Chipping Away at Bitcoin’s Biggest Challenge & Opportunity - TOKEN2049 Singapore 2024

Hey everybody. Thanks for coming out. I'm Rich from Core. Core is an L1 blockchain powered by Bitcoin. On one side, it's the most liquid BTC fi ecosystem with hundreds of millions in TVL and tens of thousands of daily active users.

And on the other side, it's the biggest Bitcoin yield product with hundreds of millions earning a risk-free rate. And here we're going to talk about some of the biggest uh some of Bitcoin's biggest challenges and how Core is starting to approach these. So this is a graph that most people in this room are probably familiar with. This is the Bitcoin halving. So every 4 years, the Bitcoin block reward is cut in half.

And that's something we've all known to come and love because our Bitcoin goes up in value. It has this perfect scarcity, this easy-to-understand monetary policy. There will only ever be 21 million Bitcoin. But on the converse of that, the Bitcoin miners have their profitability cut in half every 4 years. That's a big problem.

It's something we we need to think about. Historically, the Bitcoin price has always 2x'd, right? It's always more than made up for it. But Bitcoin's now a trillion dollars plus, it's harder to keep having those two x's every 4 years. And this isn't a problem for 20 years in the future.

This is a problem for 4 to 8 years from now, probably one to two halvings. So, pretty critical that we start working on this short-term. And what happens if this isn't solved? Well, if Bitcoin the base layer is no longer secure and decentralized, Bitcoin itself as an asset comes into question. And Bitcoin is crypto.

If Bitcoin has issues with its crypto-economic security, all of us should probably go home cuz crypto's probably gone. So, this is a pretty urgent problem. Before talking more about solutions, a little bit about me. So, I'm one of the initial contributor at Core. Prior to that, I led money movements engineering at Coinbase for 4 years, and I've been in Bitcoin since 2013.

So, this is near and dear to my heart. It's something I care a lot about and something I've dedicated my career to. So, talking about solutions. So, historically, there's been three main categories: adding tail emissions, moving Bitcoin to proof of stake, or relying on transaction fees. Adding tail emissions.

So, what this would mean is stop having halvings. So, instead of having Bitcoin having perfect security, have it mint forever, infinitely, in some capacity. Yes, that would help with profitability, but if you get rid of the meme of 21 million Bitcoins, Bitcoin probably dies, right? If it's no longer perfect digital gold, that's probably the end of the story. Switching to proof of stake.

Many of you probably remember Ethereum did this. So, in 2020, Ethereum fired their miners. They went to proof of stake. And as a result, now 95% of Ethereum blocks are produced by three different block producers. So, it's become incredibly centralized.

On the other side, there's um there's relying on transaction fees alone. And this is a question because if we have to rely on transaction fees in the long run, like we know that's the balance, how do we get there? Are we close? Well, if we look at the graph, we're not really that close. So, we've had periods in 2017, we've had periods in 2023 and 2024 where we get an excitement, right?

We get network congestion, we get fee pressure, and even though it's not necessarily great as a Bitcoin user, the miners make a lot of money. But we haven't been able to do this on any sort of sustained basis. So, despite needing to get there over the long run, we need to chip away at this problem. So, I've said a lot of scary things about Bitcoin, but we're actually in a pretty good spot. So, Bitcoin itself has proof of work.

It's this egalitarian consensus mechanism where anyone can participate and go produce blocks. It also is a trillion-dollar asset that has very little being used in productive use cases. On top of that, it has a very high market cap that's just digital gold. It's just one use case. What happens when we open up other use cases on Bitcoin?

So, there's a lot of untapped potential here, and this was kind of the novel insight behind Core was that we can help put Bitcoin to work. So, Core really helps put coin Bitcoin to work in three ways. So, it functions as a second block reward for Bitcoin miners with over 55% of the hash rate currently securing the chain. There's over 350 million Bitcoin or 350 million in Bitcoin that's staked non-custodially, earning a risk-free rate. And then finally, in our BTC Fi ecosystem, there's actually now about 400 million in TVL and tens of thousands of daily active users.

So, let's talk about proof of work. So, in Bitcoin, miners solve SHA-256 puzzles. As they solve these puzzles, they receive Bitcoin for doing so. In Core Satoshi Plus, these same Bitcoin blocks get trustlessly relayed over, and the miners receive a second block reward in the form of Core tokens. And this was actually the original genesis of Core was this transaction fee problem needs to get solved, but we need to smooth out that profitability curve until we get there.

And that's what Core helps to do. It's this exogenous block subsidy over 81 years. And this isn't uh this isn't just a meme. This has actually been critical to core's consensus since day one. So, there's three parts.

There's delegated proof of work, there's Bitcoin staking, and there's core staking. Each one of which is a critical ingredient in core's consensus and how our validators get elected and how the network remains secure. And again, there's over 55% of the hash rate currently securing the network. So, we're a little over halfway there, but still a lot of work left to be done. So, let's talk about yield, everyone's favorite topic.

So, Bitcoin miners are Bitcoin's biggest sellers. And this is true by definition, right? For Bitcoin to come into existent, it has to go from a virgin Bitcoin and get put into circulation by being sold by a miner or an individual block producer in this case. And again, that's not a bad option. Miners have expenses, too.

However, now with core's Bitcoin staking, they don't just have to sell Bitcoin. They can actually earn a risk-free rate on their treasury. So, it gives them another tool in their toolkit beyond centralized derivatives or just bringing those Bitcoin directly into market. This came out at Token 2049 in Dubai earlier this year. So, not too far, but we've got almost 5.

