OKX Ventures: Exploring the BTC Ecosystem in One Article

Author: OKX Ventures

Bitcoin Ecosystem Data Review

Macro-wise, Bitcoin, as the cornerstone of Crypto, has formed a strong value consensus, including ETFs, halving, and macro liquidity. Micro-wise, the number of Bitcoin on-chain addresses and users is rapidly increasing, and BTC Dominance remains stable.

• First, the cumulative number of Bitcoin addresses has exceeded 2 billion. The global number of crypto asset users has surpassed 420 million, a rapid increase from 5 million users in 2016. According to tokenterminal, the monthly active users of Bitcoin are about 13.7 million, with on-chain transfer data at 17.5 million. In terms of on-chain data growth, the size of Bitcoin's blockchain is approximately 507GB, a 70% increase from three years ago. These reflect the explosive growth in the usage of crypto assets, especially Bitcoin.

https://www.coingecko.com/en/global-charts

https://tokenterminal.com/terminal/projects/bitcoin

• Second, Bitcoin Dominance continues to remain high, still being the cornerstone of the crypto market. Bitcoin accounts for 47% of the total market capitalization of crypto assets. Although this proportion may fluctuate with the rise of other crypto assets, Bitcoin still maintains its position as the market leader.

https://www.coingecko.com/en/global-charts

https://members.delphidigital.io/reports/the-year-ahead-for-markets-2024

• Third, the halving is favorable: When the mining output is halved, the speed of new Bitcoin supply slows down, and if demand remains constant or increases, then theoretically, the price should rise. Under this mechanism, halving is seen as a potential value catalyst.
• Bitcoin's price has risen over 150% YTD in 2023, and market optimism about Bitcoin has begun to reflect in the price. The upward trend leading to the halving in April 2024 may continue or even accelerate.
• Historical data shows that Bitcoin achieved an average return of over 400% in the 12 months following the previous two halvings. This provides a historical precedent for observing and predicting future trends and offers investors a degree of confidence.
• Fourth, Bitcoin spot ETFs: They are gradually making its volatility more similar to traditional financial markets. With the support of financial institutions like Blackrock, Bitcoin spot ETFs are seen as a recognition of Bitcoin. It is expected to attract new capital that was previously cautious about the crypto market. Media previously suggested that the ETF expectations could bring hundreds of billions of dollars in incremental funds to BTC within the next year.
• Referring to gold ETFs, the first U.S. gold ETF, SPDR Gold Shares (GLD), launched in November 2004, accumulated over $1 billion in assets in just three days. In its first year, GLD's assets under management (AUM) soared to over $3 billion. As of 2023, the global gold ETF AUM is approximately $150 billion, indicating that these investment tools have had a profound long-term impact on the gold market.
• Additionally, macro-level liquidity changes, such as changes in the Federal Reserve's balance sheet and the U.S. Treasury market, are potential positives for the crypto market in 2024. The Fed's liquidity support may be a major force driving Bitcoin and the entire crypto asset market in 2024.

Technical Innovations and Layer 2 Development Trends in the BTC Ecosystem

Technological innovations to watch in the coming year

1. Asset issuance protocols may lead innovation:

• Ordinals: Creating unique NFTs using the smallest unit of Bitcoin, sats; currently, there is a certain consensus on the leading inscriptions in the market; there are risks of network congestion and centralization.
• RGB: Expands colored coins and the Lightning Network, optimizing privacy and scalability.
• Taproot Assets: Based on the Taproot protocol activated in 2021, enhancing the privacy and efficiency of smart contracts; combined with the Lightning Network, improving the process and speed of asset issuance and transfer.

1. BitVM: Turing-complete virtual machine:

• Concept: Achieving complex smart contract verification without changing Bitcoin's consensus; operates through off-chain computation and on-chain verification.
• Advantages: Enhances programmability without altering Bitcoin's core rules; reduces on-chain data burden; increases fraud protection.
• Limitations: Only supports two-party contracts; theoretical practicality needs testing, and implementation may face performance and cost challenges.
• The revival of OP_CAT: The potential restoration of this opcode may provide additional adaptability and efficiency for BitVM.

