This article is a collective achievement of the CKB Eco Fund, with much of the content inspired by discussions with Jan Xie, Cipher Wang, Han Tang, Baiyu, and Chester Chen. Author of this article: Dr. Hongzhou Chen, Research Lead, [email protected]
Original link: https://drive.google.com/file/d/1l7_LT_aSXooh0E1Y-lGop8PAsp7IF3I-
1 Introduction#
In recent years, a nihilistic sentiment has pervaded the blockchain industry, with many believing it has strayed from the original vision of the "P2P electronic cash system" proposed in the Bitcoin white paper [1]. Innovation has stagnated, with little real value created or widespread adoption achieved. Instead, the field is dominated by speculative gambling.
The root of this predicament lies in the Ethereum model, which has led the entire industry astray. Undoubtedly, Ethereum ushered in a new era for programmable blockchains and has driven the prosperity of the entire industry over the past few years. However, today Ethereum has lost its way. In attempting to turn blockchain into a universal "world computer," Ethereum not only faces severe scalability challenges but has also spawned a plethora of "nominally decentralized" (DINO) or pseudo-decentralized applications and platforms. This flawed approach has recreated the rent-seeking intermediaries and centralized bottlenecks that blockchain was supposed to eliminate. However, not all is lost. By critically examining Ethereum's mistakes and reigniting Bitcoin's P2P vision, the industry can still get back on track. Accordingly, this article posits that the correct P2P vision will lead to the future of Web5, which is a fusion of the best aspects of Web2 and Web3, with Bitcoin as its pillar (Web5 = Web2 + Web3).
First, from a socio-technical perspective, we will analyze three key dimensions of Ethereum's pseudo-decentralized model: Participation, Ownership, and Distribution, and how they produce results contrary to Bitcoin's P2P vision. Next, we will re-examine Bitcoin's architecture and how its design avoids or mitigates these issues. Then, we propose the "Public Lightning Network Initiative" as a roadmap for achieving a truly P2P value network built on Bitcoin. Finally, we will elucidate our understanding of concepts such as BTCFi, P2P economy, and Web5 through use cases.
The road ahead will not be smooth. But by rediscovering the foundations of Bitcoin (Proof of Work (PoW) + Unspent Transaction Outputs (UTXO)) and leveraging emerging technologies like the Lightning Network, we can lay the groundwork for Web5. Let us join hands to reclaim the P2P vision and embrace a future of innovation without barriers, empowering all with Web5.
2 The Pitfalls of Ethereum's Pseudo-Decentralization#
2.1 Distinguishing Decentralization from Peer-to-Peer (P2P)#
First, we must acknowledge Ethereum's significant contributions to the development of the blockchain industry. As the first platform to introduce smart contract functionality, Ethereum paved the way for a new era of programmable blockchains and decentralized applications (DApps). Its innovative Ethereum Virtual Machine and Solidity programming language enabled developers to build complex, Turing-complete smart contracts, unlocking infinite possibilities beyond simple value transfer. Moreover, while the Initial Coin Offering (ICO) model of Ethereum has been controversial, it democratized the fundraising process and accelerated the development of the blockchain ecosystem. These achievements cannot be overlooked when criticizing the current state of Ethereum. However, as the inventor of the smart contract concept, Nick Szabo, has criticized, Ethereum, which once seemed so promising, has devolved into a centralized cult and become a garbage coin. What exactly happened?
Figure 1: P2P aims to avoid centralization in participation, ownership, and distribution
To understand why Ethereum went astray, it is crucial to distinguish between decentralization and P2P architecture. While these two terms are often used interchangeably, there are significant differences between them. Decentralized systems may still contain hierarchies or intermediaries, while true P2P systems aim to eliminate them, facilitating direct interaction among participants [2].
This distinction also has profound social and economic implications. Economists argue that hierarchies, which are the opposite of P2P, can lead to power concentration and the emergence of new intermediaries, who subsequently extract rents, restrict access, and influence the evolution of the system [3], [4]. Hierarchies in socio-technical systems manifest primarily in three dimensions: participation, ownership, and distribution [5], [6]. True P2P systems minimize hierarchies in these aspects, ensuring equitable access, control, and returns.
