BitVM technology breakthrough drives new opportunities for the Bitcoin ecosystem: Outlook on BTC development prospects in 2025

Recently, the price of Bitcoin has fluctuated between $90,000 and $100,000, and market participants are looking for the next hotspot. For Bitcoin developers and researchers, the silence of the past six months has not been without gains, as progress has been made in areas such as BitVM open source and trust-minimized Bitcoin bridges, which are worth following.

On February 12, Bitlayer, a Bitcoin Layer 2 solution built on BitVM, held a Space discussion, inviting several guests to explore topics such as Bitcoin scalability, BTCFI, and future opportunities.

The main content of this discussion includes:

• Bitcoin price fluctuation and ecological prediction for 2025, key tracks and opportunity sharing
• Discussion on different Bitcoin L2 solutions, especially the trade-off analysis of security and scalability
• BitVM Technology Paradigm: BTC Bridge Classification and BitVM Bridge Implementation Progress
• Bitcoin L2 Development Trends and Market Opportunities

The following is a summary of the organized dialogue content for reference:

Bitcoin 2025 Development Forecast and Layout

Kevin( co-founder of Bitlayer): From a technical perspective, the financing projects in the past year have made progress in direction and commitment. For example, BitVM has achieved good progress after a year. Many business models have also been successfully implemented, including various asset management needs for Bitcoin.

The strategy of Bitlayer is to ensure that BTCFI occurs in a decentralized environment by implementing BitVM. The focus is on addressing the asset management needs of BTC holders, including obtaining returns, risk management, acquiring liquidity, and other investment needs. These already exist off-chain, and we want to bring them on-chain through the latest generation of secure scaling technology.

Lao Bai ( ABCDE Investment Research Partner ): We mainly follow three directions:

1. BTCFI represented by Solv may combine with the US stock BTC ETF and TradeFi.

2. The BitVM on-chain technology represented by Bitlayer may stimulate Bitcoin on-chain transactions. In the long run, BTC cannot maintain such a security budget after continuous halving.

3. Taproot Assets. Recently, Tether decided to issue USDT using Taproot Assets, which is a positive development for Taproot Assets.

May ( Web3 Caff researcher ): From the perspective of policy regulation, Bitcoin's influence is increasing, having risen from a niche investment target to a national-level reserve asset. By 2025, Bitcoin may face stricter regulation, which also means it will become more mainstream. The clarity of regulation helps to eliminate market uncertainty and attract more institutions to participate.

In terms of market ecology, by 2025, Bitcoin will not only be a value storage asset but will gradually transform into a financial instrument with the acceleration of BTCFI. The rise of decentralized platforms has driven liquidity and efficient financial tools, making Bitcoin not only used for value storage but especially in areas such as lending. With the acceleration of the compliance process, yield-bearing derivatives will greatly enrich the financial ecology of Bitcoin.

WongSSH( Developer ): I started to follow the Bitcoin ecosystem in 2024, when there were various technical solutions, and I thought BitVM was a very good solution. However, after not following for a while, I recently looked at BitVM again and found that it has made great progress compared to before. I once thought that BitVM was impossible to achieve, but with the release of BitVM2, there has been a real implementation.

I believe the Bitcoin ecosystem will have another round of development in 2025. Personally, I pay more attention to Bitcoin's cross-chain bridges, and of course, another direction is Bitcoin CDP, which can release Bitcoin's liquidity. For example, building a true on-chain microstrategy that uses Bitcoin as collateral to access more stablecoins, mint stablecoins, and then use stablecoins to continue purchasing Bitcoin, achieving a strategy that leverages Bitcoin with stablecoins.

CH999( Vice Chairman of the Blockchain Association at Peking University ): I personally take a wait-and-see attitude, because a Bitcoin bull market does not equate to a bull market in the Bitcoin ecosystem, and the two have not yet formed a strong binding state.

The Bitcoin ecosystem, including layer two networks and other applications, whether it can ultimately be realized or is just a bubble, depends on on-chain data, whether there are real applications, real benefits, and real users. We hope to see a more innovative or different application system than Ethereum and Solana. Whether the Bitcoin ecosystem can produce representative applications to attract more users is the point I am personally more focused on.

Bitcoin scaling: the trade-off between security and scalability

Kevin: Let's first take a look at some observed phenomena. The market's FUD regarding WBTC, including the removal of MakerDAO and Coinbase, indicates that concerns about security and the underlying packaging methods of BTC still exist. There is still a demand in the market for safer and more reliable Bitcoin packaging solutions. The first implementation of BitVM is aimed at solving this issue.

Another phenomenon is that in this round of market related to Bitcoin protocols, the amount of BTC staked on-chain has significantly increased, including many Bitcoins that were previously not staked on-chain. Whether it is native Bitcoins or Bitcoins in Yield protocols, the total may be close to 100,000. The appearance of these Bitcoins on-chain is a trend.

The relationship between the security and scalability of Bitcoin expansion is a well-trodden topic. There is a certain contradiction between Bitcoin's security and its application scenarios. For example, you can choose a sidechain with rich application scenarios, or you can only engage in simple transfer applications, such as the Lightning Network or Taproot Assets. There is a trade-off here: either you feel very secure but have limited functionality, or you have enough application scenarios but with questionable security. The problem we want to solve is how to combine these two features, or how BitVM can combine these two features, so that it can be both trustless or trust-minimized, while also supporting programmable.

