Merlin Protocol Exclusive Interview: An Asset Adaptation Protocol Built on the Bitcoin Network


Recently, the popularity and traffic of inscriptions in the BTC ecosystem have triggered a small wave in the market. More and more users are beginning to pay attention to the BRC-20 narrative. However, as inscriptions, the scarce application scenarios and value of BRC-20 have always been criticized. Merlin Protocol, an asset adaptation protocol built on the Bitcoin network, has proposed its own unique solution. Today, we invited Eason, co-founder of Merlin Protocol, to discuss the BTC ecosystem, BRC-20 narrative, and Merlin Protocol.

Founder of Merlin Protocol - Seasoned BTC Developer

Eason, the founder and CEO of Merlin Protocol, is a seasoned developer with a robust background in BTC technology. He entered the crypto realm as early as 2016, a time when Ethereum had not yet fully dominated the entire cryptocurrency market. According to Eason, "During that period, various protocol stacks were available for development teams, encompassing consortium blockchains and other stacks. However, a majority of projects were constructed on the BTC protocol stack, including notable ones like Dogecoin and the early Quantum Blockchain."

Eason's initial development efforts were centered around the BTC protocol stack, particularly focusing on the development of BTC network transmission. In subsequent phases, he extended his involvement to BTC mining-related tasks and contributed code to the open-source community libBitcoin.

Merlin Protocol is a project co-founded by Eason and his partner after five years of cumulative experience, aspires to emerge as the foremost asset adaptation protocol within the BTC ecosystem.

BTC Ecosystem - A Pivotal and Promising Narrative in the Upcoming Bull Market Cycles

Drawing parallels, Eason identifies a similar sentiment with BRC-20 in the present BTC ecosystem. He states, "The current positioning of BRC-20 can be viewed as a successful instance of social practice. It has achieved token distribution reminiscent of past ICOs but in a new and equitable manner."

However, despite acknowledging the success of BRC-20, Eason refrains from adopting an overly optimistic outlook for its development. He anticipates that, following a surge of enthusiasm, BRC-20 is likely to transition into a more subdued phase. Historical retrospection reveals that many ICO projects that experienced rapid growth have since faded away. However, Eason emphasizes that a more composed state does not imply a complete cooling.

Eason notes that in previous bull market cycles, BTC typically led the charge, bringing a substantial influx of funds into the entire Web3 market, resulting in a cascading effect of fund overflow. These funds would diversify into various cryptocurrencies, including Ethereum, Ripple, LTC, and even smaller altcoins.

However, the ascent of BRC-20 this time around may alter the landscape significantly. With the potential catalysts of future BTC Spot ETF and BTC halving, the overflow of funds may not be as substantial into Ethereum and other non-BTC ecosystems. Investors might lean towards holding BTC for the long term or using BTC to engage in BRC-20 and other projects within the BTC ecosystem. Consequently, Eason posits that BRC-20 isn't a transitory concept destined to vanish after a single surge but represents one of the most significant and promising emerging trends poised to gather momentum in the next 1-2 bull market cycles.

Critical Elements of BTC Ecosystem Progression - Consensus Layer and Application Layer

When discussing the progression of the BTC ecosystem, Eason outlines a dual-layered perspective on its development. The first layer involves the code maintenance work executed by the BTC Core development team. Historically, the progress of the entire technical protocol stack of BTC has been deliberate, marked by two significant updates over eight years: Segregated Witness (SegWit) and the introduction of Taproot technology. At its core, Bitcoin's most substantial value emanates from its consensus. Thus, the paramount focus in BTC development lies in stabilizing its code and fortifying consensus. The ultimate objective at this layer is to globally recognize BTC, with a fixed supply of 21 million, as a valuable digital asset like gold.

The second layer encompasses application development endeavors within the BTC ecosystem. The market's optimism towards BTC application development stems from its colossal market value, ranking it among the top 10 assets globally. Theoretically, innovative applications within the BTC ecosystem could unleash unimaginable volume and value.