From this perspective, the industry's emphasis on "decentralization" is actually closer to the principles of P2P rather than its literal meaning. Figure 1 illustrates how P2P systems avoid centralization in participation, ownership, and distribution. However, while Ethereum claims decentralization (which we know actually refers to P2P), it has led to power concentration and the emergence of new intermediaries in these dimensions, deviating from the P2P vision in Satoshi Nakamoto's Bitcoin white paper. By analyzing pseudo-decentralization, we can identify where Ethereum has diverged from the original P2P vision and how to realign with it.
2.2 The Pseudo-Decentralization of Participation: The Fallacy of "Everything On-Chain"#
Ethereum has opened a new era for programmable assets and decentralized applications, attracting numerous developers and users. However, Ethereum's pursuit of becoming a "world computer," with an extreme adherence to the big block principle, has led to concerning centralization trends [7]. The mindset of "everything on-chain" has overwhelmed Ethereum's base layer, resulting in network congestion, slower transaction speeds, and increased fees. This forced it to shift from Proof of Work (PoW) to Proof of Stake (PoS), compromising the security of the ledger and concentrating power in the hands of a few large stakeholders [8]. The rise of staking models has exacerbated centralization, attempting to leverage Bitcoin's security to provide assurance for PoS-based blockchains rather than enhancing Bitcoin's security, undermining the principle of decentralization and raising concerns about its effectiveness.
The attempt to turn blockchain into a "world computer" is misleading. In fact, blockchain enhances social circulation rather than creating it; it is a technological advancement in production relations rather than productive forces [9]. Even Vitalik has acknowledged that blockchain is inefficient in computation and storage, trading performance for censorship resistance and trustless consensus [10]. Ironically, Ethereum's push to put everything on-chain has led it into a trap of its own making. Blockchain should focus on its socio-technical mission: providing a neutral, censorship-resistant settlement layer rather than trying to be everything. Most computation and data storage should occur off-chain, with only critical state updates on-chain.
2.3 The Pseudo-Decentralization of Ownership: The Trap of Blockchain as "Intermediary"#
In the 1970s, Chile's Project Cybersyn attempted to manage the economy through centralized computer control but failed due to elitism and centralization [11]. Ethereum's development is similar, as its account-based model and smart contract-centric design have fostered a new technical bureaucratic elite, particularly among Layer 2 solution providers and core developers of the Ethereum Foundation (EF). These groups control critical infrastructure, extract economic rents, and gradually concentrate power and wealth. The account model abstracts and obscures true asset ownership, creating an illusion of decentralization. Furthermore, the revolving door between EF and well-known Layer 2 projects, such as EF researchers "re-staking" into projects like EigenLayer, exacerbates conflicts of interest and entrenches a funding culture where projects recognized by Vitalik and EF are seen as legitimate while others are marginalized [13].
From a technical perspective, Ethereum's account model and state design have fueled this centralization. The account model tightly couples asset ownership with application layer logic, transforming peer-to-peer interaction into peer-to-contract relationships [14]. This global state model not only introduces central control points but also leads to rapid state growth as the number of transactions and smart contracts increases, further concentrating power. The extraction of MEV (Maximum Extractable Value) through Layer 2 solutions further evidences this centralization. Initially, MEV was seen as an attack, but through "democratic" distribution among major stakeholders, MEV has been legitimized, making Ethereum increasingly resemble traditional financial systems. Moreover, most current Ethereum Layer 2 solutions rely on multi-signature wallets or committee-authorized upgradable contracts, introducing centralization risks [15]. The rise of enterprise-led chains like Soneium serves as a stark warning of a potential future: decentralization may become a facade, masking the reality of power concentrated in the hands of a few.
To avoid this dystopian future, we must transcend Ethereum's flawed model. Returning to the original P2P vision, emphasizing individual sovereignty over centralized intermediaries, provides a pathway to establish a more open and equitable system.
2.4 The Pseudo-Decentralization of Distribution: Speculation-Driven Token Economics#
Launched in 2015, Ethereum sparked a wave of ICOs that allowed projects to issue tokens, democratizing the fundraising and value distribution process. While this provided broader opportunities for new enterprises, it also led to a proliferation of "garbage coins" with minimal utility and value [16]. Token-oriented business models blur the line between speculation and genuine value creation. Many ICOs are merely get-rich-quick schemes. Even legitimate projects face distorted incentive mechanisms, as the criteria for judging projects are more about their token price performance than actual adoption or impact.