Old Bai: Our initial investment in Merlin was a bet on a short-term scaling solution, because Merlin is similar to Polygon, to put it simply, it is just a sidechain, but it is EVM, so it is very easy to migrate and expand, this was the short-term solution at that time. Taproot Assets, as well as RGB and RGB++, we believe are more Bitcoin native solutions, which may take longer than BitVM for verification or market PMF exploration, so we invested in UTXO Stack, which is also based on RGB++, and this is a layout on this ultra-long-term Bitcoin solution. The core of the mid-term layout is to explore or bet on Solv and Bitlayer. Solv is mainly in the BTCFI field, and we are not yet 100% certain about Bitlayer.

May: I want to emphasize the security issue that Kevin just mentioned. In the BTC field, many EVM sidechain solutions initially emerged, which essentially unlock the liquidity of Bitcoin through cross-chain bridges. My personal view is that this model has obvious security issues, appearing more fragile compared to the BitVM we discussed earlier. I believe the importance of BTCFI exceeds that of BTC L2. BTC L2 needs to first address security issues; only by solving security issues can it attract more funds, allowing BTC to appreciate on-chain as an asset occupying half of the Web3 space, which is crucial. Although some EVM sidechain projects are developing rapidly, their lifecycle may be short. In the long run, we need to seek a balance between security and ecology, which is the issue I want to emphasize.

WongSSH: As a developer, when I first saw some EVM scaling solutions for Bitcoin, I found that there were no very good solutions for security when reviewing their documentation, so I did not participate in any Bitcoin EVM sidechain projects. RGB++ and the Lightning Network were topics I had researched before. At that time, I was studying Taproot, so I also learned about these technologies. From a developer's perspective, these theories are very complex and contain a lot of terminology I am not familiar with. Since I was mainly doing EVM smart contract development, I was not particularly familiar with the UTXO system, so I had to take a lot of courses to better understand RGB++ and the Lightning Network.

For BitVM, my initial exposure was to BitVM0, which I found very complex. I spent a long time studying the various design types of BitVM0, and ultimately still did not fully understand it. Later, when I looked at it again, it was BitVM2. Compared to BitVM0, I can at least understand much more now, possibly because I have gained a better understanding of UTXO. Therefore, for BitVM2, I feel it has started to have practical application potential. Later on, I learned that the Bitlayer team announced in their blog that they had addressed most of the technical issues in BitVM2, which, in my view, makes BitVM2 a more interesting direction.

( BitVM Technology Paradigm Implementation and Outlook

Kevin: Before deciding to engage in the Bitlayer project, we were helping ABCDE review projects. At that time, we thought about building a second-layer network on Bitcoin. Based on our experience in L2 over the past few years, the core of the system requires off-chain calculations or state transitions to be verified on-chain. Theoretically, obtaining verification at any layer or main chain and driving corresponding actions, such as Slash or redemption in emergency mode, which is akin to an escape pod mode, means that the chain theoretically inherits the security of the parent chain. This model has been widely understood and tested over time.

Based on this concept, we are exploring the possibility of implementing verification on Bitcoin. Initially, there was indeed no solution, but fortunately, around October 2023, we noticed the paper by Robin Linus, whose white paper proposed a method for implementing fraud proof or OP on Bitcoin, which is essentially a means of verification.

We believe its greatest value lies in several aspects: first, it does not require a fork, which is the most important feature. If a fork is necessary, then achieving this goal will be a long way off, and many protocols based on these opcodes will find it difficult to land. At first, I might have been overly optimistic; historically, Bitcoin forks and upgrades have come around quickly, but a year has passed, and I have conducted research published in the community, discovering that things are not optimistic. Thus, our initial judgment— the importance of the no-fork characteristic— is correct. The OP model or the model for implementing fraud proofs on Bitcoin is very clear and easy to understand. Since everyone has been educated for many years, there is no need to re-understand concepts such as rollup, OP, Validity Proof, etc., which is relatively easy for developer and user education. This is one important reason why we chose this direction.

Next, we consider what changes it can bring. Since it is a means of verification implemented on Bitcoin without forks, theoretically, any computation done off-chain can be validated. The first is the bridge we discussed, whether it is today or cashing out, especially when cashing out, it is necessary to verify the eligibility or ability to regain funds on layer one. The user's funds have already been stored at a certain address when entering, so why does this address have the authority to give funds back to the user when the user cashes out, and how much funding is left? Legitimacy also needs to be verified. The BitVM mentioned earlier is intended to land in this scenario.

Lao Bai: I'm not purely focused on technology, so my understanding of BitVM is not as deep as Kevin's. From an investor's perspective, BitVM feels a bit like the initial proposal of ZK rollup in Ethereum; it aims to achieve a completely trustless environment, which is essentially similar to Ethereum's ZK rollup. OP is considered a temporary solution, and after ZK, everyone can fully verify, becoming fully trustless. Once we have a fully trustless environment, what do you actually want to do on top of it? Or to put it another way, there are some things we cannot do today due to trust reasons, or we cannot do them on a large scale. Understanding this from a broader perspective helps in grasping the concept.

I just mentioned that BitVM is considered the third attempt on the Bitcoin chain, and it is highly likely to be the last attempt. Following the failures of large blocks and issuing assets on-chain, this third attempt is probably the last stimulation attempt for on-chain transactions. I am wondering, if BitVM also fails, what means do we have left? Whether in terms of technology or other ideas and directions, I personally can't think of anything for now.

May: One practical application of BitVM is a trustless cross-chain bridge. We can imagine that since DeFi is still dominated by ETH, if there is a BitVM bridge, could we make Bitcoin's liquidity the core of a new DeFi development path, allowing Bitcoin to take a dominant position in DeFi and reducing reliance on centralized derivatives like WBTC? This is what I consider to be a more practical application scenario for BitVM, which could activate BTCFI in the future.

) Bitlayer BitVM bridge solution's differentiation

Kevin: In simple terms, we are going to use BitVM