terms we have ZK Roll-Ups on ethereum is it simply as is it as simple as just taking the technology that we've gotten and started to roll out in the ethereum world and just applying it to bitcoin and then also it just like quote works is it is it really that simple depending on how validity Roll-Ups are actually enabled on bitcoin layer one the smart contracts that secure the bridge between layer one and the layer two validity roll up could be

practically identical to the smart contracts that are used for validity Roll-Ups on other chains or they could be quite different because Bitcoin uses a different state model than ethereum for example so ethereum uses a state model that's known as the account model Bitcoin uses a state model that's known as the utxo model and this has implications for how you program smart

contracts to interact with user funds including in this use case enabling users to transfer their funds into a layer 2 protocol such as a validity roll-up so while the roll-up features will be or could be identical between Roll-Ups that you could build on ethereum for example or Roll-Ups that you would build on bitcoin the actual mechanics of how

the funds are secured on layer one could be quite different Eric I know you've always been an optimist about the future of Bitcoin Innovation I know that ZK Roll-Ups has been one of those things when you saw this paper and also for the for the listeners who have a computer handy bitcoinrollups.org is a useful website which is kind of the the punch line of this whole show uh Eric when you when you saw this paper when you read this paper and saw it out of John light what did you see what got sparked in your imagination

yeah so just to give some context on like how the research project came to be uh like the sort of origin story here is that it was actually Udi wertheimer that had some argument on Twitter that led to CMS Holdings making a hundred thousand Grand to uh charity of Udi's Choice might have been actually it might have been the the the podcast that you guys did within the the BNB uh b b is sound money hyper sound money or something yeah right so

um CMS sent a hundred thousand dollar Grant to the human rights Foundation the human rights Foundation partnered with starkware and Alex Gladstone who's the chief uh strategy officer at Human Rights Foundation has been like he has his own like he he's very idealistic with Bitcoin and he wants he really wants Bitcoin to succeed and he's very I would say in many cases he's very uh intellectually honest about like what the complications for um for Bitcoin is and then he uses the

human rights Foundation sometimes to to create grants and create research projects to to solve the bottlenecks that he's seeing so Alex lasting he has been interested in trying to understand like can we use something like CK Roll-Ups as an alternative technology or is that as a complementary technology to to the lightning Network on bitcoin and then uh he did a combined Grant between stockware and the human rights Foundation uh to to research this basically and I was helping Alex find

the right candidate to do the research projects we had a bunch of different applications and I've known John light like from Twitter from before and I know that he's uh very clued in about what the technology Stacks already looks like so it's not going to be completely new pieces to him so we chose him base because he was the best candidate and the uh the uh work that he's done uh we're very happy with with the work that John has done so uh from our from our end uh the the

research project I would say has been a success and uh it's incredibly interesting to listen to John speak about this because John was previous to to having done this work he was a bit skeptical to whether or not Roll-Ups were actually a fitting technology on bitcoin I myself have been skeptical uh whether or not because one of the things that a roll up does it's it it allows you to segregate state from the main chain to uh a secondary layer so one of the scalability bottlenecks in ethereum is that the the main chain state is so

bloated but the roll-up is a new state um and in Bitcoin we don't really have we have a utxo set which is the the closest equivalent to a state uh the way that we have it in ethereum but the state in Bitcoin isn't really you know it's not it's not tens of gigabytes or hundreds of gigabytes large as it is in ethereum it's much smaller it's it's much leaner so for this reason it hasn't been really clear like do we actually need Roll-Ups on bitcoin does it solve

the I mean ethereum is an extremely computationally heavy product right Bitcoin doesn't really function in the same way we don't really have the same type of scalability bottlenecks so therefore it really has been a question like does does ZK rollups on bitcoin actually solve the correct type of scalability bottlenecks and sort of the interesting thing that has come out of John's research is that it does address those specific bottlenecks it is uh something that we can use to reach like orders of magnitude more scale and Bitcoin

so so when I hear a roll up on bitcoin two things come to mind one is a better lightning Network um my opinion on the net lightning network is that the ux is too difficult for it to be really adopted as a mainstream technology um and and so if with a ZK roll up on bitcoin we might be able to have the scalability of that we need in order to scale Bitcoin payments to the world um so I want to go down that rabbit hole the other Rabbit Hole I want to go down is expressivity it's like okay what

other potential is unlocked by Ezekiel does it make Bitcoin more expressive than the layer one and so I'll we'll take those one at a time John uh is a very simple like ZK roll up on bitcoin just a better lightning network is that something that we've unlocked here by the way could I just jump in here real quick yeah sorry let Eric uh let Eric hop in he probably can ask the question better yeah so no I just want to I just want to mention something that I thought it was pretty funny so um I had a bet with the editor of Bitcoin magazine