The centralized control of token minting and distribution by project teams further undermines decentralization. As scholar Angela Walch points out, this creates severe information asymmetries, giving insiders an advantage over ordinary users [17]. The concentration of tokens in the hands of early investors leads to wealth inequality and the centralization of governance power, with Ethereum's value proposition criticized as a "veil of decentralization" [18], similar to the hierarchies and intermediaries discussed earlier.
However, we cannot generalize about ICOs; it is essential to recognize that ICOs marked a significant shift in the cryptocurrency space from traditional equity financing to token economics. ICOs provided crucial seed funding for developing decentralized protocols and applications, offering investment opportunities to a broader audience [19]. The problem lies in the abuse of ICOs, where tokens are forcibly embedded into business models, creating speculative bubbles and misaligned incentives. To give tokens genuine value, the industry must shift from token-centric models to service-centric models. Stablecoins are key to this transition. Stablecoins act as a bridge between traditional financial systems and the crypto economy, providing a stable medium of exchange that supports cooperation and economic specialization [20], [21]. This reflects a broader historical shift from focusing on asset price appreciation to prioritizing utility and user experience. We believe that Bitcoin-native stablecoins will further this transition, realizing an innovative P2P economy.
3 Returning to Bitcoin: The True Path of the P2P Paradigm#
To realize the original P2P vision and address the flaws of the Ethereum model, we must return to the roots of Bitcoin and build upon its robust technological stack. The unique combination of Bitcoin's PoW consensus, programmable UTXO model, Lightning Network, and native stablecoins provides a strong foundation for unlocking the true potential of cryptocurrencies and blockchain-based systems. By leveraging these key components, we can create a more open, secure, and scalable ecosystem that empowers users and enables genuine P2P interactions.
3.1 Empowering Participation: PoW and the Programmable UTXO Model#
A key advantage of Bitcoin's tech stack is its ability to achieve true decentralization (which we should call P2P), allowing users to participate equally in the network. This is accomplished through the combination of PoW consensus and the programmable UTXO model.
PoW consensus is not only the most secure but also the most cost-effective mechanism for achieving distributed consensus in decentralized networks, even being the cheapest way to implement anti-51% attack protocols [22]. PoS systems face a range of issues, including "no-stake" attacks, long-range attacks, and stake centralization, while PoW ensures that the cost of attacking the network is proportional to the computational power the attacker must acquire. In contrast, PoS has a circular logic flaw where the largest holders determine the state of the ledger, and the ledger state determines who the largest holders are. Furthermore, cooperation is inherently based on trust, which requires participation and commitment through labor. Participation is not just about being involved or having a say; it also includes contributing actual value [23], [24]. PoW consensus is not just a technical mechanism but a social contract that aligns participants' incentives with the security and stability of the network. This perspective from social sciences explains why PoW is so powerful. It ensures that participants have a tangible stake in the system and incentivizes them to act in the system's best interest. PoW ensures that participation in the network is open to anyone willing to contribute computational power and energy, securing the blockchain in what may be the only fair dimension (the time dimension, which is evidently also the essence of energy) and thus achieving a more decentralized and democratic form of participation. This aligns with the fundamental principles of P2P systems, which aim to minimize reliance on trusted intermediaries and facilitate direct interaction among participants.
Regarding programmability, the UTXO model offers a unique approach to building certain types of applications and services on top of the base layer. Unlike Ethereum's account-based model (which maintains a global state and requires all nodes to process all transactions), the UTXO model treats each transaction output as a discrete "first-class" asset [25]. While this model may be less flexible for complex smart contracts, it provides a more scalable and privacy-preserving method for transaction validation, as nodes only need to validate specific UTXOs of interest rather than the entire global state. Additionally, the concept of "first-class" assets grants users greater control and ownership over their digital assets, akin to cash or coins. In the UTXO model, users can directly hold their assets, as each UTXO is controlled by a specific set of private keys. This sharply contrasts with the account model, where assets are typically held by contracts controlled by third parties, similar to traditional banks. By allowing users to directly own and control their assets, the UTXO model fosters a more decentralized and user-centric approach to digital asset management. To fully realize the potential of the programmable UTXO model, new protocols like RGB++ Layer [26] are being developed to extend Bitcoin's functionality without compromising the security of its base layer. RGB++ introduces the concept of "homomorphic binding," allowing smart contracts to execute off-chain while still being anchored to the Bitcoin base layer via UTXOs. This enables more complex computations and data storage without burdening the base layer, thus enhancing Bitcoin's scalability and flexibility [27].
