Wanwu Island Space Highlights: Wang Fenghong Shuning is currently discussing BTC ecological investment and entrepreneurial opportunities

Author: Wànwù Dǎo

Following the review of the most noteworthy entrepreneurial projects in the BTC ecosystem by Wànwù Chuangyeying, the Wànwù Dǎo community's official Twitter account @ThreeDAOspace invited Coach, Founders, and industry experts for a three-hour discussion on November 16. They talked about the origins and branches of the BTC ecosystem, current issues, and opportunities, with nearly 1,000 people online and over 10,000 cumulative listeners. Below are the core viewpoints distilled into text, shared for you who are in the entrepreneurial journey. Enjoy it:

Wànwù Dǎo: What key milestones has BRC20 experienced to lead to its current popularity?

Dàshān (Founding Partner of Waterdrop Capital, Wànwù Dǎo Coach): I think the biggest event is taproot. I like to refer to Bitcoin after the taproot upgrade as Bitcoin 2.0. We started laying out the Bitcoin ecosystem at the beginning of 2022 and invested in over a dozen projects. Personally, I had two turning points: first, the taproot upgrade, which was a significant event in the Bitcoin OG circle. However, the Bitcoin community does not engage with the media or speak out, so most outsiders are unaware of its importance. The other event was when Teacher A Jian, who previously operated the ETHFans Ethereum forum, suddenly renamed ETHFans to BTCFans last year. I had deep discussions with him, and seeing such a popular figure in the Ethereum ecosystem transition to the Bitcoin ecosystem made me think I should seriously study the Bitcoin ecosystem. Later, I discovered that there are indeed many treasures worth exploring; Bitcoin and the Bitcoin ecosystem are two different things, and I believe the Bitcoin ecosystem is severely underestimated.

Although Ordinals is written using the taproot script path, Ordinals could actually be done without the taproot upgrade. However, after the taproot upgrade, the block space increased, allowing for a lot of information to be written at once, whereas similar information before might have required several blocks. Thus, the taproot upgrade led many people to start paying attention to the Bitcoin ecosystem, as they found it easier to write using the taproot script, which facilitated the emergence of Ordinals and drew more attention to the new possibilities within the Bitcoin ecosystem, creating a positive feedback loop.

I believe this wheel cannot be stopped. A few days ago, I spoke with several Ethereum teams that migrated from Ethereum Layer 2. They believe there is no future in working on Ethereum Layer 2 and want to build Layer 2 on Bitcoin.

Kiwi (Head of Investment Research at OKX Venture): Although there have been many technological developments in the Bitcoin ecosystem over the past few years, there has been a lack of idle capital coming in. Recently, I met many large institutions from Europe and America in Turkey, and when discussing the Bitcoin ecosystem, they still expressed confusion and believed they couldn't engage with it yet. Essentially, the Bitcoin ecosystem is indeed a non-consensus track. From this perspective, it was very beneficial for us at OKX to lay the groundwork early on. Therefore, OKX started developing some Bitcoin-related infrastructure last year when no one was paying attention. We hope to bring some incremental value to the Bitcoin ecosystem, whether in trading liquidity or user engagement.

Wànwù Dǎo: How did you realize the potential of the BTC ecosystem, and how did you enter the field?

Wáng Fēng (Founder of Element, Wànwù Dǎo Coach): The taproot upgrade in 2021 made me start catching up on knowledge. I revisited SegWit and then saw the release of the Ordinals protocol at the end of last year. Since we operate an NFT marketplace, I noticed that our peer Magic Eden quickly followed up with a Bitcoin version. When a new asset paradigm emerges, it is often overlooked, and we missed it in our internal discussions. However, what truly impacted me was the rapid growth of Ordi on BRC20 in March this year, which brought a different sense of excitement compared to just seeing a new technical protocol.