about whether or not the merge would happen this year and the BET was for a Tungsten Cube and as we know the merge happened this year so uh he was going to send me 333 dollars over the lightning network uh yesterday and I downloaded a wallet called the wallet of Satoshi and I sent him an invoice and I wasn't sure it's going to work because the problem that you usually have with lightning is that you don't have enough inbound liquidity so in lightning you need uh liquidity locked up to be able to receive a payment which one is one of the most fundamental limitations of the

lightning Network and in this case it actually worked I didn't have to do any setup I just received the payment of 333 dollars I was like holy lightning actually works and I was this close to making like I guess I feel like I have to be intellectually honest when good things are happening with lightning like if something really works and it impresses me it would be intellectually dishonest if I said you know I'm not gonna publish I'm not going to Tweet about that so as I'm writing the tweet I thought you know I'll just I just to go and look up but this is actually like a non-custodial wallet and that it is in the custodial wallet that handles all

the lightning uh channels turns out the walls of Satoshi is a custodial lightning wallet so this was all like done in a centralized fashion and I was like okay well that's the reason that you know this works and it wasn't it wasn't this discovery that the lightning Network suddenly Works um so I think you know the this this issue with lightning is really in my perspective this is the reason why Roll-Ups has been such a huge interest for me it's because these Channel limitations that you have the lightning and John you've looked at this um like you in your in your rollups

paper you've gone through like the sort of user experience bottlenecks or quirks with the lightning networks and how Roll-Ups are sort of different so it would be super interesting to hear like how you compare those two technologies yeah yeah I think it from from what I can tell people's experience using lightning varies some people have a great experience all the time some people have problems and it it's very set up dependent like dependent on the wallet dependent on what nodes you have

channels open to depending on how much liquidity you have um like I have used Phoenix wallet and Breeze wallet and blue wallet all for lightning um I believe blue wallets implementation of lightning is custodial but Breeze wallet and Phoenix are mostly non-custodial um and I I have I haven't had any problems with with any of those wallets I think I've had two or three outbound payments that have ever failed

um and it was because the person I was sending it to just didn't have enough uh liquidity um and uh so whereas Roll-Ups they're blockchains so if you have funds on the Chain you can send it to any other address on the Chain um and you know as long as your transaction gets included in a block like the payment is going to complete the trade-off that you get is throughput so lightning throughput

on the network itself is not constrained in any way you and I can pass back and forth uh you know a Satoshi millions of times and it's not constrained by data it's not yeah it's not constrained by the base layer uh you know block size limit uh yeah good clarification um it is constrained by bandwidth and like liquidity um but it's not constrained by the base

layer um transaction throughput and the transactions on Lightning have what is referred to as like local state so only the parties to the transaction actually even know that really the transaction is happening and that that's like where you get Lightning's massive throughput and scalability gains from because you don't need to tell your your transaction to the entire world you just

keep those transaction details between the parties to a transaction whereas Roll-Ups have what is called Global state where everybody who's using the protocol knows about all the transactions because just like with the base layer blockchain you're broadcasting these transactions to a Global Network um some nodes out there that are performing the role of block producers are bundling those transactions into a block and then that block has to get confirmed on the layer one or or base

layer blockchain and so the amount of transactions that fits in a rollout block has to fit within the the L1 data a availability capacity whether that's you know within the the layer one block itself or in some like data blob that's attached to the block um and and so that's that's like kind of the fundamental trade-off like you get these nice user experience benefits where it just feels like using any other

blockchain um but you're you're fundamentally constrained in in throughput by the data availability uh capacity on on your base layer blockchain Okay so is it is it fair to say if I um uh that we've seen Roll-Ups grow in adoption on the ethereum side of things we haven't seen the lightning Network really become adopted on the Bitcoin side of things is it fair to say that like with Roll-Ups

on bitcoin we would have a payments Network that is Superior in its adoption potential than lightning network is that a fair thing to say well I don't know that a fair comparison can really be made between Roll-Ups on ethereum today and lightning on bitcoin one they're used for very different things so you know the amount of money that say circulates in a financial system for

trading different types of assets is almost certainly going to be different than the amount of money that's circulating through say a peer-to-peer payments application or something like that another thing that you have to look at is not just the liquidity but the actual like amount of users um and there are thousands of lightning nodes on the network and some of those are custodial so they have like

customers who are utilizing those nodes that it's hard to you know even say how many users they have unless they advertise it since they're hidden behind like a custodial interface and so even the throughput on the network because it's not a global state we don't know how many transactions are happening um across the lightning Network so it's hard to make a compare a comparison

and even if you could compare them like I said I don't think it's quite comparing Apples to Apples um with that having been said I think that because of the ux benefits that you get from having this Global State model and like being able to receive offline payments being able to receive payments without requiring inbound liquidity and and having Channel limitations and things like that

