How Elastos is building a Bitcoin Layer 2 ecosystem with BEL2

0:01I'm Ashton Addison from the cryptocoin show and today on blockchain interviews with Jonathan harrie the global head of Business Development and ESG Ed lasos and we're also going to be talking about Bitcoin layer 2 Solutions as well Jonathan welcome so much to the show thanks for thanks for having me on M you're very welcome uh i' I've actually had elastos on a few times over

0:24the years uh rang Chen and some of the other members and it's great to see the ecosystem still thriving um and especially in this case of of our video today talking about uh Bell 2 Bitcoin layer 2 ecosystem I feel like Bitcoin needs some catching up um now that ethereum and the other evm or virtual machine ecosystems have a lot of defi all this utilization I know it's

0:50possible on bitcoin and that just needs to be unlocked with the right technology so thank you so much for taking the time I'd love to get a high level on just a little bit of a differentiator on elastos for those who aren't familiar with the intricacies and then we can dive into the newest Layer Two Solutions well that's great and um actually Ashton it's exactly as you say

1:11um we've been um established since 2018 uh VI an Ico so there are three things that make us different um firstly um the token that we launched then Ela is specifically merge mine with Bitcoin so whenever you produce um mine Bitcoin you can also mine Ela um and that's meant over the years we've um acquired a lot of the hash rate of Bitcoin so up to 54% now so that's a very distinctive

1:38feature um and particularly supports the security of the system uh there were a few other um obviously companies from from that area as well that have that but that's that's the first thing that makes us uh specifically different uh the second thing is um as we know and as you alluded to um with the ethereum ecosystem um it you know it was able to do a lot more so

2:00uh what we did is actually engineer um a EV am compatible um solution um and what that means in technical terms is that we have a proof of work that comes um from the uh Bitcoin and the merge mining um but we also have a bonded proof of stake as well which allows us as a consensus mechanism um to run um you know evm compatible um systems uh so we have both

2:25and and we can do the defi on on evm um and that's that's obviously very very distinctive um you know even more so than just the merge mining um but then the third piece I think that makes us very very different is that we have and you alluded to a wrong very uh complete view of decentralization so if you look at the four levels of Bitcoin at the layer zero we have solutions that

2:49decentralize storage decentralized carrier but we also have um the layer one the not just the main chain for the year token but also the um alas smart smart chain which is what what allows the evm compatibility now the problem comes from many um people in the bit Bitcoin world at layer 2 which historically has not been as scalable um it's been it's slow and and and to be

3:15honest expensive so um what we're really doing now is trying to solve that layer two problem and and and actually bring the benefits due to some recent technical changes in the nature of Bitcoin we're able to kind of solve that scalability problem and actually add um add to the um layer swap layer that layer three um and the daps we're able to build daps that are um fully

3:39compatible with both Bitcoin and ethereum so you know really essentially combining the ecosystems uh so that's uh not entirely by Design it's evolved as we've gone along but we've kind of reacted to to the market and that's why this is really exciting uh now because we can really bring um the as you as you suggest Define solutions to to the whole e system uh but it's the layer to

4:02Innovation that that's the the huge game changer and not just for for ourselves but for the whole Bitcoin ecosystem definitely and the merged mining with Bitcoin that really brings strength to uh elastos Network as well I I know a small handful that are sort of merg Mining and it's like hey you're backing on the strongest uh most long-standing blockchain that there is

4:26so um I feel like that's a great benefit uh and it's a nice to hear that it's actually connected to the Bitcoin ecosystem and the ethereum ecosystem because they're both growing at different rates I feel like now is the time for bitcoin's uh expanded ecosystem to catch up with more utilization of maybe defi staking other daps um there's a I don't know if it would would say

4:52controversial but there's a debate on you know whether Bitcoin should just be the digital gold and just a store of value or it should actually have all this other functionality but I think if it's possible we should build it yeah well it's an important debate as well and I think one of the things about the Innovation that that we're focused on is try to remain true so as well as as well

5:14as well as Bitcoin it is the most decentralized ecosystem um and and that is very important to how we evolve the um these new Solutions is to maintain the absolute Integrity of Bitcoin and that and that's something we're we're very focused on in building the layer too um now there are different approaches obviously to later to so for example um what you can do is you can

5:35you can wrap the Bitcoin um um and move it from the Bitcoin Network as as an asset um and that's something that many you've probably seen lots of different l2s and many l2s take that route and and obviously it's a it's it's a powerful uh Innovation we don't do that though um so so the way that um we're different is that we actually keep the uh Bitcoin

5:59asset on on the Bitcoin Network right uh and actually our Layer Two which we call Bel to bitcoin elastos Layer Two um it what it does is it transmits data and information using zedk proofs from the the Bitcoin network if you imagine Bitcoin on the left hand side there um and the evm network on the right hand side um Bell 2 sits in the middle and transmits data to Smart contracts which