1. Development of Bitcoin Covenants:

• Core value: Allows additional conditional restrictions to be added when creating UTXOs, increasing the diversity and security of smart contracts.
• Evolution of development:
• Early proposals: Various proposals such as OPCHECKOUTPUTVERIFY and OPCHECKSIGFROMSTACK seek to improve Bitcoin's smart contract capabilities.
• Latest developments: OPTXHASH and OPCHECKTXHASHVERIFY enhance script access to segregated witness data, as well as the flexibility and decentralization of Layer 2 solutions.

Overall, BTC's technological innovations are focused on improving the feasibility, privacy, and complexity and security of asset issuance standards. These innovations showcase a series of exciting possibilities for Bitcoin's future, and with the efforts of the community and developers, the richness of the BTC ecosystem is expected to continue to grow.

Layer 2 innovations include Rollup and Sidechains

Layer 2 solutions include sidechains, Plasma, Rollup, etc. The difference between Rollup and sidechains is that Rollup cannot operate when the mainnet fails (consensus is formed on the mainnet), while sidechains can still operate independently when the mainnet fails (with independent consensus).

• Rollup is divided into two schemes: mainnet verification and mainnet "witnessing":
• Not verifying, only "witnessing": Only stores and aggregates DAS. For example, Celestia-like schemes generate DAS details and store them in their own sovereign layer to ensure security, or aggregate DAS and store it in Taproot (since storing detailed DAS is too costly);
• Verification through ZKP: Fraud proof schemes based on ZKP. For example, B^2 transforms ZKP verification programs into arithmetic circuits, using NAND gates to implement addition and multiplication gates, converting the entire arithmetic circuit into a logic gate circuit, and implementing it with Bitcoin script, ultimately forming Circuit Taproot, and then committing the Taproot to the main chain. Compared to BitVM, its circuit is deterministic, simplifying the design. Its Rollup transaction details and proof data are stored using various decentralized storage protocols, and after Rollup stops running, it can continue to operate.
• Sidechain projects have independent scheme preferences, with the impossible triangle being security, speed, and decentralization:
• Stacks - Proof of Transfer (PoX): Stacks miners verify transactions by bidding Bitcoin to become the next block producer, and by generating and verifying blocks, they send the hash of the completed block header in the message field of Bitcoin transactions, permanently recording it on the Bitcoin main blockchain;
• RSK: Rootstock (RSK) uses the same SHA-256 algorithm as Bitcoin and connects to Bitcoin through a two-way bridge. Bitcoin miners can perform "merged mining" while mining, without additional resource consumption, while also earning transaction fees in Rootstock;
• Drivechain: An open-sidechain protocol for Bitcoin that can customize different sidechains based on different needs. Its design comes from two Bitcoin Improvement Proposals, BIP 300 "Hashrate Escrows" compressing 3-6 months of transaction data into 32 bytes through "Container UTXOs," and BIP 301 "Blind Merged Mining," where the network's security is also maintained through merged mining by existing Bitcoin miners;

Layer 2 evaluation criteria: To what extent does it reuse mainnet security

There are two reuse methods:

• Reusing the mainnet's consensus, reusing POW: That is, adopting the mainnet's DA and consensus, which needs to be evaluated on how it uses a layer; zk solutions like Bitmap and B^2 all adopt the scheme of aggregating zkproof and storing it on the mainnet, which can complete commitment confirmation through a mechanism similar to Optimistic Rollup;
• Here, we believe that in the short term, the mainstream is mainnet "witnessing" data schemes, but in the long term, we are optimistic about mainnet "verifying" data schemes. The fraud proof of optimistic rollup may be a better solution: After off-chain ZKP verification, write the inscription into the BTC network, generating logical gate commitments from the ZKP verification program, with the commitment written into the Bitcoin network as Taproot, confirming on-chain Bitcoin through fraud proof, inheriting BTC's security and efficiency while ensuring legitimacy;
• Currently, projects like B^2 are working in this direction, with nodes + part of Bitcoin jointly serving as the DA layer, responsible for the validity and data availability of ZK-Rollup tx; the BTC mainnet serves as the settlement layer, responsible for transaction finality.
• Reusing mainnet liquidity, reusing POS: For example, Babylon's fully punishable security, the security of stakers, and staking liquidity; for example, wbtc bridges BTC to ETH and Solana, making ETH and Solana effectively Bitcoin sidechains, with Stacks and Bevm adopting similar schemes;
• Here, we are optimistic about Babylon, leveraging the security of the Bitcoin native chain while providing additional trust and capital to PoS chains. This cross-chain staking structure helps establish a new economic model in which PoS chains can enhance their security through Bitcoin's market value, while Bitcoin holders can gain potential returns by supporting the security of PoS chains. This mechanism also increases the usability of Bitcoin and may incentivize more people to participate in the Bitcoin ecosystem.

OKX is committed to building the BTC ecosystem

OKX Ventures invests in and supports innovation in BTC ecosystem projects

B^2 Network

• Project introduction
• B^2 Network is a Layer-2 solution built on Bitcoin, combining ZKP with BTC rollup, allowing aggregated storage and ZKP to be written into BTC inscriptions, achieving higher legitimacy and usability for BTC layer 2.
• It operates the first zero-knowledge proof verification commitment rollup based on zero-knowledge proof (ZK-proof) technology. Utilizing rollup technology, it supports Turing-complete smart contracts, enabling off-chain transactions and reducing costs. In Bitcoin's transaction confirmation, it combines zero-knowledge proof technology, gate commitments, and Taproot challenge-response to ensure transaction privacy and security.
• The goal of this network is to transform Bitcoin into a multifunctional platform, laying the foundation for applications such as DeFi, NFTs, and other decentralized systems.
• Project advantages
• Security and decentralization: Based on Bitcoin, all B^2 rollup transactions can be recovered. Through zero-knowledge proof commitments and challenge-response, it achieves bidirectional confirmation on Bitcoin, not just one-way data writing.
• Seamless development and access: EVM compatibility allows developers to quickly migrate from other EVM-compatible chains to the B^2 network and simplifies DApp development. By executing account abstraction, it supports Bitcoin address accounts, Ethereum address accounts, and email accounts, allowing Bitcoin users to interact cross-chain on B^2 without changing wallets. Storing Bitcoin state enables triggering cross-chain transactions without needing a bridge from Layer 1 to Layer 2, also providing developers with programming capabilities to develop on the basis of Bitcoin transactions, along with a reliable decentralized Bitcoin indexing service.
• Performance readiness for large-scale users: The Rollup Layer operations using rollup technology do not require consensus, ensuring high performance, and the strong data availability layer of the B^2 network guarantees security. Low costs and affordable fees ensure that costs do not increase during demand surges.

Bitmap Tech (formerly Recursiverse)

• Bitmap Tech (formerly Recursiverse) is an innovative project aimed at building an intelligent, decentralized, and composable digital world through the Ordinals network and Bitcoin Layer 1. The project embodies a strong commitment to creating a valuable metaverse ecosystem and has launched a series of cutting-edge products:
• BRC-420 protocol: A decentralized economic framework operating on the Ordinals network. It allows creators to earn income directly without relying on platforms to accept or host transactions.
• Recursive indexing and Inception inscriptions: Showcasing the relationships and citation counts between inscriptions, emphasizing the value that interconnected inscriptions can bring to the network; Inception introduces a multi-layer recursive inscription method, where top-layer inscriptions can contain a large amount of content and logic in a very small digital footprint.
• Bitcoin Layer 2 network: Plans to bridge the BRC 420 protocol and Bitmap with Layer 2 solutions like ZKP, rollups, and the Lightning Network, further building its vision of a decentralized metaverse and becoming an important participant in the ongoing evolution of the digital world.
• Game: The first metaverse product based on Bitmap assets, allowing any user to enter this world, chat/trade/play with other players, and currently the largest metaverse product by user volume on the Bitcoin network.
• Project highlights:
• High freedom: Anyone can use the BRC-420 protocol to create their own metaverse inscriptions.
• Composability: The protocol is designed to integrate with Bitcoin Layer 2 solutions, bringing liquidity and scalability to the second layer.
• Innovative narrative methods: Introducing a novel "bitmap protocol" for metaverse land, not limited to a single NFT form, but using it to tell broader metaverse stories.
• Clear positioning: Bitmap is positioned as a metaverse protocol and NFT marketplace on Bitcoin, supporting inscriptions based on the BRC-420 protocol and planning to integrate liquidity mechanisms through Layer 2 in the future.
• Experienced team: The CEO has a rich entrepreneurial history in web2, VR, and web3 development engines.
• Attractive products: The BRC-420 market already has derivatives and an active community, with high-priced base goods indicating strong user interest and whale participation.
• Operational momentum: The apparent market FOMO phenomenon around Bitmap NFTs, significant whale participation, and partnerships within the Bitcoin ecosystem highlight the project's operational strength.

