The first fully decentralized EVM-equivalent Layer 2 on Bitcoin
Enter Botanix
Welcome to the alpha please newsletter.
gm friends, today we are learning about Botanix.
Botanix is an EVM equivalent Bitcoin L2. They have a full working product in testnet currently, and I think will be one of the most exciting Bitcoin related launches this year.
I chatted with the Botanix Labs founder Willem Schroe to find out more and better understand his BTC L2 thesis.
I will also drop some resources at the end. As I said above, they have a testnet which is live currently. I strongly recommend you check it out. It’s always good to try things, you never know what could happen later down the line.
I was so impressed that I invested in Botanix Labs after speaking with Willem.
TL;DR Botanix
Botanix Labs are building the first fully decentralized EVM-equivalent Layer 2 on Bitcoin, where the ease and versatility of EVM meets the decentralization and security of Bitcoin.
Leveraging Bitcoin's Proof-of-Work (PoW) as a Layer 1 for base settlement and decentralization, Botanix will use a Proof-of-Stake consensus model, where the stakes (represented by bitcoin) are securely stored on the Spiderchain, a distributed network of decentralized multisigs safeguarded by a randomized subset of participants. You will be able to stake your bitcoin on Bitcoin.
Tell us about yourself and how you came to build Botanix?
I grew up in Belgium and ended up becoming the national champion in mathematics there. Later on I completed my bachelor's and master's in electrical engineering. Belgium actually has a strong reputation in the world of cryptography, so my Masters actually focused on cryptography. I ended up doing research on authenticated encryption and even managed to break some encryption algorithms. At that time, I didn't realize how cryptography would eventually become relevant to my career again though.
After my studies, I worked in the chemicals industry for six years and moved to Saudi Arabia for two years. It was in the Middle East, particularly when seeing the hyperinflation in Lebanon, that I fully understood the importance of cryptocurrency. This led me to apply to Harvard Business School, which was my entry point into the United States.
At Harvard I formed the thesis for Botanix, and our thesis has actually remained exactly the same since then. A year and a half ago, I was trying to understand where the infrastructure of crypto was headed. It's interesting that, after 15 years, the theories on infrastructure keep on changing. However, our thesis is straightforward. We saw Bitcoin as a purely decentralized, secure form of money with almost zero utility built on top of it. So you had this massive sleeping pool of capital just waiting for something to be built on top of it.
Building on Bitcoin is notoriously hard though, which everybody realizes at this point. Meanwhile, outside of Bitcoin, there's a huge amount of utility and applications, many of which have Product-Market Fit, creating significant value.
I realized these were all built on what are known as virtual machines. Virtual machines are essentially a software layer and follow the same principles of software technology. I realized that the EVM, Ethereum Virtual Machine, is the most prominent, with the widest distribution. In software technology battles, distribution matters the most. When you look at Windows in the '80s; it wasn't the best technology or the most secure, but it had by far the biggest distribution.
Distribution has always been key in software technology battles. So, while Bitcoin might be winning in terms of being a form of money, the EVM is the winning virtual machine. This led to the idea of a second-layer on Bitcoin, which sets us apart from the rest. This idea was conceived a year and a half ago, and we spent the first six months delving back into cryptography to develop a fully decentralized Layer 2 on Bitcoin, which we call the Spiderchain. The Spiderchain is the technology capable of building that second layer.
We've received positive feedback and reviews from many in the Bitcoin community. We began building and came out of stealth in September, launched our Public Testnet in November, and are now preparing to launch the Mainnet. I believe we're the only ones who have actually shipped a fully end-to-end working product.
Can you give us a high-level overview of how Botanix works?
We are fully EVM equivalent, so anything that works on the EVM, you can copy and paste and it will work on Botanix, and the whole thing runs on top of Bitcoin. Once you have your MetaMask connected, you generate a Bitcoin deposit address. This looks like a normal Bitcoin address, but in reality, it's a special type of address where, in Taproot, we encode your EVM address.
This means that from now on, this Bitcoin address is uniquely connected to your EVM address that we got from your MetaMask. We did this because we saw what Stacks and Rootstock did and where they went wrong. We want to make it as easy as possible for people to onboard onto the second layer on Bitcoin, so it will feel as easy as bridging from Ethereum to a Layer 2 like Arbitrum when bridging from Bitcoin to Botanix.
So basically, with this address, you can now send Bitcoin directly from Coinbase, Kraken, or any exchange to this Bitcoin deposit address, and you'll have the Bitcoin in your MetaMask. From then onwards, it feels like Ethereum, but you're using Bitcoin for everything.
Which users do you think Botanix will attract - Ethereum L2 users or Bitcoin natives?
I think the answer is a bit of both. In the crypto space, there's often a comparison between Bitcoin and Ethereum, with people aligning ideologically with one or the other. Some prefer Bitcoin because it represents fully decentralized money, which matters most to them. Others lean towards Ethereum, valuing utility above all. However, I believe users will ultimately come from both sides.
I know a lot of Bitcoiners actually want to use their Bitcoin to get yield on their Bitcoin. But there's nothing out there to actually do that. I know a lot of people would want to use their Bitcoin on a perps dex or something, but there's no access to it natively on Bitcoin. And so this basically allows any application that has reached product market fit on Ethereum to also reach product market fit on Bitcoin. I've always had this theory that even Bitcoiners are just people, very similar in terms of behavior to other people. So, anything that has reached product market fit on Ethereum could also reach product market fit on Bitcoin; there's just no infrastructure to actually do it.