Combining PoW with the programmable UTXO model also enables a unique governance form that emphasizes individual freedom and competition. First, under the PoW model, miners compete for rewards through individual effort. This contrasts with PoS, which requires a cooperative collective entity to vote or stake. Second, since each UTXO is a discrete asset, users can freely transfer and interact without the permission of a central authority. In contrast, the account model manages assets in a centralized manner, akin to authoritarianism, where a few large stakeholders influence the direction of the network. Therefore, as shown in Figure 2, we can place PoW + UTXO and PoS + Account on the political spectrum. PoW + UTXO belongs to the libertarian-individual quadrant, while PoS + Account belongs to the authoritarian-collaborative quadrant. The stark contrast between these two approaches highlights the fundamental differences in their underlying philosophies and system types. The PoW + UTXO combination aligns with Bitcoin's P2P vision, advocating for individual freedom, decentralization, and direct interaction among participants, while the PoS + Account model diverges significantly from these principles. By understanding the political and philosophical foundations of different blockchain designs, we can make more informed decisions about which systems to build and participate in, ensuring that we remain true to the transformative potential of the P2P model.
Figure 2: Comparison of Governance Models
3.2 Eliminating Intermediaries: The Lightning Network#
The base layer of Bitcoin provides a secure and decentralized foundation for storing and transferring value. However, it faces limitations in scalability and transaction speed. To address these challenges and achieve true P2P interactions without relying on intermediaries, the Bitcoin community introduced the Lightning Network, a second-layer solution running on the Bitcoin blockchain [28]. The Lightning Network enables instant, low-cost, and scalable micropayments while maintaining the core principles of decentralization and security. By using off-chain payment channels and smart contracts, users can transact directly without broadcasting each transaction to the main chain. This approach significantly reduces the load on the Bitcoin network, making transactions faster, cheaper, and more private, suitable for various use cases.
The design of the Lightning Network perfectly aligns with the concept of a P2P electronic cash system. By enabling direct bilateral payment channels between users, the Lightning Network eliminates the need for intermediaries at the most fundamental level of blockchain transactions—value transfer—which is a key step toward achieving a truly P2P socio-technical system. To genuinely realize the vision of a P2P system, solutions must possess four key features: high throughput, low latency, low cost, and privacy protection. The Lightning Network excels in all four areas, making it the most viable path for achieving crypto payments. In contrast, while Ethereum's Layer 2 solutions aim to improve scalability and reduce transaction costs, they even introduce new intermediaries, as discussed in section 2.3. Moreover, compared to fully centralized systems, the inherent multi-node consensus of blockchain systems makes them more costly and slower, especially in payment scenarios. Considering the global population of 8 billion, the Ethereum model is unlikely to replace traditional payment systems like VISA due to its inherent limitations in scalability and transaction costs.
Figure 3: The Evolution of Energy, Information, and Value Channels
The first industrial revolution established global energy transmission channels, while the second industrial revolution established information transmission channels. However, we still lack dedicated value transmission channels. Existing methods of value transmission, such as the VISA system, are built on application layers above information channels. Blockchain has the potential to become this missing value channel, but relying solely on blockchain is insufficient. To truly revolutionize value transmission, we need to combine blockchain with the Lightning Network. In this value network, blockchain handles large transactions while the Lightning Network manages small, high-frequency transactions. Just as information channels have expanded globally, value channels should be constructed in parallel, following where information channels are laid.
As shown in Figure 3, introducing a dedicated value channel beyond existing energy and information channels is a significant leap. This innovation in payment methods is essentially a revolution in production relations, with the potential to change business models and collaboration methods. Just as using shells could not create a modern financial system, the fundamental impact of the Lightning Network lies in its ability to change pricing models and expand the realm of imagination. Many scenarios that are difficult to price based on subjective human judgment can now be transformed into more atomized, granular pricing mechanisms. This shift is particularly relevant to Internet of Things (IoT) and artificial intelligence (AI) applications, as the Lightning Network's micropayment capabilities can enable new forms of machine-to-machine interaction and data monetization [29].