Babylon

• Project introduction
• The Babylon project is a proposed Bitcoin staking protocol that allows Bitcoin holders to stake their idle Bitcoin to enhance the security of PoS (Proof-of-Stake) chains while earning rewards in the process. It aims to integrate Bitcoin with the PoS economic system.
• The Babylon project attempts to utilize Bitcoin staking as a new use case, enhancing the efficiency of Bitcoin as an asset while strengthening the economic security of PoS chains. This new use case brings positive impacts to Bitcoin itself, Layer 2, and related PoS ecosystems.
• Project highlights
• Strong security: The Babylon protocol ensures comprehensive security for PoS chains; if there are security violations, at least 1/3 of the staked Bitcoin will be deducted.
• Staker protection: As long as stakers comply with the rules of the PoS protocol, they can ensure that their funds can be safely withdrawn.
• High liquidity: Babylon allows stakers to quickly withdraw their staked Bitcoin without relying on community consensus mechanisms.
• Modular design: The protocol is designed to be modular, easily integrating with various PoS consensus algorithms.
• System architecture: A system architecture has been launched for scaling multiple stakers and multiple PoS chain protocols.
• Fast unbinding: A fast, frictionless asset unbinding process has been designed to reduce the time required for unbinding.

BitSmiley

• BitSmiley is the first native stablecoin project in the BTC ecosystem, a comprehensive financial protocol built on the Bitcoin blockchain, as part of the Fintegra framework. It consists of three key components:
• Decentralized stablecoin protocol: Through the Bitcoin network, BitSmiley has launched an over-collateralized stablecoin protocol, issuing UNO, a stablecoin soft-pegged to the U.S. dollar. Users can mint UNO by locking Bitcoin as collateral in the BitSmiley treasury (a smart contract on the Bitcoin blockchain).
• Trust-free lending protocol: The native lending platform built into BitSmiley allows users to participate in decentralized lending activities. Borrowers can receive the tokens they want to borrow by collateralizing BTC, and after returning the borrowed assets and interest, the collateralized BTC will be returned.
• Derivatives protocol: BitSmiley plans to expand into lending-based derivatives, enhancing capital efficiency and meeting the DeFi space's demand for more complex financial instruments.
• Project highlights:
• Integrated stablecoin issuance mechanism on the Bitcoin blockchain: Effectively reduces market risks caused by Bitcoin's value fluctuations, providing users with a more stable medium of exchange.
• Advanced liquidation and auction design: Adopts Dutch auctions to address collateral value shortfalls, automated through smart contracts, ensuring the system's robustness and decentralized attributes.
• Innovative insurance and risk management solutions: Proposes an insurance pricing model based on extreme value theory and T-Copula, allowing lending participants to hedge against potential significant price volatility risks, increasing the protocol's security.
• Enhanced capital efficiency: The segmentation and merging functions of loans improve capital utilization, meeting different users' lending needs.
• Future scalability and innovation guidance: The project plans to develop multiple derivatives, including credit default swaps (CDS), aiming to make BitSmiley a one-stop decentralized financial platform supporting various financial services.