6:29result side um uh in the evm system and then that information is transmitted back to the Bitcoin um Network itself so the assets always remain on bitcoin and we're not um we're not um actually putting additional pressure or or even um moving anything from the bit the Bitcoin Network and we kind of refer to that as native Bitcoin so as opposed to a rra solution we would describe

6:55ourselves as native and it has some huge benefits not not least in that you can maintain you don't divide the liquidity available from Bitcoin and it maintains that security the you know huge security comes in the decentralized network so that's very much our flavor of um a layer to um and the great beauty of it is what it also means is we can interoperate with other um many of the

7:17other layer twos within Bitcoin to create um that consistent consistent um flow of information um between the Bitcoin world but also then bring it into the ethereum world so we're able to able to do that um importantly without bridging um any of the assets and that's that's that's you know why we're so excited because you know is a tremendous opportunity for a lot more Innovation

7:45definitely and myself exploring through layer 2os uh specifically on bitcoin you know I've only really deled into uh the lightning Network I think that's the most sort of wellknown for people that probably haven't used toos they've only heard know lightning Network um and the other ones I don't really think have broken into the mainstream I've used it

8:07a little bit you know in in the years past but I I feel like it never really took off uh the on-ramps and off-ramps were sort of hard um and for me it just it wasn't as easy as I thought it would be many extra steps on top of Bitcoin do you think that beltu can solve those Solutions of adoption well there are a couple of things it could do um in in that respect

8:30so first of all um the difference is with lightning Network it is it is a very powerful Innovation and technology and allows the certainly the transmission of data um but what we're trying to do which is really build Defi and Innovation on the Bitcoin Network and around the Bitcoin Network um the danger is that that becomes even more complicated if you see

8:54what I mean so so we're trying to do things that are really clever um and and you know the truth of of it is that when you do that it does there is it always creates complexity in the technical solution right um now what we don't want to do is pass that on to the user right so uh by running Bel to in the way whether we do it we really take we take pressure off of off of that complexity

9:16and we um had Partnerships and we're um um at the moment in integration with particle Network for instance which actually abstracts the blockchain away from uh away from the user and the account um so they will feel like they're in in a in a web two environment just a traditional Web Two environment so dealing with that complexity but you know I think it's important to stress

9:37that what we're trying to do is add additional fun functions of utility to bitcoin that really allows us to unlock um uh that one trillion or what whatever the 1.3 trillion that we're heading towards value that that's really been dorant in Bitcoin um um you know until very very recently so it's really important to stress that you know lightning has done something which is

10:03really important but what we're looking at is that further level of innovation and and try to do that in a convenient way for the for the user um and that is part that that's still part of the challenge we shouldn't kind of underestimate how important that is um and also some people do like comp complexity as well which is part of the fun right it's simplifying it um you

10:25know for the for the broader audience as well definitely I I agree and now in terms of the the functionality that can be unlocked when you build a new layer 2 uh I you you mentioned there in the previous answers about wrapped Bitcoin I've seen wrapped Bitcoin in defi but it's not actually on bitcoin you're moving it to ethereum ecosystem or something else uh so having native

10:51Bitcoin into Defi and potentially staking do you think those are two of the first go-to functionalities of hey when we have this layer two up and running to the mainstream uh where where do the masses flood in to bring more utility to the Bitcoin they're already holding yeah that's a good question so I'll give an example of one of the Innovations we're about to launch um you

11:16know with bell 2 which is a lending protocol um so that's what that allows you to do is is basically take loans out against against Bitcoin um so if you come back to the model um where where you know again you have the Bitcoin on the left and then the ethereum on the right um the way we try to think of it is um if you you got uh somebody um Bob say Rich Bob who's got a whole load of

11:42usdt uh and he wants to kind of invest that us um what our what our Bell to app capability gives them the potential for is to is to actually in create a contract and invest that um in in in the in in the layer two um but then we need to match that with a with with a a person that needs to take a loan so in this case um we talk about Amy Amy's not quite as Rich she runs she's runs

12:09Bitcoin nodes but at this point you know the Market's not been so great so she just needs a short-term loan um and what she can do then is by is is by interacting with the the Bel to contract is lock a Bitcoin in in a script um um clised at 80% uh so that the um you know Bob can essentially lend lend her the money the the asset never the Bitcoin asset never moves from the

12:36Bitcoin Network so am is secure in the fact that she still retains that um but the smart contracts then enable the um the loan to be um processed and run when Amy repays the loan uh Bob gets his interest from that loan um and she then unlocks unlocks her Bitcoin and is's able to get back on with the the exciting business of the bull run and and and making sure that um the world is