Looking back at the development logic of Bitcoin, we find that the UTXO ledger logic is completely different from Ethereum's account logic. Although it seems frustrating and not as easy to understand as Ethereum, I find it very simple, like binary. It pursues the simplest logic in the entire architectural design. However, this simplicity at the base layer makes application development at the upper layer more challenging. Solving Bitcoin's programmability and scalability is crucial. RGB, BitVM, and the Lightning Network are also key areas we will focus on next. Therefore, my enthusiasm for the Bitcoin ecosystem should be greater than that of any of our internal technical teams and product managers.

Odos (Founder of ODOS, Wànwù Chuangyeying Alumnus): I actually didn't have a deep understanding of Bitcoin's history before. I started catching up when Ordinals came out. My reflection is simple: when you miss an opportunity for a ten-thousand-fold asset growth, you start to think whether the world is crazy or if you are the one being foolish. Back in March, the lack of infrastructure allowed this situation to form a non-consensus. Once it hit the marketplace, the spread would not be what it is now. The lack of infrastructure at that stage actually provided a new narrative for this track, allowing for a more dispersed lifecycle, giving people more time to understand it and letting it ferment.

Looking back over the past six months from a macro perspective, the BTC ecosystem has just completed the first phase driven by emotions or funds. Currently, the number of addresses holding BRC20 tokens is still very low. I believe this could be a huge narrative and an opportunity to open a new map, making it worthwhile for us to participate as builders at this time.

Jeff (Founder of RCSV.io, Wànwù Chuangyeying Alumnus): At first, most institutions and OGs like BAYC thought Ordinals was just a child's toy, a meaningless step backward. The reason we decided to participate in Ordinals without hesitation is that we saw the users and builders in this ecosystem radiating the glow of an early sunrise industry. All users spontaneously built communities, constantly opened spaces, and wrote documents to teach others how to use it, solving their confusion and problems. So if I could return to that state of entrepreneurship, I think even if I don't make money, experiencing that youthful feeling again would be fantastic.

Kiwi (Head of Investment Research at OKX Venture): From the perspective of investment institutions, the most intuitive data is WBTC, which has a fully diluted valuation of $6 billion and reached sixth place at its peak during the bull market. This shows that Bitcoin can easily outperform other ecosystems. WBTC is essentially a bridge for Bitcoin holders to enter other ecosystems, but Bitcoin holders themselves are very conservative. The value of the bridge represents these people's demand for DeFi. When people enter the Bitcoin ecosystem to play DeFi, it indicates dissatisfaction with the Bitcoin ecosystem. If these demands can be addressed natively within the Bitcoin ecosystem, there is a strong need for Bitcoin's expansion. Once an ecosystem has DeFi, it naturally needs to integrate with NFTs, games, etc., which will bring in more new users. This is why we are optimistic about the Bitcoin ecosystem and the native expansion solutions for Bitcoin.

Thus, Bitcoin's current state is very similar to Ethereum's various Dex explosions at the end of 2019. So now is Bitcoin's Uniswap moment.

Wànwù Dǎo: Besides BRC20, what other areas in the BTC ecosystem are thriving?

Hóng Shùnníng (Researcher of BTC): The technical architecture of Bitcoin itself is very advanced. You could say the entire blockchain is just rehashing Bitcoin's cold leftovers. But why do people feel that Bitcoin has been quiet for a while? I believe it is mainly due to the hard fork in 2017, which was a huge blow to the entire Bitcoin ecosystem. At that time, there were the big block faction and the small block faction. The big block faction was very radical technically, later giving rise to BCH and BSV. Ordinals is essentially a form of colored coin, and this idea comes from BSV.

In the end, the small block faction won the fork war, but it also made the Bitcoin ecosystem very conservative. People generally believe the big block faction was wrong, and the reason for that is they were too radical and innovative, while Bitcoin should just be a currency or digital gold, not needing to create complex applications. This also led to Bitcoin's technical stagnation after 2017, while Ethereum began to rise in 2016, with applications flourishing. This time window allowed Bitcoin to hand over blockchain applications to Ethereum. After seven years of rapid development, the Ethereum ecosystem has fallen into a scalability dilemma, unable to find the next direction for development. At this time, the taproot upgrade of Bitcoin facilitated the development of Ordinals, creating a clever rise and fall between Bitcoin and Ethereum.