Another key advantage of the Lightning Network is its ability to protect transaction privacy. Traditional payment systems have become a "digital panopticon" [30], where users' financial activities are monitored and potentially abused, while the off-chain payment channels of the Lightning Network allow for private transactions that are not broadcast to the public blockchain. This privacy feature is crucial for many real-world payment scenarios, as businesses and individuals often require confidentiality for their financial transactions. While privacy-focused cryptocurrencies like Zcash and Monero attempt to address privacy issues, they are often associated with illegal activities [31]. In contrast, the privacy features of the Lightning Network are built on payment channels, allowing users to benefit from enhanced privacy infrastructure without bearing the stigma or risks associated with specific privacy coins. Furthermore, the Lightning Network has the potential to promote financial inclusion, bridging the digital divide in access to financial services. All these efforts to eliminate intermediaries could have a significant impact on remittances, e-commerce, and access to digital goods and services in emerging economies.
3.3 From Token-Oriented to Service-Oriented: Bitcoin-Native Stablecoins#
The RAND Corporation has pointed out that Bitcoin and stablecoins are sufficient to support the mass adoption of cryptocurrencies and drive industry growth [32], [33]. While this is somewhat subjective, this combination is crucial for overcoming financial speculation and realigning the industry with the original P2P vision.
As is well known, one of the biggest challenges for Bitcoin to become a universal medium of exchange is its volatility. This is where stablecoins come into play. Stablecoins provide a price-stable asset by pegging to a reference (such as fiat currency), serving as a bridge between traditional financial systems and the crypto economy [20]. Like fiat currency, stablecoins offer a stable medium of exchange, which is the foundation of cooperation, specialization, and organization in human history [21]. Throughout this historical development, we have shifted our focus from asset price appreciation to practical utility and experience, nurturing the fundamental paradigm of modern economic systems: using stable media to exchange services from others [34], [35].
The history of stablecoins is marked by the development of various types of stablecoins, each with its unique characteristics and challenges. Tether (USDT) and USD Coin (USDC) have gained significant traction but face criticism regarding transparency and centralization. In contrast, decentralized stablecoins (like MakerDAO's DAI) were once considered a promising alternative. However, most existing decentralized stablecoins are built on the Ethereum model, facing issues of pseudo-decentralization, as discussed earlier. In particular, MakerDAO's recent brand upgrade and the introduction of account freezing features further highlight the demand for truly decentralized, censorship-resistant stablecoin solutions.
To realize the potential of stablecoins in a service-oriented P2P economy [36], we need Bitcoin-native stablecoins that align with the core principles of the Bitcoin network. These stablecoins, such as Stable++ (RUSD), can be built on the RGB++ Layer, leveraging Bitcoin's security and decentralization while providing a stable medium of exchange and unit of account. By eliminating the need for centralized platforms or institutions to manage issuance, redemption, and account freezing, Bitcoin-native stablecoins foster a more inclusive and censorship-resistant ecosystem. Notably, both decentralized and centralized stablecoin solutions have a place within the Bitcoin ecosystem. Decentralized stablecoins possess stronger censorship resistance and align more closely with Bitcoin's ethos, while centralized solutions can offer greater convenience and liquidity. The coexistence of these different solutions reflects the vibrant and competitive nature of the Bitcoin community, where multiple solutions can thrive and cater to diverse user preferences.
Moreover, integrating Bitcoin-native stablecoins with the Lightning Network will unleash powerful synergies, enabling a wide range of P2P financial services and applications. The Lightning Network's instant, low-cost, and scalable micropayments, combined with the stability of Bitcoin-native stablecoins, create an ideal environment for everyday transactions, remittances, and complex financial products. This combination allows entrepreneurs to focus on creating valuable services and user experiences without the need to issue tokens or face potential security compliance risks.
In summary, from a distribution perspective, the success of Bitcoin-native stablecoins and the Lightning Network will have broader implications for the power distribution and control within the cryptocurrency industry. By providing a stable and accessible infrastructure for P2P transactions, this approach empowers individuals and businesses to interact directly without relying on centralized intermediaries. This shift toward a service-oriented model aligns with the original P2P vision, fostering greater financial inclusion, innovation, and value creation.