Yet, Eason identifies two pressing issues demanding resolution in the current BTC development process, corresponding to the aforementioned two-layer structure.

The foremost challenge revolves around consensus and the extensively debated BTC halving. In Satoshi Nakamoto's design, BTC undergoes a halving of mining rewards every four years, reducing token rewards for miners securing the BTC network. Despite predictions in the BTC whitepaper that transaction fees would compensate for losses incurred by halving, reality has proven otherwise. Current transaction fees cannot fully offset miner losses post-halving, potentially leading to a protracted decline in Bitcoin's hash rate after reaching historical highs. Since Bitcoin's security and consensus rely on its hash rate, achieving equilibrium between miners, network security, and token incentives becomes a pivotal concern.

The second issue is tied to application development within the BTC ecosystem. Unlike Ethereum, which is a development-centric platform, BTC fundamentally operates as an asset and a peer-to-peer transfer protocol. Consequently, the current BTC ecosystem features BRC-20 assets and technologies like Taproot but lacks native DeFi infrastructure to support these assets' development.

This mismatch may lead to a contraction in projects within the BTC ecosystem, with only a few surviving amidst a plethora of emerging initiatives. Simultaneously, the entire BTC ecosystem might struggle to generate sufficient DeFi services that entice and add value for holders to participate. Addressing these challenges becomes imperative for the ongoing development of BTC.

Merlin Protocol - Asset Adaptation Protocol in the BTC Ecosystem

Merlin Protocol is at the forefront of technological innovation and exploration within the application layer of the BTC ecosystem. According to Eason, the core purpose of the protocol is to function as an asset adaptation platform on the BTC network. In simpler terms, Merlin facilitates the transfer of BRC-20-related assets in a flexible manner to ecosystems beyond BTC, such as the Ethereum-related EVM ecosystem.

Eason elaborates: "The EVM ecosystem linked to Ethereum has transcended its early phase dominated by ICO FOMO sentiment, especially after the developments during the last DeFi Summer. The rise of DeFi has convincingly demonstrated that blockchain technology can serve finance and foster long-term value growth. The EVM ecosystem has the potential to birth a series of DeFi platforms and infrastructure with enduring value."

Therefore, the primary vision of Merlin Protocol is to assist high-quality BRC-20 projects in transitioning to the EVM Layer 2 ecosystem for essential DeFi activities, bridging the gap until native DeFi infrastructure matures within the BTC ecosystem. By doing so, Merlin enhances the value proposition of BRC-20 assets and offers users greater income feasibility.

Simultaneously, Eason notes Merlin's development team's attention to BTC Layer 2 solutions like BitVM. However, recognizing the early stages of such technologies, Eason highlights that while some BTC Layer 2 solutions claim to migrate native assets from the BTC network, the practical process often involves steps resembling airdrops, snapshots, or even more intricate and high-threshold procedures. Merlin Protocol remains committed to monitoring the BTC Layer 2 trajectory. As these high-quality Layer 2 solutions progress, Merlin Protocol aims to proactively adapt them, enabling users to migrate their holdings of BRC-20-related assets to the target ecosystem in a more convenient and flexible manner.

Merlin Protocol vs. MultiBit - Protocol-Level Standard vs. Cross-Chain Product

In the interview, Eason conducted a comparative analysis between two trending projects, MultiBit and Merlin, aiming to elucidate Merlin's distinct market positioning. Eason acknowledged MultiBit's success as a cross-chain product on the BTC network, noting that Merlin drew inspiration from MultiBit's design concepts during its initial development. However, he emphasized the fundamental disparity between Merlin Protocol and MultiBit: Merlin is not a mere cross-chain product; it operates as a protocol-level standard.

Eason clarified that MultiBit primarily serves consumers, allowing cross-chain assets through straightforward wallet connections. In contrast, Merlin Protocol is tailored as a business-oriented protocol. Notably, achieving cross-chain functionality from BRC-20 to ERC-20 presents challenges due to the non-fungible nature of BRC-20 based on Ordinals. Ordinals, being individual inscriptions, are non-fungible tokens (NFTs), making cross-chain transitions for assets of different types difficult. Merlin Protocol addresses this challenge by technically transforming inscriptions into fungible tokens, facilitating the conversion from BRC-20 to ERC-20.

