How To Make Money While Holding Bitcoin | Charlie Hu

Charlie Hu is the Co-Founder of Bitlayer. In this conversation we talk about bitcoin, current state of DeFi, why it’s bringing together Asian retail and Western institutions, evaluating TVL as a metric, what Bitlayer is building, and the potential future for bitcoin ETF staking? ========================Markets are at all-time highs. Public equities are outperforming. And individual investors are driving it all. It’s officially the rise of the retail investor. On September 12th in NYC, I’m hosting the Independent Investor Summit — a one-day event built exclusively for self-directed investors. We’re bringing together some of the smartest public market investors I know for a full day of macro insights, market predictions, one-on-one fireside chats, and actionable investment ideas from each investor. This is going to be an absolute banger event. Join us if you like markets and think retail is two steps ahead of Wall Street. TICKETS: ⁠https://www.independentinvestor.co/⁠ (use promo code POMPYT25)========================Check out my NEW show for daily bite-sized breakdowns of the biggest stories in finance, technology, and politics: ⁠http://pompdesk.com/⁠========================Listen to The Pomp Podcast on the audio platform of your choice: ⁠http://pomppodcast.com ⁠========================Pomp writes a daily letter to over 270,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at: ⁠https://pomp.substack.com/⁠========================This episode is brought to you by Figure (https://figuremarkets.co/pomp), the platform to Earn and Borrow. Need liquidity without selling your crypto? Figure offers Crypto-Backed Loans, allowing you to borrow against your Bitcoin or Ethereum with 12-month terms and no prepayment penalties. They have the lowest rates in the industry at 8.91%, allowing you to access instant cash or buy more Bitcoin without triggering a tax event. Your BTC collateral is protected by decentralized MPC custody. You can always see your BTC ownership in your FM account and verify holdings in your personal BTC vault on chain. Unlock your crypto’s potential today. Visit their app to apply (https://figuremarkets.co/pomp) for a Crypto Backed Loan (https://figuremarkets.co/pomp) today! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply. Visit figure.com for more information. Figure Markets Credit LLC. 650 S. Tryon Street, 8th Floor, Charlotte, NC 28202. (888) 926-6259. NMLS ID 2559612. Terms and conditions apply. Visit https://figuremarkets.com/borrow for more information.========================BitcoinIRA: Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Take 3 minutes to open your account & get connected to a team of IRA specialists that will guide you through every step of the process. Go to https://bitcoinira.com/pomp/ to earn up to $500 in rewards.========================0:54 - Intro2:00 - Bringing Asian retail investors and Western institutions together6:39 - Takeaways from Vietnam8:30 - Current state of DeFi11:24 - What does Bitcoin DeFi mean?24:06 - Bitlayer business30:01 - Bitcoin ETF staking32:27 - Bitcoin as a productive vs non-productive asset37:59 - Is ‘Total Value Locked’ a good metric?40:28 - Where to find Charlie and Bitlayer

• 0:01Speaker 00

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• 0:16Speaker 01

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• 0:48Speaker 02

  What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode.

• 1:16Speaker 03

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:39Speaker 02

  What you're saying is you believe that there will be US-based ETFs that get approved that are Bitcoin, but then Bitcoin is used inside the Bitcoin DeFi basis like a Bitlayer to actually get yield on top of the Bitcoin.

• 1:52Speaker 04

  I think we'll start from a European other jurisdiction first, and eventually come back to the United States, right? But I think that will be like a major, major value unlock or like clarity in regulatory rights as a major catalyst for Bitcoin DeFi.

• 2:06Speaker 02

  What's going on guys? Today we got a great episode with Charlie Hu. He is the co-founder of Bitlayer. And in this conversation, we talk all about Bitcoin, DeFi, and what is going on with all this innovation, experimentation, and people trying to build products and services on top of, around, and near Bitcoin. There's a lot of questions. I have a lot of them too. And I think a lot of people are trying to better understand what's going on in DeFi. What's going on with Bitcoin, DeFi? Is this stuff real? Is it not? What metrics should they be paying attention to? What are the metrics that are being gained? And what the heck is actually a product that's being used versus something that's just hype? Charlie's here to explain it all. I think he does a fantastic job of helping us get to what is the actual signal among all the noise? Here's my latest conversation with Charlie Hu. All right, Charlie, I thought a great place to start this conversation is you live in Singapore and there's this like what appears to be a dichotomy

• 2:51Speaker 02

  between Asian retail investors and Bitcoin, and then Western financial institutions who are into Bitcoin. But because they both have this shared interest in Bitcoin, Asian retail Western institutions, they're actually on the same team, on the same side of the table. Talk us through a little bit as to kind of this unique setup here of bringing together two different groups that people wouldn't think are working together, but actually are.