The Bitcoin ecosystem includes Bitcoin's own technological upgrades, such as taproot, SegWit, and the Lightning Network, with the Lightning Network being a tremendous innovation. If we compare Bitcoin to the US dollar, then Bitcoin Layer 1 is like the Federal Reserve. We can't all open accounts at the Federal Reserve, so we need a banking system like Swift. The Lightning Network serves as this Swift. Currently, the design of the Lightning Network is 40 million TPS, but I believe that is still not enough. In the future, the entire architecture of the Lightning Network needs to be expanded, but more TPS will inevitably lead to more channel openings, naturally transmitting pressure back to Bitcoin Layer 1, thus forcing Layer 1 to expand to larger blocks. This could be the developmental logic behind it.

The second type of technology is sidechains, which have also been borrowed by Ethereum, leading to a large number of sidechains. Sidechains have been thriving, especially since 2016 when Rootstock proposed drive chains, marking a peak. If drive chains can be implemented, it would be a perfect solution for achieving Turing-complete smart contracts on Bitcoin. However, drive chains require a fork of Bitcoin, which has led the community to reject such proposals, so sidechains still lack a perfect decentralized path.

The third type is BitVM, which was recently proposed. Theoretically, it is a perfect solution that can achieve high scalability, high performance, and Turing completeness, and can be implemented as a Bitcoin expansion solution on Layer 1. Unfortunately, BitVM currently only has theoretical feasibility and is difficult to implement for a long time.

There are also other attempts, such as bringing Ethereum's Rollup solution over. I personally believe this is destined to fail because Ethereum and Bitcoin are fundamentally different architectures, and simply copying Ethereum's path won't work.

The last type is mimicking the Lightning Network, not operating on-chain but solving everything off-chain through smart contracts, thus avoiding the blockchain's impossible triangle problem. Currently, the most successful example is RGB, which uses Bitcoin as a security promise for off-chain smart contract computation. Combined with the Lightning Network, it can achieve a highly scalable smart contract system: first layer Bitcoin, second layer Lightning Network, third layer RGB. This is a very imaginative future, and once successful, it can establish the entire digital economy on Bitcoin.

Wànwù Dǎo: Is the development of the BTC ecosystem merely replicating Ethereum and reinventing the wheel? What unique aspects or things can Bitcoin do that Ethereum cannot?

Wáng Fēng (Founder of Element, Wànwù Dǎo Coach): First, we must recognize the emergence of Ordinals and the BRC20 series of asset protocols last year, as well as the continuous emergence of more asset protocols like Atomical on Layer 1 and Taproot Assets on Layer 2, which have greatly enriched today's Bitcoin ecosystem and made the market noticeably more active. Previously, only a few core Bitcoin developers and cryptocurrency enthusiasts participated in and cared about the Bitcoin network. Now, more ordinary individual investors have joined in. It's like a long-awaited large-scale online game has opened its first test server, increasing the number of players in the market and stimulating the interest of institutional investors and developers.

In the cryptocurrency field, solidifying new protocol asset consensus and gradually improving trading services is the prerequisite and foundation. For the Bitcoin ecosystem to thrive, this step must be taken. It is not about reinventing the wheel. The Bitcoin network must first do what it should do in the financial sector. It cannot do without creating native assets, nor can it do without the enthusiasm of investors participating. Therefore, we cannot underestimate the milestone significance of Ordinals/BRC20.

Although both Bitcoin and Ethereum networks are based on distributed ledger and cryptographic concepts, they differ significantly in technical specifications. Bitcoin, as digital gold, essentially focuses on currency and transactions, with the data attached to Bitcoin network transactions used to record currency transaction information. In contrast, the Ethereum network is positioned to provide a decentralized service network for dApp applications, such as EVM and Solidity, which can create smart contracts to build various applications and their interactions. Based on the strongest cryptocurrency consensus (digital gold) and the most decentralized security (POW), Bitcoin has an absolute advantage in all cryptocurrency systems.