Eason illustrated this distinction with examples. Merlin Protocol effectively tackled the centralization concern in the BRC-20 indexer service by employing Oracle technology, a notable advancement in BRC-20 asset issuance. Traditionally, this process relies on centralized servers, introducing trust risks. Merlin, however, implemented an indexer module with equivalent functionality on the Solidity smart contract, mitigating potential centralization risks in the adaptation of BRC-20 and ERC-20. Additionally, Merlin accomplished the minting and burning of BRC-20 through the protocol stack of Oracle and native token transfer technologies.

In essence, the key divergence between Merlin Protocol and MultiBit lies in the protocol's object-oriented nature. Merlin, at the protocol level, provides solutions for project parties, offering an open standard that any BRC-20 project or community can adopt for cross-chain functionality. On the other hand, MultiBit, functioning as a cross-chain product, facilitates services for users, involving BRC-20 and subsequent cross-chain transfers. Therefore, Eason asserted that, in comparison to MultiBit, Merlin Protocol affords greater freedom at the protocol level and ensures enhanced security.

Merlin 2024 - Official Launch & Collaborative Initiatives

As per the developmental updates shared by Eason, Merlin Protocol is poised to officially unveil its BRC-20 adaptation protocol in January 2024. Meanwhile, Merlin is actively engaging in collaborative efforts with various Layer 2 and BRC-20 projects to diversify the range of supported asset types and services within its platform. Eason disclosed that Merlin has already forged substantial business collaborations with several selected Layer 2s. Anticipated for January of the upcoming year, Merlin aims to collaborate with several esteemed BRC-20 projects, striving to integrate their BRC-20 assets into Layer 2 environments beyond the BTC ecosystem. The objective is to leverage the DeFi infrastructure within these Layer 2 solutions, offering value-added services for these assets.

Additionally, Merlin Protocol is set to provide tailored solutions for BRC-20 assets, especially those potentially constrained by official Oracles like Chainlink, facilitating a seamless transition into the DeFi ecosystem. Projections indicate that Merlin will strategically partner with approximately 30 high-quality BRC-20 projects in the first quarter of the coming year.

Eason encourages users to closely follow Merlin's official communities such as Twitter and Discord. Within these communities, BRC-20 Launchpad platforms collaborating with Merlin may release pertinent information about the sales of BRC-20 tokens. Users keen on BRC-20 projects can leverage the Merlin community to access timely and comprehensive information about these unfolding developments.

The Future - Transitioning from EVM to BTC Layer 2

In recent times, attention and activity within crypto space have markedly gravitated towards the BTC ecosystem, particularly the BRC-20 ecosystem. Consequently, Merlin Protocol's immediate plan is to offer asset adaptation services for BRC-20 project parties in a business-to-business manner, collectively propelling the advancement of the BTC ecosystem.

Following the accomplishment of short-term objectives, Merlin will pivot towards developing cross-chain solutions for native BTC. During this phase, users will leverage Merlin Protocol to facilitate adaptation between native BTC and the EVM Layer 2 ecosystem. Eason further noted that, in the future, Merlin will persistently adapt and ensure compatibility with a broader range of value assets within the BTC ecosystem, encompassing BTC hash power and Taproot assets, among others. The protocol will also retain attention regarding the ongoing progress in the BTC Layer 2 ecosystem.

At the end of the interview, Eason conveyed a highly optimistic outlook on the development of the BTC ecosystem. He envisions a substantial likelihood of significant breakthroughs in BTC Layer 2, akin to projects like BitVM, emerging in the third and fourth quarters of the upcoming year. There is even the prospect of witnessing innovations within the ecosystem. At that time, as an adaptation protocol, Merlin Protocol will assist early users to seamlessly integrate with the entire BTC ecosystem, leveraging its technological advancements to facilitate further asset appreciation for users.

BRC 20


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