• 3:11Speaker 04

  Yeah, great question to start with. First of all, great, thanks for being here. And I think we look at the Bitcoin ecosystem, right? We start from two years ago. What happened was all of those protocol came out, right? It was due to the fact Bitcoin has the upgrade in 2021, the BIP 430, right? Which allows people to create this inscription on SATS. It didn't really drive the attention in the Western community. And due to various reasons, I think a lot of people were still kind of in the initial of NFT and a few other kind of use cases last cycle. And Bitcoin audios was kind of really heavily picked up and adopted by the Asia retail community. So that was kind of the reason I got interested, you know, kind of orange peel myself to explore what kind of we can create use cases around Bitcoin.

• 3:55Speaker 04

  You know, even doing assets around Bitcoin and also doing DeFi, right? Now it's become more and more obvious. It's, there's an interesting adoption demand. So that was kind of the case. 80% of the audios was created by the retail community in Asia. And, and also on the other spectrum, Bitcoin community, a lot of, a lot of them actually are miners. Bitcoin mining community was heavily from Asia last time, uh, last cycle, right? Before like the lot of the Asian countries banned Bitcoin mining in two thousand twenty one. Almost thirty percent of the Bitcoin hash rate was from the mining pools and, you know, miners in Asia. So that was a lot of that. But obviously, as a lot of the network, you know, um, United States and maybe Western communities.

• 4:39Speaker 04

  The ETF came out, right? You know, institution finally have a way, have a vehicle to come in. So it's very interesting, like two sided spectrum. Because it's the same network. We're talking about the same thing and same assets, right? The first, the principle the same, but people are comprehending differently, right? So people who are very, very just pure digital gold driven. Uh, they don't actually like any use case on Bitcoin network. But there's people actually wants to create interesting things on, on top of that to even getting more value recruits mechanism for Bitcoin, right? So that's kind of the beauty part, I would say, um, for Bitcoin network. It's so decentralized, it's so liberal. Different, different people have different opinions. But it's serving the same purpose and serving, serving this, serving the same goal for this entire interesting assets, right?

• 5:23Speaker 02

  When you think about the Asian retail community, um, what about the Asian institutions? Are they into Bitcoin as well or is it pretty much retail?

• 5:31Speaker 04

  In the beginning, definitely was retail, right? I think until, uh, you know, United States government actually approved ETF, right? And then Hong Kong approved last year. And now we're seeing Australia, and obviously you have Bitcoin treasury company like Metaplanet, right? There's quite a few new ones probably going to come out in Korea as well. It's just following up, right? I think that the momentum, the velocity of following up on this is getting higher and higher. Um, but I would say, um, a lot of the builders, a lot of the actual users in the Bitcoin network, in the Bitcoin ecosystem. Are still are more or less retail, right? Who are interesting to see what are the interesting use cases for the Bitcoin assets? They are using all, all these kind of web three wallets such as OKX, Binance or Coinbase wallet, right? To, to try new things.

• 6:16Speaker 04

  I think the level of curiosity and also the, the speed of adoption for new use case on chain, it's pretty high in, in Asia.

• 6:24Speaker 02

  When you think about the folks that are, uh, in Asia, how many of them are Western, you know, citizens that have moved there versus are native to the, uh, the geography?

• 6:35Speaker 04

  I I mean, I haven't done too thorough like quantitative and research about this. I I would say definitely quite a lot of them actually expects. The people who live in Singapore, which I am, we we based there as well, like huge community right there, Western community, they travel a lot. Um, people in Japan, in Hong Kong, even in Vietnam, we were just there two weeks ago in the GM Vietnam Conference. So a lot of expects are there, right? They mingle with local communities, um, but they stay online, they do things online, they explore. Unchain opportunity globally, right? So geographic location is not the hurdle for them, right? And I mean, because it's DeFi, it doesn't really read, need too much like KYC, you know, you don't need a bank account for that, right?

• 7:16Speaker 04

  So it gives you this kind of a digital nomad, kind of a liberty, right? I that that's I think that's kind of the majority of the early user base, right?

• 7:25Speaker 02

  In these communities, like take Vietnam as an example, I think that the Western perspective of Vietnam may be different than the truth on the ground. What did you take away from being there in terms of adoption of Bitcoin or people using it to buy things? Like, just walk me through kind of what are some of the lessons learned from a trip to Vietnam or?

• 7:40Speaker 04

  Interesting. Yeah, I think it's a very great question. First of all, I've been to Vietnam many times. It's in in Belay. Vietnamese community is one of the most active retail community. We we try to engage, we getting quite a lot of interesting demand. And inquiry and also even builders wants to build things with us. Um, so Vietnamese community is definitely one of the, you know, first of all. As a country, Vietnam has highest crypto penetrate rate. They were like multiple times number one in the world. So people actually use crypto in various kind of cases, right? In stable coins, payments, all that. And DeFi was pretty early. I remember one of the most OG DeFi protocols called a cyber network. Uh, the founder called it Loy Lu, um, great OG in the DeFi builder. He's also our Andrew investor.