alexGo

• Project introduction:
• alexGo is a platform based on the Bitcoin DeFi (decentralized finance) ecosystem, aiming to become the top DeFi platform for Bitcoin users, innovators, and the broader ecosystem, addressing Bitcoin's limitations in the DeFi space due to the need for smart contracts and computation layers.
• alexGo utilizes the Stacks Layer 2 solution to introduce smart contract functionality to Bitcoin, aiming to eliminate barriers between Bitcoin L1 and L2, creating a seamless DeFi experience.
• ALEX has established the "Bitcoin Lab" ecosystem fund, providing funding support, technical services, community engagement, and a platform for project launch and growth, which is very attractive to project developers and investors.
• Project advantages:
• Seamless bridging: Strengthening the entire Bitcoin DeFi experience through seamless bridging between Bitcoin Layer 1 and Stacks Layer 2.
• Transaction speed: Reducing the confirmation time of each block from 10-15 minutes to just 5 seconds through Stack's Nakamoto Release.
• Reliability and security: Comprehensive integration and cross-layer security guarantees, including collaboration with industry groups to establish on-chain Oracles for BRC-20, enhancing its reliability and security in Bitcoin DeFi.

Portal DeFi

• Project introduction:
• Portal DeFi proposes the first truly cross-chain private DEX protocol, aiming to address the risks of centralized exchanges and the risks associated with decentralized exchanges (DEXs) using cross-chain bridges and "wrapped tokens."
• It launches the PortalX system, capable of executing decentralized trades of Bitcoin and other assets and creating financial contracts.
• Users can directly access decentralized services using non-custodial wallets, with response speed and liquidity comparable to centralized exchanges while maintaining the security of assets and data.
• Adopting multi-party hash time lock contracts and smart contracts, along with a collection of validators to ensure fast, economical, and secure execution of transactions.
• Project highlights:
• Cross-chain interoperability: PortalX supports asset swaps across different blockchains, completely eliminating the need for reliance on centralized third parties.
• Zero-knowledge protocol: Utilizing zero-knowledge proof technology, Portal achieves transaction privacy protection and the security of the swapping process.
• Anti-censorship: The financial applications provided adhere to decentralized principles, ensuring freedom and the ability to resist external interference.
• Non-custodial design: Users can trade without giving up control of their assets, solving the asset custody issue.
• PortalOS operating system: A comprehensive operating system supporting various functions of Portal DeFi, ensuring efficient system operation.
• Validator incentive mechanism: Introducing a proof-of-stake mechanism, using native tokens for staking, ensuring that network participants have sufficient incentives to participate in system maintenance.
• Solutions to the Tier-Nolan atomic swap problem: Providing innovative solutions to classic atomic swap protocol issues, such as fair option problems and the lack of facilitative incentives.
• Liquidity aggregation: Through the design of on-chain contracts and protocols, Portal aims to aggregate and match liquidity in decentralized financial applications.

OKX Ventures Empowers the BTC Ecosystem, Launches Bitcoin Ecosystem Hackathon

This year, Ordinals exploded, essentially a large-scale application of asset issuance capabilities. Subsequently, a dazzling array of asset issuance protocols emerged, including Ordinals, BRC-20, RGB, Taproot Assets, Runes, Taro, Atomicals, TAP, PIPE, etc. Data:

• BRC 20: The cumulative number of BRC-20 transfers has exceeded 4 million, with cumulative fees generated by BRC-20 exceeding 4,290 BTC;
• Ordinals: The total number of inscriptions has exceeded 53 million, with cumulative fees generated by Ordinals exceeding 5,383 BTC;

The innovation of asset issuance standards will bring more possibilities to the Bitcoin ecosystem.

The Ordinals ecosystem has exploded, with large-scale asset issuance, leading to a need for liquidity, infrastructure, and applications like game NFTs. Therefore, we hope to guide more developers to invest in the Bitcoin ecosystem and utilize it to build a richer ecosystem.