13:01working um you know for this new kind of future of of of building with Bitcoin so that's as an example of the lending app and how that works um the key to to this transmission is this is the key point that you raise on ZK uh proofs right they're the things that anchor um that transmission of data um and what we're doing um in that lending point is we're

13:26also adding another level of of feature which is is an arbitration contract so um a smart contract that all if there's a dispute um is able to a automate and and and and come in and resolve the the terms of that dispute and that arbitration contract is actually where the opportunity comes um within our our ecosystem to add that lower of staking so people will run these ZK proof nodes

13:54in fact you can run it on a mobile phone um but they'll be able to get an additional level of reward just um above running running running that node and staking that node uh to run these arbitration contracts uh which are crucial to to actually having this peer-to-peer ecosystem uh where everyone's lending based on kind of Market based rules so that's quite I

14:17hope that's not too much of a technical Deep dive but it's it's it it really allows you to stay but also transform and create new defi products um that that are incredibly exciting so that's um you know that's an example of how the how the staking can work um around a loan product now obviously you can then also move on to more kind of traditional and simplified staking as well um but I

14:41think it's important to say that staking is just the beginning of this Innovation it's not it's it's it's a mechanism particularly for enabling it but there are lots of other services and products that will come from it that are they're really exciting now that's very interesting about the ZK part and be able to contribute uh into the network having that

15:01decentralized nature I feel like is important U but I feel like the functionality is is of the utmost importance um so to make easy user adoption but um the decentralization I feel like is is a key factor into it now I'm curious on the timing of the market Bitcoin you know 2024 as a whole with all the new entrance uh through the Bitcoin ETF issuers and all the big

15:28players now holding Bitcoin ETF at least I feel like that trickles down the rabbit hole to them owning more other crypto assets and getting further into the Bitcoin Rabbit Hole in into layer twos what do you think about the timing for beltu and Adoption of the greater industry do you think now is the right time now is absolutely the right time so you know I think I think you know

15:53everyone everyone hopes that the you know the recent slowdown in Bitcoin is going to follow through into more traditional kind of ball run timing um and I and I think that you know with with that momentum these kind of Innovations unlocking a lot of new potential for users um overlaps with I think new as you say it's not just the ETF it's actually new consumers coming

16:17into Bitcoin I would describe them probably not as mainstream just yet I think they're um early adopters that are looking for more easy to use products that are not you know not the kind of dgen sort of user that historically has d a lot of defi um but not necessarily yet mom and dad so it's at that moment where we're kind of transitioning from you know a really hardcore Innovation

16:42user audience into one that's more mainstream early adopter um and I think in the next um 12 to 18 months uh this critical issue of can how easy can we make it to use these products um will will will dictate how fast it moves towards a more more mainstream market um but but I also get the feeling particularly you know we referenced Nashville conference you know with the

17:08politicians arriving there with it there's seems to be a sea change in in in PE people at a political and Regulatory level saying this is not entirely a bad thing actually can open up economies it can open up access to you know one of the promises is a more Equitable sharing of credit and and and and and value so you know take an example of a project we're working on in

17:32Brazil where this is an an EV pure evm system but farmers pay 90% interest rate there um and that's before they've begun work so I mean that that's just mind-blowing in terms of the risk they're taking on uh using these systems they can get access to you know still not still slightly painful but interest rates that are globally competitive you know say 14% so the this is

17:55transformative for for for for those economies um and and I think really addresses some huge issues that s in the background behind Global tensions um we we refer to it as a kind of new Bretton Woods um you know the the conference that happened in the 40s where uh gold was used as a way of creating liquidity to um to help solve um you know a lot of um dysfunction in the in the financial

18:21system um I think Bitcoin can play a similar role in bringing liquidity into the into a market that's starting to it's been really strained um in recent times you know and that's a very kind of high level Vision but um you know there's no reason if these Technologies take off that why that can't a Bitcoin can't be used in that way um you know additionally but in in the similar way

18:44to the way that gold is historically worked and in conjunction with gold uh at this time so yeah so there quite a big uh I think you know uh big opportunity here um governments will accelerate it if they do push if they if they do get more on board I think I think it will be a faster um Innovation curve if if they if they and you know there is serious issues that they need

19:08to protect consumer rights um if if they take the steps Etc in terms of freeing that Innovation I still think it's going to happen it just will be slow yeah it's uh it's a big uh it's a big few months ahead I feel like with the politicians getting involved the legislation at the beginning of this year sort of opens the door for uh big players to be like hey we can start

19:35exploring in here and once they're saturated their pockets with Bitcoin what's next um and I feel like or making it cheaper as well with layer two solutions of course when you have billions of dollars that you have to move um and you want to do it faster uh Layer Two is going to be much faster I'm sure than than traditional Bitcoin and more secure as well than if