• 8:24Speaker 04

  So he told me a lot of things like they have a very interesting builder base who built interesting tooling, um, you know, in the Bitcoin space, in the DeFi space. So I think people over there, there's a lot of interesting builders that have been very quiet, and they just heads down building. Because of the fact, the opportunity to for jobs and also for career wise, crypto become a very important kind of alternative solution for them. So I think it's getting very high penetrated market retail wise. You know, there's a lot of people actually at very high knowledge level about the on-chain opportunities, DeFi use cases, the education level, just learning by doing is pretty high. Yeah.

• 9:06Speaker 02

  So we're talking about Bitcoin. Let's talk about just DeFi in general, right? I always joke, it's a little bit of a jab towards the non-Bitcoiners where I say Bitcoin was the first decentralized financial product, first DeFi product, true market, product market fit, very big scale, decentralized money. We now have seen a lot of other use cases around decentralization that's come to, we've got decentralized exchanges, we've got lending pool, you know, all these different components. What is the current state of DeFi in your mind, right? Forget about on Bitcoin, but just in general, is it working? Is it not working? Is it still kind of cautiously optimistic about the future? How do you see, you know, the existing DeFi landscape?

• 9:45Speaker 04

  Yeah, great question. So first of all, I'm very, very bullish on DeFi as the trend, as like adoption category in the Web3 space. I think this is one of the most battle-tested, kind of almost like user adoption proven use cases. And many other new frontier like AI agent, some other new things. It started in Ethereum, right? From 2020, I was quite early, like, you know, get to know what is, you know, automatic market maker like Uniswap. And obviously on-chain lending protocols, using smart country do a lot of the interesting things. And it's just keep innovating, you know, doing the bear market as well. In the last six years, we see a lot of the interesting new primitive across like perpetual daxes, option trading protocol, leverage, you know, staking, liquid staking.

• 10:29Speaker 04

  Things goes on, right? Something maybe not as successful as people thought, something was massively successful. It just keeps sustainability growing, right? With the momentum in terms of TVL, on-chain transactions. AVE, you know, one of the leading lending protocol on Ethereum just hit 50 billion on TVR, right? On the lending market, it's getting huge. Whereas, you know, right? Ethereum, the reason Ethereum, you know, with all this adoption because they have the smart contract capability, right?

• 11:00Speaker 04

  If we, we definitely see the huge asymmetrical potential. If we bring this programmability features and verification components for the Bitcoin network. And then we're sitting on this massive assets, right? It has been not underutilized, has been idle in the last 10, 15 years. And I think we, you know, this big amount of assets can be used with all these proven use cases. Then it's like massive value unlock. So, yeah, I mentioned Bitcoin is the most decentralized, you know, successful, winning assets, you know? It's incorruptible, it's, it's censorship resistant. It serves all, it checks all the boxes to be the right assets for on-chain decentralized finance, right?

• 11:42Speaker 04

  But due to this lack of programmability and all these, you know, infrastructure limitation. We can't really do like all these interesting use cases around Bitcoin assets yet, right? We had a payment, that's pretty much it. Like Lightning had a kind of alternative kind of Plan B solution through, through state channel, right? Actually serve certain category of user base. But I don't really see too much on the mainstream yet. So I think that's kind of how, why we want to jump on board to building the infrastructure for Bitcoin DeFi.

• 12:11Speaker 02

  So you mentioned that Bitcoin Layer One has a lack of programmability compared to some of these other L ones.

• 12:17Speaker 04

  Yeah.

• 12:17Speaker 02

  Um, there are people who are building, you know, the lightnings of the world and things like that. I think a lot of people will hear about Bitcoin DeFi.

• 12:23Speaker 04

  Yeah.

• 12:24Speaker 02

  And if I say that to 10 people in the Bitcoin community, I'll get very different reactions. Some people are very excited about this. Some people think that it is all a scam and it's never going to work and it's just, you know, hyperware or whatever. Walk me through, when we talk about Bitcoin DeFi, what does that mean? Are we actually building on top of Bitcoin? Is it a layer two, side chains? Like kind of just walk me through and again, not so much just like what you guys are doing, but just maybe like, like understand the market first and then we can dig into what you guys are doing.

• 12:50Speaker 04

  Yeah, so there's two category of things, right? To understand Bitcoin DeFi means Bitcoin assets, but you know, serving, you know, being provided as liquidity assets for DeFi use cases. And also using Bitcoin network, right? As a settlement layer, things like that. So when we know DeFi, it's a serving like a lot of, covers a lot of the primitive, right? We have stablecoin, we have lending, we have all these new frontier of assets, kind of use cases. But pretty much none of them actually happening on Bitcoin network, right? You know, it had some small use cases in the past in the sidechain space. But I think after all those now with, you know, big demand, also attention back to Bitcoin assets.