Theoretically, only Bitcoin is most likely to break Swift's monopoly and has the best chance to take over the global digital financial service network. Standing on Satoshi Nakamoto's original intention, Bitcoin's potential and significance in breaking the sovereign currency paradigm far exceed SpaceX's challenge to NASA and Tesla's disruption of the traditional automotive industry.

Hóng Shùnníng (Researcher of BTC): The development of the Bitcoin ecosystem should not replicate Ethereum's path. First, Ethereum's years of exploration have many experiences and lessons; the Bitcoin ecosystem can fully take the essence and discard the dross to avoid retracing old paths. Second, the underlying technical architecture of Bitcoin is vastly different from Ethereum. For example, RGB's client verifies smart contracts, which is a completely different paradigm from Ethereum's miners verifying "smart contracts." The applications built on it should also follow entirely different models. Third, Bitcoin's Lightning Network has almost unlimited scalability, which Ethereum does not possess. Based on this unlimited scalability, it can achieve ultra-high-performance applications, allowing most web2 applications and their users to migrate to Bitcoin, creating more imaginative business models.

Dàshān (Founding Partner of Waterdrop Capital, Wànwù Dǎo Coach): This question is somewhat misphrased. Bitcoin has tokens like token-btc that predate Ethereum, stablecoins like omniUSDT that are older than ERC20-USDT, and NFTs like cryptopunk that are older than crypto kitties. There have also long been various non-Turing complete contracts, such as HTLC and RSMC. Therefore, we cannot say that the current development of applications in the Bitcoin ecosystem is merely reinventing the wheel. It can only be said that in the past few years, the development of the BTC ecosystem has been too quiet and received too little attention. BTC has always had its own development path, and the current popularity is just a normal reaction after the Bitcoin soft fork upgrade and many technological breakthroughs.

Of course, in the past few years, Ethereum has also accumulated valuable trial-and-error experiences for Bitcoin, which the Bitcoin ecosystem can learn from, and this cannot be denied. There are many things that BTC can do that Ethereum cannot, such as the privacy brought by UTXO, which the account-based Ethereum network cannot match. The extremely high performance of the Lightning Network is also something that Ethereum Layer 1, 2, or 3 cannot compare to. Ordinals, RGB, and BitVM are all unique to BTC. As for Ethereum Layer 2, once the data storage issues are resolved, they can all migrate to the Bitcoin network. In summary, what Ethereum can do, theoretically, Bitcoin can also do, but the reverse is not true.

Jeff (Founder of RCSV.io, Wànwù Chuangyeying Alumnus): "History does not repeat itself, but it often rhymes." It is undeniable that any ecosystem's infrastructure will be redone. Bitcoin's uniqueness is also evident. We previously worked on an on-chain engine on Ethereum, hoping to "enable developers to innovate quickly through modular composability," but the content on Ethereum is not on-chain and is not open source. In the best case, it requires wrapping a layer of smart contracts.

Ordinals' "interoperability" and "composability" are inherent. Any module developed by anyone (whether a game or application) can be recursively used and redeveloped by other developers. This includes what ETH calls "Client Agnostic," which can be more natively realized in BTC because the content is all on-chain. Who indexes/renders this content becomes unimportant. Additionally, why do we see various protocols emerging only from Ordinals? It is also due to its open-source and on-chain characteristics.

Odos (Founder of ODOS, Wànwù Chuangyeying Alumnus): I think there is a similarity in form but a difference in essence. On one hand, BRC20 and BTC NFTs correspond to Ethereum's ERC20 and NFTs, while the Lightning Network corresponds to Ethereum's Layer 2. Ordinals and Atomical protocols correspond to smart contracts, showing similarities in the paths taken. On the other hand, at each stage, we see some technical paths or implementation methods that differ, and this differentiation will bring about new narratives and new models.