7 thousand Bitcoin that's staked today. And the reason that it's got so much adoption is today your Bitcoin earns zero, right? It's it's a non-yield producing asset. And on top of it, it's totally non-custodial. So, the only risk you have is duration, but you're not planning on selling your Bitcoin anyways.

So, by leveraging native Bitcoin time locks, there's no multi-sigs, there's no giving up custody, you just send it to yourself. So, it's a one-of-a-kind product that we think will unlock billions of dollars in value in the very near future. Recently, we announced dual staking. And dual staking is what takes Bitcoin staking to the next level. So, you'll always be able to stake your Bitcoin at the base rate, but now if you stake your Bitcoin and stake core, you'll earn much higher rates.

And this is deliberately designed to help blend the Bitcoin and the core community. And this is important for what we call Bitcoin alignment. It's not just security sharing between the two networks. Now, there's capital alignment. And on this same curve, it's so easy to understand where the yield comes from.

If you don't understand where the yield is, you yourself are the yield as they say. And in core system, it's just paid out in core tokens. There's no need to go find exogenous sources of yield. It's all endogenous to the system. So again, it's a huge unlock for this Bitcoin alignment in the future of Bitcoin staking.

And to play forward kind of the minor options today. So, now they earn core rewards for delegating their hash. And if they have bills to pay, they can sell Bitcoin, they can sell core, or they can stake Bitcoin, or they can stake core. And the idea is you now again have more tools in your toolkit that allows you to again smooth that profitability curve over time. And this doesn't just apply to Bitcoin miners.

I've talked a lot about the miners, but this applies to everybody in this room as well as the largest financial institutions. Anybody can go dual stake their Bitcoin. And this is a big focus for the core team is this institutional adoption. We saw the first spot ETFs blew out even the most bullish analysts' expectations earlier this year. Core has recently launched the first yield bearing ETPs, and we hope to work our way into the ETFs as regulation permits around the world.

But this is the future. Everyone that's a Bitcoin holder, whether it's stored at BlackRock, or whether it's stored self-custodially, which we as Bitcoiners should always prefer, can now be earning yield. And it's really the next wave of the future of Bitcoin. Finally, let's talk about BTCfi. So, Bitcoin's a trillion-dollar asset today, but it's only digital gold, which in and of itself is very impressive, but there's so many other use cases to unlock, whether it's payments, DeFi, staking, and I'm sure there's more that I haven't thought about that people in this audience are working on.

But, it's this untapped store of uh of utility that if we unlock, will it will help accrete more value back to Bitcoin. And we're starting to see this on Core already, and this is going to be further unlocked with our Bitcoin LST, LSTBTC, which will unlock other use cases like restaking, Bitcoin-backed stables, and more. And the Core ecosystem's already pretty expansive. There's a 100-plus projects that are already launched. There's probably another 100 that will launch before the end of the year.

There's already apps for everyone, but we encourage builders, users, everybody to get involved in the ecosystem, and we actually just launched our Ignition Season 2, which is an incentive campaign for both users and builders. So, there's never been a better time to go test it out. And this is a a graph that I love to show. It's actually now about 400 TV 400 million TVL, but the idea is we're seeing liquidity grow rapidly, right? And this is amazing because again, it's showing some adoption.

It's showing that you can build businesses on top of Core. But, it's not just about the up into the right graphs with TVL. It's also about product market fit. Are we building stuff people want? And this has been something that the crypto space has largely ignored, actually delivering utility to users.

And again, it's early days, but we're seeing about 50,000 daily active users start to use protocols on top of Core. We have a lot of work left to be done there, but it's nice to see early adoption. How are we doing overall? So, in the L2 in scaling space, Core is doing pretty well, but we're still in the first inning. There's still so many cards to turn over, and this pie is enormous.

We've barely started to crack the surface, but it's the most exciting space for folks to play in, and it's so amazing to have so many folks that are cooperating with us or competing with us on the other side, cuz in general, we're all trying to deliver more value for Bitcoin holders. One quick bull post for everybody to to kind of leave on. So, right now, Bitcoin's a trillion-dollar asset. Using the comps of Ethereum, that should be somewhere from 100 to 300 billion that should be on chain today. We're nowhere close to that.

We're, you know, a little over 10 billion. The vast majority of that is sitting in Aave earning 0.9%. So, without growing at all, this is the largest opportunity in all of crypto. If we look at what 5, 10 years from now, when Bitcoin gets close to the market cap of gold, or even maybe gets to half of that, you're talking about a trillion-dollar space.

This is one of the largest untapped markets in the world, even by a TradFi space. So, again, if you're not building in Bitcoin or you're not participating, it's a great time to get involved. All right. So, to wrap it all up, so, Bitcoin is facing the security budget problem in the next 4 to 8 years. There's a lot of folks experimenting with different solutions.

Core and our solution is trying to be the proof-of-stake layer on top of Bitcoin. On one side, being a Bitcoin yield product, on the other, being a BTCFi platform. We're the only ones that are approaching it from an end-to-end holistic perspective, and that's critical, because you need drivers of value on both sides. Supply and demand needs to be met, and we think this is, you know, a fantastic solution to helping unlock the 1.2 trillion today, 10 trillion tomorrow of trapped Bitcoin liquidity.

So, thanks so much for coming out and get involved with Core.