• 13:37Speaker 04

  We're looking at Bitcoin serving as one of the most important assets and coming into all the DeFi use cases. Right? So, so the two categories to look at. The reason why W B D C started in 2018 was because they want to unlock the Bitcoin liquidity, right? To provide the new liquidity source to the DeFi space in Ethereum. It's using the centralized custody, right? A multi-sig approach to wrapping the BTC assets, right? To the W B D C through the W B D C DAO. So we call this like the first generation Bitcoin bridging, right? I know after you bridge over to Ethereum, you have this like wrapped version of BTC token and assets, right?

• 14:19Speaker 04

  That you can enter all these lending, borrowing, you know, decentralized taxes, all kinds of use cases, right? So that's that. And then people wants to try a more decentralized way or trust minimized way to bring the BTC assets to the all these new layer one framework. So that's that. But if we talk about the kind of the ultimate definition of Bitcoin DeFi, there's a few principles we need to follow, which we believe that's kind of the standard. One, the transaction needs to settle eventually on Bitcoin network. We call this Bitcoin finality, right? So it's not just only on some sidechains, which is completely side system, has nothing to do with Bitcoin security. In a way, we believe Bitcoin is the most decentralized network, right?

• 15:04Speaker 04

  So we trust Bitcoin, we trust the security level Bitcoin. But if the transaction, like the DeFi transaction happened outside of the Bitcoin network and it's not actually settled on Bitcoin block, now it's not Bitcoin security, right? That's quite different. So that's kind of how we see the differentiating between like some sidechain completely side systems to like the real Bitcoin security equivalent or layer two, kind of how we see the new paradigm of infrastructure.

• 15:31Speaker 04

  And the second thing is, does this infrastructure use Bitcoin as gas fee? Right? And a lot of the use cases, no matter it's like liquidity pool on AMM, DEXs, or other things, is using Bitcoin as liquidity assets. Right? If the Bitcoin is not being utilized in the use case of DeFi, it doesn't really kind of fit into the category of a Bitcoin DeFi, right? So our definition of future Bitcoin DeFi should be Bitcoin as a gas fee, Bitcoin is liquidity assets, and being utilized by all the proven, you know, DeFi use cases. And eventually, the transaction settle back through their recursive proof or verification component, which a lot of team, including us, are building. And then transactions settle on Bitcoin block.

• 16:14Speaker 04

  Right? So we don't have to put all the data, you know, to congest it, make it congested, put on the Bitcoin network. It's pretty expensive. And, you know, Bitcoin network, each block is only four megabytes, right? You can't really fit in everything there. But if it's just like the final proof data, right? Which is like pretty optimized and, you know, in a minimum way, but it still can represent all the transaction proof happening on the, on the true ROI kind of model. I think that's kind of the best design choices, which we can keep the principle of decentralization, Bitcoin security, and using Bitcoin as, you know, important assets to the DeFi.

• 16:50Speaker 02

  So I want to run through a couple of different components as we do rapid fire, right? The first is you're talking about speed of transactions. If you do it, you know, off of the layer one, then you should be able to do it much faster. You write to the finality of layer one. Is that true? Is the idea of Bitcoin DeFi being structured in this way should provide more speed?

• 17:07Speaker 04

  Yeah, I think at the end of the day, if we want to provide assets, which can potentially get a mass adoption, right? Bitcoin currently is, in the day one, only have seven transactions per second, right? The, that high throughput level is not enough. If we talk about millions of users using that for on-chain trading, or like lending or whatnot, right? It's not the best use case, right? We don't want people to wait for 20 minutes, you know, for the settlement, right? Which takes that for the finality, right? It happens in two years ago, three years ago, in during the autumnal season, right? People had a hard time to really verify. When they were inscribing some, you know, BRC 20 or some kind of all of those assets on Bitcoin, they have to pay huge amount of gas fees with the hard earned Bitcoin they they had, right?

• 17:51Speaker 04

  So that was the issue. That was a pretty bad kind of user experiences, which we don't believe that's going to sustainable in the long run, right? You know, it's going to hit the like certain plateau pretty fast, which happened at kind of the end of 2023. And I think when we talk about like importance of, you know, speed, right? We need to have an infrastructure in which Bitcoin is serving as the kind of settlement layer, right? You know, that keeps the highest level of decentralization and security. But letting all these like heavy lifting transaction throughput work, you know, handled by this new layer of infrastructure. So I think that's kind of the best way to keep the balance.

• 18:30Speaker 02

  Cost in terms of more expensive or less expensive doing this with Bitcoin DeFi?