I think that ordinals and BRC-20s showcase that many Bitcoiners are also secretly degens who want to engage in various activities, but currently, there's just nothing out there for them. What I've observed is that over the last few months as we've been doing massive business development, is from a developer's perspective, if you're an Ethereum DApp and you choose to deploy on Arbitrum or Ethereum, you're facing massive competition, competing for the same users and capital. Alternatively, deploying on Botanix gives you the chance to be a first mover in the entire Bitcoin market, appealing to all the Bitcoiners who want to do something with their Bitcoin.
I think 70% of the people or the capital will actually come from native Bitcoin, all the sleeping dead capital that's waiting there on Bitcoin for something to do with it will come from there, and a bunch of the other capital will come from Ethereum.
Is there also interest from devs to build native apps on Botanix?
The Bitzy team is building a quite novel new DEX, using a V2 front end but a V3 aggregator in the back end, similar in logic to Ethereum DEXes. The Vertex team is building a next-gen perps app, improving on existing proof models. Other well known Perps Dexs are looking at deploying as well.
Palladium will be announcing a Bitcoin-backed stablecoin, which is a massive application in itself. Many have attempted to create a stablecoin on Bitcoin, but it's just not there yet. However, the biggest application for wrapped Bitcoin on Ethereum is essentially to have a wrapped-Bitcoin-backed stablecoin, like MakerDAO with DAI, but it makes more sense to do this natively and decentralized on Bitcoin itself. So, the Palladium team is moving into that space of having a Bitcoin-backed stablecoin on Bitcoin itself.
Then, there are a bunch of different lending and borrowing protocols. The most obvious use cases on Bitcoin are those that have already seen product-market fit on Ethereum. Some are considering venturing into unique Bitcoin spaces like mining hash rate. Others are interested in building commodity DEXes, which might align more with Bitcoiners and their interest in macro. But mostly, it's about bringing to Bitcoin applications that have already reached product market fit on Ethereum.
Will people be able to use BRC-20s on Botanix?
As you might know, the user experience for BRC-20s is quite bad at the moment. Essentially, what you will be able to do is use a bridge to move from Bitcoin's main layer, bridge that to Botanix' second layer, and then you can suddenly have nine-second blocks, start trading it on DEXes, start trading in protocols, and essentially have access to the full ecosystem of the ERC-20 DeFi ecosystem, so to speak.
Are you looking to compete with high-throughput chains? Or do you want to carve your own niche?
Very good question. The answer is no. I think the game changer here is that we provide infrastructure on Bitcoin. And actually, the Spiderchain is designed more like Ethereum. We are capable of supporting 10,000 to 100,000 different full nodes where anyone can join the network, stake Bitcoin, and run a full node. And so, that's also a bit more appealing to Bitcoiners, who prefer decentralization.
That's the big game changer here. The blockchain trilemma says that if you go for massive high throughput, it limits your decentralization. We, on the second layer with Botanix, are essentially following the Ethereum vision, requiring more hardware but still running at 9-10 second blocks, yet capable of being extremely decentralized. This vision leans more towards decentralization rather than massive high throughput. We believe this is one of the main reasons we have significant buy-in from the Bitcoin community. Our strong stance on decentralization is well recognized within the Bitcoin community.
How will the fees look on Botanix?
The fees will be really low here. Roll-ups at the moment are quite centralized in nature, leading to various problems and higher fees. In order to be censorship resistant, have liveness, and unilateral withdrawals, they need to push data back to the Layer 1, increasing costs on Layer 2. In contrast, we are fully decentralized, where anyone can run a full node, addressing those issues. As a result, our Layer 2 fees will be very low. We might not achieve massive speeds, but our fees will remain low because we don't have to post data back to the Bitcoin main layer, which would be extremely expensive.
What about the speed?
Botanix is optimized like Ethereum. In terms of the blockchain trilemma and fast speeds, we are like an Ethereum in that essence. However, it's possible to build a layer three or even a semi layer 2.5 that is directly connected to Bitcoin as the base layer, and achieve those massive speeds. The EVM would then act as the data availability layer. The Spiderchain is essentially how you decentralize the actual Bitcoin on the base layer. It's akin to an EigenLayer design, but on Bitcoin, so we can secure very fast roll-ups in them. So that's the longer-term vision. And from then onwards, you can move to like, achieving a Solana or very fast roll-ups on Bitcoin.
What do you think is the size of the “sleeping capital” on the Bitcoin network?
The basic thinking is, Bitcoin is three times, or four times bigger than Ethereum in total market cap. Initial stats show that actually, the ordinals and the BRC-20s were more or less also three times bigger than the NFT market we saw when that first broke on Ethereum.
We also believe the DeFi market on Bitcoin will be three times bigger as well. I think out of the trillion dollars of market cap, factoring in all the Bitcoin that's in ETFs, in long-term holder wallets, and some small share of like 20% of extreme Bitcoin Maxis that don't want to do anything with their Bitcoin, there will be about 30% of the supply that will be absolutely breaking open. And when you think Bitcoin is a trillion-dollar asset, that market could be easily 100 billion dollars on the DeFi side.
Resources
Follow Botanix on Twitter & join their discord
And that’s your alpha.
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Crypto currencies are very risky assets and you can lose all of your money. Do your own research.
Thanks for the alpha! Just trying my luck here, any chance I can invest in them too? Haha