Alexei Zamyatin is a (recovering) academic cryptographer who co-founded the Build on Bitcoin project – an initiative which focuses on layer 2 solutions that scale Bitcoin. In this episode, we talk about zero-knowledge proofs, rollups, sidechains, and the various types of layer 2s.

Though I’ve previously interviewed Alexei in S15 E6 alongside John Light and Super Testnet, I had to get him back for three important reasons: firstly, he was the first to leave the conversation from Buenos Aires and he didn’t get the chance to express his views on certain topics; secondly, back in November 2023 I didn’t know as much about Build on Bitcoin and I wasn’t prepared to make the most of his expertise; and thirdly, I really wanted to know Alexei Zamyatin’s opinion on Citrea – a ZK rollup system which got launched in February of 2024, claims to be the first of its kind on Bitcoin, and intersects with some of Alexei’s work.

Interviewing individuals whose work is at the bleeding edge of innovation always comes with challenges, and some of them take on personal beliefs and more or less dogmatic views. In the case of Alexei Zamyatin, it was interesting to discover a rather unorthodox approach which leverages the Ethereum blockchain for its EVM functionalities. Alexei argues that this alternative network provides the most robust layer for smart contracts and applications – and if its functionalities can be employed to scale Bitcoin, then he will make use of it.

At this point, it should also be mentioned that Alexei Zamyatin’s academic research focuses heavily on building trustless bridges between blockchains, so to him any kind of protocol maximalism doesn’t make much sense. He is also a fan of BitVM and ZK rollups on Bitcoin, but believes the network will never have native smart contracts like Ethereum.

Furthermore, Alexei is focused on the WBTC issue – currently, there is much more bitcoin under BitGo custody that’s issued on the Ethereum blockchain for DeFi purposes than on Lightning, Liquid, Rootstock, and other sidechains combined. As a builder, he’s looking for ways to bring that liquidity back to Bitcoin in a way which allows users to benefit from the security of the most robust network and the features of the more experimental ones. It’s a delicate balance to strike, but Alexei Zamyatin is focused on solving it.

In the last section of our interview, we also talk about Drivechains (BIP 300) and covenants. Alexei appears to like both, but seems to favor covenants for the simple reason that they enable trust minimized bridges – something with which he is more familiar.

Season 15 of the Bitcoin Takeover podcast is sponsored by Wasabi wallet, Cryptosteel, Satochip, and IVPN!

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Time stamps:

Zero Knowledge Proofs and Rollups (00:01:21) Discussion of the development of layer two solutions, including zero knowledge proofs and rollups.

Defining BitVM Rollups (00:01:58) Explanation of the debate surrounding the definition of zk rollups and the introduction of the new category of BitVM rollups.

Citrea’s Approach (00:04:41) Analysis of Citrea’s zk optimized BitVM rollup and its approach to sidechains and rollups.

Zero Knowledge Proofs and Rollups Explained (00:05:26) Explanation of the concepts of zero knowledge proofs and rollups in the context of layer two solutions.

Comparison of Rollups and Sidechains (00:12:41) Comparison of sidechains and zk rollups, discussing their differences and promises.

The Vision of Build on Bitcoin (00:18:48) Discussion of the problems to be solved in the development of layer two solutions and the vision of the Build on Bitcoin project.

EVM: The easiest way to build decentralized applications (00:22:54) Alexei Zamyatin advocates for the ease of building decentralized applications using EVM, while pointing out to the challenges of building infrastructure from scratch.

Liquidity and Stablecoins on Rollups (00:23:53) The challenges of bringing stablecoins onto rollups and the dependency on centralized parties for stablecoin provision.

Bootstrapping BOB as an ETH Rollup (00:25:47) Alexei xplains the decision to bootstrap BOB as an ETH rollup, inheriting Ethereum security and bridging assets.

Pragmatic approach to Bitcoin and Ethereum (00:30:06) Alexei Zamyatin discusses the pragmatic approach to Bitcoin and Ethereum, acknowledging the need to cater to user preferences and solve real-world problems.