• 18:35Speaker 04

  We need the definitely less expensive kind of way to, you know, for users to pay transaction fees. But, you know, getting their, you know, transaction processed, right? So currently, if we talk about some crazy mint and happening in autumnal season, people have to pay tens even crazy time like hundreds of dollars of worth of BTC, right? As a gas fee, you know, and it's it's kind of anti-human, right? You know, you you don't want to spend too much of the gas fees, right? To to process some transactions. So it's going to be, it was, it will be a hurdle. We saw that coming for use cases to really build. It's like the minute you gets bigger and you get a lot of people have an interesting demand at the same time, it become unusable because the fee is getting too high, right?

• 19:17Speaker 04

  And then if we talk about certain low value kind of highest transaction kind of, you know, transactions, it doesn't make sense, you know, because the transaction fee is actually higher than the the transaction itself, right? So that was kind of the hurdle for a lot of the user, uh, and especially the retail users to enter that, right? So I think that's kind of the problem we want to solve and make it much cheaper. Still keep the same similar level of security. Uh, and also, as I said, uh, high throughput, right? So high speed.

• 19:46Speaker 02

  So you mentioned security. That's another one. I think there's speed, there's cost, then there's security. Bitcoin obviously being the most secure computer network in the world. People are really excited about that. How do these Bitcoin DeFi projects or technology stacks uh kind of compare? Today's episode is brought to you by Figure. They're the largest non-bank mortgage lender in the United States with over $15 billion unlocked on their lending platform. They've just lowered rates on their Bitcoin and Ethereum-backed loans to 8.91%, improving their already industry-low fixed-rate 50% LTV loans. They keep building as well, being the only major CBL player to launch decentralized MPC custody to protect against single-entry failure, and they just removed interest deferral fees

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• 22:12Speaker 02

  So you mentioned security. That's another one. I think there's speed, there's cost, then there's security. Bitcoin obviously being the most secure computer network in the world. People are really excited about that. How do these Bitcoin DeFi projects or technology stacks kind of compare?

• 22:25Speaker 04

  Exactly. So I think that's the most important kind of parameter among the three, right? Speed, people can wait a bit. There's way people call it even called a slow fire. The people were joking about it. But I think security is the most important thing. One of the key principle, right? People wants to make sure their transaction is secure, they're not being hacked, right? You know, there's no vulnerability issues on their liquidity pools and so on. So on a smart contract layer, it's pretty much the same. Like, we want to keep the design choice of what we think is the best is, you know, same as Ethereum, like the most battle tested kind of smart contract infrastructure with EVM, Ethereum virtual machine. But then the transaction eventually

• 23:10Speaker 04

  needs to settle on Bitcoin block, right? So that's kind of the key difference between the true Bitcoin security equivalent model compared to the sidechain, right? So the sidechain, in case people don't know, transaction doesn't really settle back to Bitcoin network. It's settled within their own validator sets. So it's sidechain security, right? So sidechain security is fundamentally different compared to Bitcoin security. So that how to, you know, have the speed in a low cost, you know, kind of infrastructure, but still have the similar level of Bitcoin security. I think that's kind of the breakthrough we need to actually build, right? And actually get that kind of infrastructure to the market. So the verification components become one of

• 23:52Speaker 04

  the key solution. So if the transaction is not verified and settled back to Bitcoin, then it's essentially just settle on the on the sidechain system, right? So let's take an extreme example. If, you know, there's a vulnerability hacks, right? You know, issues in the sidechain, and users actually cannot withdraw their assets, which will bridge over from Bitcoin layer one to the sidechain, they cannot withdraw back seamlessly. So eventually, if the sidechain, you know, get issues when it's security hacks, then your assets get lost, right? So this is kind of the most important thing people try to avoid, right? It happened in quite a lot of sidechain systems in Ethereum and other ecosystem before. And I think we don't

• 24:36Speaker 04

  want to see that happen in the Bitcoin space, right? So I kind of want to see if we want to see like If we want to build a true mass adoption, high potential infrastructure, the Bitcoin settlement or Bitcoin finality, I think that's kind of the one, one of the most important principle we need to keep.

• 24:51Speaker 02

  All right. Explain a little bit more about what Bitlayer, what you guys are doing, how this works, what's live, what's not.

• 24:56Speaker 04

  Sure.

• 24:57Speaker 02

  One of the aspects that, as I've gotten to know you and we started to do some work together, I think I found most interesting is you guys, I think, have Franklin Templeton as investors.

• 25:05Speaker 04

  Yes.

• 25:05Speaker 02

  But also Polychain.

• 25:06Speaker 04

  Yeah.

• 25:07Speaker 02

  And there was like on completely different inspection, right? You got like hardcore crypto native, you know, type investor. And then you basically have as tradFi as they become, as they come, right? All invested in the same thing. So describe a little bit of just like how this is working and what you guys are seeing so far.

• 25:21Speaker 04

  Sure. So Bitlayer started in, at the end of 2023, right? Kind of right before or right between this kind of Arnold's craziness season, networking Bitcoin in the mempool was very congested. People were paying crazy amount of gas fee, right? To inscribe, creating all these unchecked assets. That's kind of the, you know, the kind of the macro contest of why I was start, I was start doing research about how to scale Bitcoin with the principle I was, I was just explaining.