OKX Ventures, in collaboration with ABCDE and BeWater, held a winter roadshow day for BTC ecosystem projects online, with a total of 51 projects applying, and 7 projects receiving final investment. Hackathon detailed data:

• Project tracks involve Layer 2, RGB, Lightning Network, Taproot, Ordinals, BRC20, stablecoins, lending, etc.;
• Project teams come from around the world, including Singapore, Hong Kong, the United States, Russia, and Hungary;
• 82% of founders are serial entrepreneurs;

For a richer developer ecosystem and application ecosystem, OKX Ventures will invest $10 million to continuously support emerging entrepreneurs in the industry.

OKX Web3 is in a leading position in the BTC ecosystem

The OKX Web3 wallet is the first wallet ecosystem to make large-scale investments in the BTC ecosystem, investing significant ecological resources and receiving unanimous praise from the market.

OKX Web3 Wallet Data

As of the end of December 2023, the total trading volume of the OKX Web3 wallet Ordinals market has exceeded $1 billion, with 120,332 unique addresses and a total of 552,818 transactions, peaking at 92% market share in daily trading volume, maintaining a leading position in the industry.

Currently, the OKX Web3 wallet Ordinals market is the largest BRC-20 inscription and BTC NFT trading market, with 16,000 types of BRC-20 tokens available for trading. The OKX Ordinals market is fully decentralized, with no platform service fees for interactions, and supports batch transfers, trading, and inscribing BRC-20 and BTC NFTs among various functions.

By the end of December, the OKX NFT market had approximately 20 million annual transactions, with daily trading volume around $6.5 million, totaling $2.366 billion. Influenced by the inscription craze, the OKX NFT market surged to become the second-largest NFT market by trading volume in just the two months of November and December, capturing 32% market share.

OKX Web3 Wallet is user-centric, continuously meeting user needs

The OKX Web3 wallet always insists on starting from user needs and quickly refining user needs into product requirements, rather than using its own needs as user needs.

OKX has launched a one-stop DApp exploration and reward interaction platform—Cryptopedia, regularly introducing activities themed around different blockchain networks, and collaborating with corresponding partners to set DApp interaction tasks, helping users reduce search costs while allowing precise interactions even in fragmented time.

The OKX Web3 wallet has launched a DeFi section, serving as a one-stop on-chain investment platform. It aggregates over 10 public chains, 60 projects, and 200 protocols, supporting V3 liquidity pools, one-click cross-coin investments, automatic yield calculations, and lower gas fees, making DeFi investment extremely simple.

The latest ecological overview released by the OKX Web3 wallet shows that its wallet section connects to over 70 public chains, supports over 120 protocols in the DeFi section, and aggregates over 30 NFT marketplace platforms, supporting multiple ecosystems such as Game, Social, MEME, Tool, totaling over 300 platforms and protocols.

Conclusion

In terms of the Bitcoin ecosystem, OKX Ventures has demonstrated a strong commitment and determination to continue contributing, dedicated to promoting ecological innovation and accelerating the development of blockchain technology. With the growth in the number of Bitcoin users, the increase in Bitcoin blockchain data, and the explosion of new innovative protocols like Ordinals, the Bitcoin ecosystem is experiencing unprecedented growth. OKX Ventures is not only willing to provide financial support but also offers services and resources to help partners grow together.

Recognizing the vast innovation space within the Bitcoin ecosystem, OKX Ventures helps projects find their footing in this grand wave of the crypto field by providing platform-level support such as the OKX Web3 wallet and OKX chain. For OKX Ventures, the prosperity of the Bitcoin ecosystem goes beyond simple financial investment; we value long-term industry development and scale growth more.

Even as market conditions fluctuate, OKX Ventures focuses on the continuous progress of the industry, paying attention to theoretical innovations, the launch of practical new applications, and the actual growth of user traffic and the overall scale of the industry. We firmly believe that in the next three to five years, OKX Ventures will witness and seize greater market opportunities brought by the Bitcoin ecosystem alongside the market.