19:59if it's if it's done using the the power of the Bitcoin Network and one one point um I missed on the ZK proof piece is every time you're setting up a node using said kpr you're improving the security of the Bitcoin Network even further because they become another validation node so security I think um you know will on the regulatory side be you know rightly

20:22one of one of the main main levers I think as well as cost and speed obviously that's a great point and what what does the you know I I feel like Bitcoin is going to be doing very well at least I'm I'm hopeful towards the election and towards the end of this year um because you need to have some little lull periods like we had over the summer of 24 here where Bitcoin has been so hot

20:46since last September it's like you can't you can't just do two straight years of up there needs to be a small break but I feel like there's still more momentum especially with ethereum ETF and and more people getting involved uh I feel like that's also going going to push Bitcoin up further um what do you have in the in the road map for the next few months or you know for the end

21:10of this year for Bell 2 you know what what are we going to be seeing uh next so I think the next big wave of innovation is um is um the integration of these layer two technologies um with um terrible terrible acronym deep hint so decentralized physical infrastructure so this is the development of much more sophisticated decentralized defy options using um te you a whole new Ser of

21:40Technologies um and that and that those two things coming together be very important not least because it enables um um a fantastic amount of AI Innovation so a lot of these deepin networks are actually using artificial intelligence to secure things like privacy um and and and and and you know more meable sharing of U of profits essentially within a decentralized

22:04network so that's end of this next year I think that's going to start to start to really gain traction and then you know one of the things we we we do say and it sounds a bit naive is the price is really important but there's a lot more to this wave of uh Bitcoin than just the price accumulation it's really about how how we're creating a whole new ecosystem of

22:27value around Bitcoin um and and one that can have a have a huge impact um and more the more fundamental that value is built you know that there will be as you say there will be um downs and there will probably be you know another winter at some point um you know it's almost part of the algorithm and system uh but the more that those fundamentals are built I

22:51think the you know some of that volatility uh potentially may head off definitely and what is the best way to actually get started uh exploring the layer 2 ecosystem or following along as new daps new functionalities come out for Bel 2 so um um The Lending product I mentioned uh We've developed it as a

23:18demo U which will be available for um you know uh certainly people who are U experts to to play with um it doesn't have that full Simplicity that uh that you you rightly saying it's it's got to be our goal um but we want people to really just to be able to experiment see and play with these kind of market-based peer-to-peer lending um lending agreements um just to get a feel for the

23:43culture and and the fact that this is different model um and so you know that's an immediate thing that um users can engage engage in and you know as you said over the next six months uh the the development of uh you know more simplified interfaces new products as well so uh Insurance can equally be built using um these kind of models for example certainly certain kinds of future

24:09products Etc so it's not you know the lending is just one thing and as you mentioned the whole opportunity for staking um there's an opportunity to democratize the staking you know if you can put a ZK proof node on a mobile phone um there can be millions of them right so you know it's a whole whole hung um economy really um so that's yeah that's that that's pretty much um will

24:35the obit notes that I described with the zc actually will launch in September so that at that point um and we assume it will be technical experts who who want to do do this first um but we'll be launching that at the token 249 in Singapore in September um so um yeah it's moving really fast and and it's pretty exciting that's very exciting and I was wondering

25:01about the release of that ZK node because everyone has a phone and not everybody has a warehouse of Asic miners that they can start mining Bitcoin but hey if we can run a node on our phone uh and our phone's just sitting there overnight might as well make some functionality out of it and and potentially some earnings or at least helping out the Bitcoin

25:22Network yeah that's absolutely right that's absolutely right so so that's exciting so you know when it comes to the price discussion with that kind of innovation you know D driving under the system you know we you know you know it's it'll always I think for the short term remain volatile but I think um I think long longer term it's a tremendously um bright

25:46fature and following along for the release say I want to make sure that I uh if I'm an advanced user try out the lending platform if I want to look into the the the ZK node is there a social platform where the majority of the community is following along for the updates or where's the best place to stay up to date yeah the the best place is on our telegram group um and which we

26:13you know we can share the T telegram address for that uh there there actually the demo app is available via uh a group on that within our telegram group um so for anyone to just just engage with um and that's I think the easiest the easiest me M uh we can also uh details can be found and access VI and.info website as well um so yeah any anyone that anyone is welcome to join the

26:40telegram group uh input into the community and uh help us with the as you say how do we how do we make it so that you know anyone anyone can get involved in this new Bitcoin economy definitely it's very exciting I'm looking forward to uh more functionality on bitcoin I appreciate your insights into the ecosystem Jonathan and uh you and your teams work on developing Bitcoin out

27:03further I will leave a link to the the telegram and the the elastos uh site people can navigate through and check out all the other details and what else is coming up um wishing your team all the best uh over the next coming months and let's definitely follow up in the near future right thanks very much astion bye