I think those features do overall improve the user experience and so light uh Roll-Ups could be an alternative for certain use cases and not others um like if you need really high capacity high volume low value transactions like micropayments or Nano payments then you know a state Channel network such as

Lightning might still be the better option but for simple venmo like peer-to-peer payments or maybe even like you know business to business uh payments Roll-Ups might be better like a better user experience the the the constraints or requirements of that type of payment this might be better suited to to a Roll-Up yeah so there's a there's a problem segment here that we don't really know the answer to like is the reason that

the lightning network is not taking office quickly as you know other layers on ethereum for example is it because the user experience of lightning is bad or is it because people don't want to make payments with Bitcoin we don't really know the answer to those questions but I can speak for myself as a bitcoiner that I would probably make more transactions if the lightning network was more reliable then I would have a wallet with some funds in it I would go I would use it whereas with lightning it's always like I pull up my wallet it sort of has to sync my

channels are not always configured and then that sort of leads me to go and put that into a custodial wall but I don't want to put a sizable amount of funds in a custodial wallet because I'm sort of worried that it's going to disappear so it's not clear exactly what the what the reason is that that people are not using I think whether it's user experience related or if it's something else my perception is that it's the the property that it's the the roll up on bitcoin and Bitcoin roll up revolves in general are this persistent thing that has 100

uptime is a big unlock whereas like the lightning network is this more nebulous thing where parts of the Latin lightning Network go offline then they come off online later uh and that the lightning network is just this Loosely uh connected network of nodes when some of those notes go offline uh versus a roll-up where the roll-up is one single blockchain with 100 uptime I think that's the unlock that I think really uh gets me excited about the potential of a

new layer on bitcoin that sees a lot of demand um uh yeah John some some thoughts on that yeah well to draw another comparison I think today Roll-Ups don't actually fit the full vision of like what we uh imagine a roll-up to be right or the full potential of a roll-up like today they're uh secured by multi-cigs not by layer one consensus today they have single

block producers not multiple block producers and so there have been outages on Roll-Ups where users can't access their funds for 24 or 48 hours or longer um and uh and so similar to the way that you know the lightning Network it's immature people are still building out tools for managing liquidity and figuring out the user experience uh at Rough edges I think some of those rough edges are

going to be able to be smoothed out some of them might you know might never be able to be smoothed out um similarly you know with Roll-Ups I think there is a potential there to get to an ideal state of trustlessness security uptime um and we might never reach that full ideal in the same way that even with base layer blockchains today there are bugs and there are there are there are ux challenges um but like we can move incrementally

closer to that ideal and I think the ideal state of a Roll-Up again for certain use cases is arguably Superior than lightning or other layer 2 protocols that we can build on Bitcoin today so that's that's one of the things that makes me excited about Roll-Ups is that I think they can fulfill particular use cases they can fill a particular potential that that just isn't possible today yeah one example of that that I think is super interesting is that like I can say

to you David like um by the way I just sent you uh forty dollars on the uh ZK sync Roll Up or On the arbitrim roll-up and you're like oh and you're like okay so do I go and claim it with my ens name like David Hoffman and then you can then you have access to those funds and we didn't have to coordinate on which layer like we need to do any setup process before that I just sent you those funds like an email like I just know your email address you now have those assets uh so

that's something that you can do in a roll up you could do that on a roll up on bitcoin also but you just send them funds without them even downloading a roller wallet you can send them funds and that's something that you cannot do with with the lightning Network the way that it's currently uh the way that it currently exists right because as a user as a lightning user I need to initially initialize my lightning node and then also maintain that lightning node in order to have like my email address being able to receive emails which is just like not a ux that people are used

to and perhaps just like is insurmountably difficult for Global adoption but this idea where you have this persistent address that exists at any layer that works universally and you don't have to maintain a node or initialize a node in the first place to be able to access this uh I think that's just a ux that is more resonant with with the internet going people of of the Modern Age I don't know if this is a problem that could be solved but you do have to be careful about that because I remember

there was a problem with some tokens on optimism that the optimism team was distributed to I think an investor or something like that winter mute it was a trading firm but there was actually a Nuance there is that it was a it was a gnosis multi-sig and it was a very early version of the gnosis multi-sig so it was a bit of software on top of a layer uh and that particular software right it was a contract address so they had it didn't actually have anything to do with the fact that it was on a new layer it

was a specific multi-sig implementation that created a new address that was um different from the address on the layer one so that was more of an application layer uh difference than a protocol layer difference I thought it was something like the case was like they they had the contract address on layer one that optimism team sent the tokens to the address on Layer Two and somebody else deployed the contract to the optimism roll-up and was