Building centralized layer on Bitcoin and counterparty models (00:37:03) The trade-offs of building centralized layers on Bitcoin and the limitations of counterparty and other models.

Satochip and IVPN ads (00:42:15) Rapid fire presentation of Satochip and IVPN ads.

Drivechains proposal and its drawbacks (00:43:20) The Drivechains proposal, its potential usefulness, and the technical details and drawbacks associated with it.

Drivechains (00:44:19) Discussion on the activation of drivechains and the need to prove demand for their implementation.

Mining and MEV (00:46:29) Exploration of miner extractable value (MEV) and its potential impact on Bitcoin’s consensus and mining incentives.

Covenants for Bitcoin (00:49:17) The need for covenants in Bitcoin to facilitate the development of sidechains, layer twos, and rollups.

Activation Proposals (00:51:06) Debate over the activation of opcode proposals, such as OP_CTV and OP_CAT, and their implications for Bitcoin’s development.

Following Build on Bitcoin (00:52:47) How to keep up with the Build on Bitcoin project and relevant resources for learning about Bitcoin rollups.

Exploring the Future of Bitcoin with Alexei Zamyatin: Layer Two Innovations and Pragmatic Cryptography

The Pragmatic Approach to Cryptography and Development

Alexei’s pragmatic stance on development was evident throughout our discussion. He emphasized the importance of tooling and the need for platforms that enable teams to deploy prototypes and go to market swiftly. The Ethereum Virtual Machine (EVM) was highlighted as the current optimal environment for building decentralized applications, not only because of its maturity but also because it allows developers to concentrate on innovation rather than infrastructure.

The Liquidity Challenge and BoB’s Strategic Decisions

One of the significant challenges in the layer two space is liquidity, particularly the integration of stablecoins into rollups. Alexei pointed out that without stablecoins, a rollup would fail to cater to the majority of crypto users. The dependency on centralized parties like Tether and Circle to provide stablecoins is a hurdle for new layers seeking to establish themselves.

In response to this challenge, the decision to bootstrap BoB as an ETH rollup was strategic. It allowed BoB to inherit Ethereum’s security and act as a bridge between Bitcoin and Ethereum, rather than starting as an isolated chain and waiting for the necessary virtual machine to become available.

Bitcoin’s Role and the Need for Layer Two Solutions

During our conversation, I challenged the notion of building solely on Bitcoin and the reluctance to embrace other networks. I argued that Bitcoin needs layers that can inherit its security and benefit from the innovations of networks like Ethereum. Alexei agreed, describing himself as a “pragmatic maximalist” who believes in enhancing Bitcoin’s utility and accessibility through layers that can learn from other ecosystems.

The Global Perspective on Cryptocurrency Use

Alexei shared insights from his visit to Argentina, where he observed the practical use of digital assets. People there prioritize stablecoins, and if a solution works, even on a network like Tron, they will use it. This underscores the need to address real-world problems rather than insisting on a Bitcoin-centric approach that may not support the diverse needs of global users.

Governance and the Need for Covenants

The topic of governance and the need for covenants in Bitcoin was also discussed. Alexei Zamyatin expressed support for covenants, which would facilitate the development of sidechains, bridges, and layer two solutions. He highlighted the importance of building an ecosystem around these technologies to demonstrate their value and demand.

Drivechains: A Controversial Proposal

Drivechains, a proposal for enabling sidechains that has been debated for years, was another focal point of our discussion. While acknowledging the interesting concept, Alexei and I discussed the reasons why it has not been activated and the potential risks it poses. We also touched on the concept of Miner Extractable Value (MEV) and its implications for Bitcoin’s security and consensus.

The Path Forward: Activation and Consensus

In conclusion, this conversation with Alexei Zamyatin brought to light the complexities and opportunities within the Bitcoin layer two space. It’s clear that while Bitcoin remains the foundational layer of the entire crypto industry, embracing and learning from other networks is essential for the protocol’s evolution. As we continue to explore these technologies, the need for pragmatic solutions that address real-world demands becomes increasingly evident.