• 25:53Speaker 04

  At the landscape at that moment, there was no like best design choices. I was looking at like Lightning Network, you know, RGB, Nostrum, a few other very exotic kind of a not well adopted, well-built kind of solution. And it was kind of coincidental, like right after the Arnold Summit in Singapore, like October, that event happened. I saw on the white paper that BVM came out. So, so, so like since then, we, me and my co-founder Kevin, we, we quickly aligned on the technical vision. We start working and doing research about BVM. It's basically using the existing Bitcoin script without actually depend on any Bitcoin network operation.

• 26:35Speaker 04

  To build this like on-chain verifiable for a proof component to verify malicious potential transactions that can serve to build, they serve for two products. BVM can, has a very key interesting technical, you know, mechanism to build this new generation Bitcoin bridging solution. We call this BVM Bridge. So currently, Billy already launched our BVM Bridge mainnet last month. We fully finished auditing, it's in production mode. Like retail small users in the Bitcoin space, even in the future, the institutional clients actually can use our new generation Bitcoin Bridge

• 27:13Speaker 04

  solution to in a more trust minimized way to bridge your Bitcoin and lock the UTXO and mint on the destination chain to get the the the bridged version BTC, which is one-to-one pact. That's kind of the key first product that's fully already live. The second product I mentioned is the BVM powered Bitcoin equivalent, Bitcoin security equivalent rollup, right? So it's not a sidechain. So the key components in infrastructure wise, BVM solution is trying to build is this verification component, Bitcoin verifier. So for the people who understand Bitcoin network, right? Bitcoin in the layer one, it doesn't really have this built-in smart contract, right? There's no verification component.

• 27:58Speaker 04

  So Bitcoin network cannot actually read and understand and verify certain things you you send to them, right? It had, it's not the case in Ethereum. Ethereum or any other layer ones actually have their programmability, so they can verify things. Verification is one of the key kind of missing gap, right? We we see in the Bitcoin space. If we're trying to build this like Bitcoin security rollup system, we need to have this like verification component. So currently, Billy, we, one of the key BVM Alliance members, doing the research and working on engineering solution and optimize this verification, you know, module.

• 28:39Speaker 04

  And it's actually getting close, I think we are like weeks away, getting close to finish the fully audit. And, you know, finish the bug fixing and then we can launch the verifier. So that's kind of the key missing gap. We say, okay, between the Bitcoin sidechains and Bitcoin true row up, right? That's that the Bitcoin verify is a key infrastructure piece we've been working on. And I think, yeah, teams like us, we are very excited. We weeks, not even not not mention years, right? We're not even months away to get this launch. But we want to make sure this is secure. This is battle tested. So it will be like a period of launching, right? Not it's not like a fee switch. It's not like switch on off.

• 29:23Speaker 04

  It will be like a probably two or three months of gradually test out like start from alpha, beta, alpha and then beta and then public beta, and then actually getting more and more use cases on board. Yeah, I think the actual Bitcoin security equivalent of up is coming to life to the market very soon.

• 29:43Speaker 02

  Yeah. What's the biggest risk here for people? Is it the security stuff or is there something else?

• 29:49Speaker 04

  The risk, you know, I think for any use cases in the web three space, right? If we talk about infrastructure, the risk is people actually don't know how to use it, right? So misuse of the smart contract, you know, people actually Ethereum every day, there's people sending, you know, their funds or assets to the wrong addresses and so on, right? So that's not certain things like we actually can't avoid as an infrastructure builder, right? The second thing is we when we look at this solution, I think just lack of lack of knowledge, lack of education. So it's not a risk. It's more like it will take a while for a lot of people get to know this and jump on board.

• 30:30Speaker 04

  So they might, we might need a quite a few interesting catalysts to really trigger the adoption, right? And one of them in the macro perspective, I believe, I believe I've been talking across many different, you know, events and also podcasts is the Bitcoin ETF staking approval.

• 30:47Speaker 02

  Explain this, what's that?

• 30:48Speaker 04

  Yeah, so right now Bitcoin have the ETF, right? You know, which is the tens of billions of volume already. But all these ETF companies is not supposed to use their Bitcoin exposure to to have like a proper official yield strategy, right? But if we have the ETF staking approval on Bitcoin, I think more and more company will be like, okay, let's you having the Bitcoin exposure, let's explore like a proper, you know. DeFi yield strategy.

• 31:19Speaker 02

  So just to repeat back to you what I'm hearing, which is ETH, Solana, many other altcoins, they have the ability to stake. If they stake, they can get yield.

• 31:30Speaker 04

  Yeah.