For example, the emergence of BRC20 is a standard format token that can store rich media files. It is neither a fungible token nor a non-fungible token. It has the liquidity of fungible tokens, and its copyright copies have no characteristic values, allowing them to circulate and trade like tokens. On the other hand, it also has the potential to carry more content and IP like NFTs, making it a new asset paradigm that will drive new entrepreneurial possibilities. Broadly speaking, I believe there are two new narratives in the Bitcoin ecosystem compared to the Ethereum ecosystem.

The first is the depersonalization of asset issuance. In the past, in the Ethereum ecosystem, projects followed the project parties. Once the project parties could no longer operate or rug pulled, the project and the assets issued would face a plunge or even go to zero, even for leading projects like Azuki. However, in the Bitcoin ecosystem, many assets on Ordinals are ownerless, like BRC20 tokens, where the deployer may not even mint or hold a significant share. Still, due to community consensus and emotional support, they have gained a certain user base and liquidity. Among these, some assets with greater significance have emerged, such as $ordi, which represents the leading asset in the Ordinals ecosystem, and $sats, which claims to surpass Bitcoin using Bitcoin. They are not controlled by any project party but have attracted many developers and communities to build around them. Unisat chose $sats as the gas token for swaps, and various teams are developing new applications around bitmap, etc. This forms a new paradigm of "project parties working around assets," which means that the leading assets in each sector will not be manipulated by a single project party, thus achieving the anti-fragility brought by depersonalization.

I personally came into contact with the Ordinals protocol at the end of March, but it wasn't until September when I met Casey in Singapore that I realized this low-key guy was the inventor of Ordinals. I thought if one day he went missing on the internet for months, the ecosystem would probably not face much resistance to development. But can you imagine Vitalik going missing for three months? Ethereum would likely experience a significant plunge. This reflects the change in new narratives.

The second point is the truly full-chain application. In the past, the small images people rushed for on Ethereum were not actually on-chain assets. Most of them only existed on AWS, and the links to store images were put on-chain. Later, there was AR, but it was still unreliable. In contrast, small images or metaverse land on Bitcoin are genuinely on Bitcoin, and with the recursive inscription technology, they can achieve richer functionalities. Theoretically, you can break down a programming language or a game and upload it to Bitcoin, then recursively implement full-chain games and full-chain development. This is very appealing. Ethereum's full-chain games are a false proposition; Bitcoin truly has the environment to grow full-chain games. I believe the potential of recursive inscriptions is underestimated, and as the industry develops, we may see broader applications.

From a purely technical perspective, there is nothing you can do that I cannot do. There are inscriptions on Ethereum, and there are ETHs. Technically, there is nothing in this industry that cannot be copied. However, the industry still respects pioneers, and once innovation starts in one place, it is likely to continue to cluster in that place. Therefore, you (ETH) can imitate my (BTC) appearance, but you cannot learn my essence. That's the feeling.

Wànwù Dǎo: What is the most urgent problem that the BTC ecosystem needs to solve? Where do you see imagination and development directions?

Dàshān (Founding Partner of Waterdrop Capital, Wànwù Dǎo Coach): Currently, Bitcoin is not facing any problems; the issues are with other public chains. Bitcoin is developing its technology step by step, waiting for more people to understand it. The sooner they understand it, the sooner they will benefit. The only regret is that many new industry capitalists, due to insufficient understanding of Bitcoin and the fact that many so-called web3 applications were indeed first born on Ethereum, mistakenly believe that "doing web3 = building applications on Ethereum." This misconception has misled many newcomers. Bitcoin's market cap is already nearly 20 times that of Ethereum, and it is entirely foreseeable that the Bitcoin ecosystem will be more prosperous than Ethereum in the future.

Of course, this does not mean Ethereum has no future. In certain niche areas, such as DeFi, Ethereum can certainly have its place. However, regarding most web3 applications, I believe they will eventually run on the Lightning Network, Nostr, or RGB, as Bitcoin's ledger is the safest.