• 31:30Speaker 02

  In the United States so far, they've not been allowed to do that inside the ETFs. Outside the United States, there are certain ETFs around the world where you buy the ETF, they take the capital, they go, they buy the asset, they stake. Sometimes they give you a percentage of the stake back. Sometimes they buy back share. There's all kinds of, you know, different ways to pass it back to the holder. What you're saying is you believe that there will be US-based ETFs that get approved that are Bitcoin, but then Bitcoin is used inside the Bitcoin DeFi spaces like a Bitlayer to actually get yield on top of the Bitcoin. And then same mechanism is that people will be able to buy the ETF and get Bitcoin yield essentially inside of these wrappers.

• 32:09Speaker 04

  I think we'll start from a Europe or other jurisdiction first and eventually come back to United States, right? But I think that will be like a major, major value unlock or like clarity in regulatory rights as a major catalyst for Bitcoin DeFi. We start from all the early adopters, right? The active native users, the DeFi users, the retail, right? I think that's kind of what's happening. For the people who actually haven't really touched anything with Bitcoin DeFi use cases, it's already kind of there in the market. A lot of people have really kind of used, have been using that. We have around three million data active user, or at least like unique wallet addresses that being used our network more than like 10 times.

• 32:52Speaker 04

  We have around 20 very, very active, fast-growing, you know, use cases on DeFi space that build on our network and over 70 million transaction happened. So I think all these things happen, we're getting like retained users who actually kind of building the habits to use their BTC to do all kinds of things.

• 33:13Speaker 02

  Talk me through Bitcoin as an asset that is non-productive versus productive. What are some of the other changes that you expect to happen in the world? You mentioned the ETFs will, you know, offer this to people. Are there other things that we should start to think about in terms of how people think about Bitcoin, use Bitcoin, hold Bitcoin, you know, anything once there is maybe more widespread ideas around yield?

• 33:35Speaker 04

  I think, yeah, there's definitely some work to be done and improve in terms of yield products, right, for BTC assets. Different yield with different APY, with different underlying risks. So we're seeing a lot of kind of yield, you know, protocol builders that wants to utilize our infrastructure in terms of Bivian Bridge and roll up to build interesting, you know, yield component. And I think the next wave of BTC, you know, yield product needs to be serving like with very good user experiences. Some of the underlying assets can be stored in a centralized way, like in a custody and also decentralized way in some vaults. And it could be multi-chain, right? So as with our Bivian Bridge can be one-to-one packed, seamlessly bridge to other infrastructure

• 34:20Speaker 04

  and layer ones. So the programmable BTC can be entered all the, you know, DeFi use cases to access to an APY from, I don't know, 4% to 10%, right? Depends on the actual use cases, it was on top of some kind of certain incentives. And eventually, I think we will hit some equilibrium, right? On the DeFi builder side, they find out like sweet spot, right? They can sustainably provide yield with certain APY that actually have a, you know, customer demand, right? On the demand side, I think people will be getting more and more practical and realistic. If you want to use their, put their Bitcoin to use, they can't really expect, let's say,

• 35:05Speaker 04

  you know, crazy high APY, you know, like 20% in a sustainable way. It doesn't really work in that way. I think we're going to hit some interesting equilibrium in the supply-demand, once we get more and more products out and also more and more Bitcoin and users, you know, from the retail to the, you know, liquid funds, even the institution actually coming into place. Right now, it's kind of a lot of moving parts still kind of figuring out. The product market fit is still kind of a lot of the dynamics moving at the same time. But I think. You mentioned about some interesting new use cases, right? I'm very excited and also very looking forward to see the kind of high frequent on-chain protocols will be built on the Bitcoin rollup, right?

• 35:50Speaker 04

  A scalable rollup. So it's not just staking, not just like lending, which is like relatively, we call this like low frequent. So like low frequent meaning the time you need to interact, the big, the net, the infrastructure is fairly low. Like you maybe do that like once a week or even, even once a month. Um, we might see some interesting Bitcoin-based use cases, which is high frequent, such as perpetual DAXs, even on-chain option protocol, like, um, you know, prediction market, you know, for price prediction. That actually, you know, doesn't require rigorous KYC, right? In a DeFi way to do that. And back, but I focus on Bitcoin assets. Um, we might even see like a Bitcoin version of hyper liquid type of protocol coming along the ways.

• 36:30Speaker 02

  Yeah. Describe that, what would that look like?

• 36:33Speaker 04

  No, so basically, you know, they, you know, the transaction eventually will settle on the Bitcoin block, right? Through the, in, in the low up model. Uh, the underlying assets on the hyper liquid, you know, most of liquidity assets will be BTC or different version of BTC. And obviously have the stablecoin as another counterparty, um, in a counter side on a trading pair. Um, users can actually, you know, do native on-chain, you know, perpetual trading on that kind of protocol. It, no, hyper liquid is a very good example, right? It's a scalable infrastructure.

• 37:03Speaker 02

  They're doing okay.

• 37:04Speaker 04

  They're doing very okay in terms of trading volume, right? You know, people can actually, you know, in an on-chain way, decentralized way to do buy call and put option, and also doing lever trading, you know? I think that's, uh, clearly say there's an interesting demand on that, uh, in trading perspective. Um, I think a lot of, a lot of interesting, you know, decentralized Bitcoiners probably wants to do that as well. Uh, that, that might be, and I, I open up like more on-chain use cases. And I think, I forgot to mention one point. Um, the reason we build this infrastructure, uh, actually can have value for the Bitcoin community is we can generate more.

• 37:44Speaker 04

  Verification, right? Back to the Bitcoin network. So there will be a new revenue stream for the miners. I think what we want to do is to make sure Bitcoin network is being utilized by people. Man pool is not going to be empty. And I think after Audino season, you know, the Bitcoin network in the man pool has been pretty empty, you know, it's not too much transaction happening on the network. If we talk about upcoming tens of trillions of major, you know, well adopted, you know, assets in the financial assets, right? If the underlying network, nobody actually use that. You know, if all the assets has just been idle as a network, I don't think it's actually really good in the long run. The miners were having hard time to justify a couple, you know, rounds of halving down the road.

• 38:29Speaker 04

  They can still keep the good profits, you know, maintain the hash rate, you know, to provide security for the network. So we've been talking to quite a lot of mining pools to, you know, because we, what we want to serve as like a new revenue stream to provide new transaction on the network. And I, so miners actually can get in the fees on that.

• 38:47Speaker 02

  Let's talk about TVL. I saw recently that you guys hit number one on TVL for, I think Bitcoin DeFi.

• 38:53Speaker 04

  Yeah.

• 38:54Speaker 02

  Is that a good metric? Like I see people sometimes yell and scream and say that it's like a kind of a nonsense metric.

• 38:58Speaker 04

  Yeah.

• 38:59Speaker 02

  How do you guys think about that? What does that mean? You know, talk through a little bit as to like the popularity of what you're doing.

• 39:04Speaker 04

  Yeah, I think, I mean, on chain TVL called a total value locked, right? It's still one of the most used metric. If we talk about what's happening in the DeFi space, right? Like, obviously, the other important metrics is on chain, the, the number of volume, right? And the number of transaction have been on chain. We hit over 70 million now recently. You know, the, the TVR on DeFi Lama, which is one, one side of a, you know, aspect we're looking at, okay, there's a, is there any real assets on your network? I think that's very important. We wanted to make sure there's enough assets and enough liquidity in our network. So more traders can come in, more builders wants to come in, right?

• 39:46Speaker 04

  While the most important kind of way to support the DeFi protocols is actually support liquidity, right? And I think without liquidity, you can't do too much as a DeFi builder. So I think that's important. But I think. TVL is not the only metric, people just tunnel vision, right? There might be some controversial case, certain protocol, you know, in the liquid staking space, they just double count, even triple count some of the assets, which is like same underlying assets, but we count multiple times, right? So when we talk about TVL, you know, we back to number one on the DeFi Lama ranking, we also need to look at number of use cases and also number of transactions happening on chain.

• 40:28Speaker 04

  So for us, like the reason we have a quite a big growth in the last two months was because of the Bitcoin DeFi education campaign we did with Binance Water, which we, I think we drive interesting amount of retail users came over to our ecosystem. And I actually started actually providing, you know, their BTC liquidity to our DeFi use cases and protocols. You know, obviously those growth sometimes is temporary, right? We want to educate the users and eventually some of them will here to stay and it will become like and retain active users. And obviously by doing those campaigns, we can support and help those protocols with the build on top of us to grow further.

• 41:10Speaker 04

  And I think that's very important to build like a healthy, sustainable, strong ecosystem on there.

• 41:16Speaker 02

  That makes sense. Where can we send people to find you online or find out more about Bitlayer?

• 41:20Speaker 04

  The best way to follow us and see what we do is follow our Twitter, it's @bitlayerlabs. Our website, bitlayer.org, we kind of cover all the fundamentals, you know, you can find our white paper there. And also our ecosystem leaderboards, which we sought out all the top TVL, top transaction, top popular protocols. And we have the user center, people can play around with different interesting on-chain tasks to earn some of your rewards. And yeah, we try to bring the best use cases in our ecosystem to the right users. I think that's the best way to follow us, yeah.

• 41:55Speaker 02

  Amazing. Well, thank you so much for taking the time to do this. It's pretty incredible to see how much innovation and I think experimentation is happening on top of and around Bitcoin. And obviously the principles of decentralization, I think, are very unique to Bitcoin. And so seeing more services and products built on top of and around it, I think, is a worthy cause. So thank you so much for all the work you guys are doing and we'll do it again in the future.

• 42:18Speaker 04

  Yeah, looking forward. Thank you very much.