Wáng Fēng (Founder of Element, Wànwù Dǎo Coach): For the past thirteen years, due to very peculiar historical reasons, Bitcoin cannot have an organization similar to the Ethereum Foundation as a centralized group headquarters. Therefore, its ecosystem's development is completely decentralized and spontaneous. The early industry ecosystem's main players were merely hash power providers and miners. This is certainly the uniqueness of Bitcoin's value, but it is also the reason for its slow development.

Investors and entrepreneurs can focus more on promoting Layer 2 solutions like the Lightning Network and actively push for the construction of trading service systems based on it. Time is of the essence. Currently, any Layer 2 solution provider on Ethereum has received far more funding than the entire Bitcoin network ecosystem. This situation must change in any way possible. This is a great opportunity, and we should promote more funds and developers to participate.

Hóng Shùnníng (Researcher of BTC): I believe the biggest problems currently facing the Bitcoin ecosystem are two interrelated points. One is to establish a long-term perspective, resisting the short-term thinking, speculative mindset, and "cutting leeks" mentality that are commonplace in the Ethereum ecosystem. The second is to establish a business model perspective, resisting the inherent fundamentalism, Bitcoin-only mentality, and "No Shitcoin" ideology in the Bitcoin community. By introducing a large number of truly valuable security tokens and utility tokens based on the only reserve currency BTC, rather than worthless MemeCoins, we can give birth to rich business models, thereby attracting many entrepreneurs to build meaningful applications on the Bitcoin chain. These applications will also feed back into BTC, providing a value foundation for BTC. Any economic system can only be sustainable if it is built on creating actual value for users. The construction of the Bitcoin ecosystem must always adhere to this principle, rather than simply issuing a coin, making a call, or pulling a market like in the past.

Jeff (Founder of RCSV.io, Wànwù Chuangyeying Alumnus): The biggest problem is obviously the performance issue of Bitcoin Layer 1, so there will definitely be various expansion solutions, including support for virtual machines, stablecoins, and cross-chain bridges, as well as how to ensure that Bitcoin's native characteristics are not lost. I believe the biggest opportunity lies in "Layer 1 assets or applications" + "Layer 2 infrastructure." Layer 1 will always be the greatest opportunity for assets, while all assets born on Layer 2 will inherently be inferior. Many applications of Layer 1 assets, such as data/content/community/trading, will definitely be opportunities and are currently very scarce. Layer 2 infrastructure is also a significant trend, as the overflow of funds is clear; it just depends on who can capture this overflow.

Odos (Founder of ODOS, Wànwù Chuangyeying Alumnus): I think the most urgent issue to resolve is the congestion problem. I am not worried about issues of model innovation, but the resolution of congestion will ultimately depend on what technical route is taken. Focusing on this can better grasp the direction of incremental funds in the industry. If I were an investor, I would cast a wide net at this stage, investing in teams that are seriously building in promising sub-sectors, as the potential is enormous. Today, the active user base of the Ordinals ecosystem is only around 50,000, while there are over 50 million Bitcoin wallet users, a ratio of one in a thousand. The game has just begun. As entrepreneurs, it is essential to stay alert to new assets and new models, maintain a focused business direction, but not get bogged down in details and work in isolation. At the right time, one must adapt flexibly to market changes.

Wànwù Dǎo: Thank you to the Coach and alumni for nearly three hours of insightful discussion. Looking forward to meeting again in the Wànwù Chuangyeying S3 BTC studio!

❇One more thing: The Wànwù Chuangyeying Creator Camp S3 (third season) will soon open for registration and recommendations in the Wànwù Dǎo community. This season introduces a Camp + Studio model, with core Coaches personally leading specialized track studios. You can scan the code to inquire about cooperation or registration for BTC Studio, or click "Read the original text" to fill out the S3 enrollment application form. Limited spots are available on a first-come, first-served basis.