3.4 Summary#
In this section, we explored how Bitcoin's tech stack, including PoW, the programmable UTXO model, the Lightning Network, and Bitcoin-native stablecoins, provides a robust foundation for unlocking the true potential of cryptocurrencies and blockchain-based systems. By examining these components, we have demonstrated how they address the flaws of Ethereum's pseudo-decentralized model across the dimensions of participation, ownership, and distribution. Table 1 summarizes the core technologies of Bitcoin and how CKB's innovations contribute to realigning the blockchain industry with the P2P vision.
Table 1: Bitcoin's Advantages in Achieving the P2P Vision and CKB's Innovations
The progress of society depends on reducing cognitive costs, increasing the value of information flows, minimizing loopholes, and discovering new mutually beneficial participants. The foundation of this process is trust minimization [37]. As human society evolves, from kinship and ethnicity to legal systems, this trust minimization has undergone a series of transformations. However, even today's widely recognized legal frameworks remain fragile and challenging to apply universally across the globe.
This is where the socio-technical mission of blockchain technology comes into play. The ultimate goal of blockchain is to achieve genuine P2P interactions, allowing two individuals, unsupported by any other trust mechanism, to establish secure and efficient transactions. However, Ethereum's pursuit of becoming a world computer has somewhat deviated from this original vision. Ethereum emphasizes on-chain computation and smart contracts at the expense of decentralization and social scalability. In contrast, Bitcoin's tech stack has been designed from the outset to minimize trust in P2P scenarios. Admittedly, Bitcoin faces challenges such as slow confirmation times, limited programmability, and high price volatility. However, as technology continues to evolve and mature, these issues are gradually being addressed. Innovative projects like Nervos CKB are further optimizing and expanding the Bitcoin model. The Bitcoin ecosystem is moving toward greater social scalability and realizing the P2P vision.
4 Reclaiming the P2P Vision and Embracing the Future of Web5: Initiatives, Trinity, Use Cases, and Web5#
4.1 The Common Lightning Network Initiative#
The Common Lightning Network Initiative is an ambitious plan aimed at realigning the blockchain industry with the P2P electronic cash system vision originally envisioned by Satoshi Nakamoto. Bitcoin has proven that a blockchain network built on P2P mining nodes can establish a solid foundation for consensus on digital gold. The decentralized nature of the Bitcoin network, achieved through its globally distributed mining nodes, ensures the security, immutability, and censorship resistance of the blockchain. For the Lightning Network, a large number of widely distributed nodes is also crucial for its security, capacity, and resilience.
However, the current Bitcoin Lightning Network has only about 15,000 nodes, and its growth has been limited since 2022. Due to insufficient infrastructure, its capacity is only around 5,000 BTC, and the supported assets are few, making it unable to replace traditional financial systems on a global scale. Therefore, based on the Fiber Network, we propose combining the Lightning Network with DePIN hardware infrastructure. By using DePIN hardware to produce dedicated Lightning Network nodes, we can create a robust and geographically distributed infrastructure that supports the growing demand and usage of the Lightning Network.
The term "Common" in this initiative represents a more inclusive Lightning Network that promotes participation across two key dimensions: cross-chain compatibility and diverse implementations. First, the initiative aims to extend the Lightning Network beyond Bitcoin, encouraging other blockchains to develop their own Lightning Network implementations. For example, CKB has launched the Fiber Network (CFN), Liquid also has Lightning channels, and Cardano is developing Hydra, all inspired by payment channel solutions. Second, the initiative emphasizes interoperability between different implementations. For instance, CFN is designed to be compatible with the Bitcoin Lightning Network, allowing for seamless cross-network transactions. Its goal is to create a globally interconnected Lightning Network, where Bitcoin's Lightning Network is one of many sub-networks. By promoting interoperability, the initiative envisions establishing a highly liquid global value network that facilitates seamless asset transfers across various channels.
The Common Lightning Network Initiative consists of three key components:
- Comprehensive Development of CFN: CFN is a high-performance, multi-asset Lightning Network designed to enhance the scalability, interoperability, and user experience of the existing Bitcoin Lightning Network. CFN will support multiple assets, including BTC, stablecoins, and RGB++ assets, enabling seamless cross-chain exchanges and multi-asset transactions within a single payment channel. CFN will also implement advanced features such as channel factories, Watchtower, and multi-path payments to improve the efficiency, security, and reliability of the network. In short, CFN is the Lightning channel on CKB.
- Integration with DePIN Hardware: To ensure the decentralization and robustness of the Lightning Network, we will integrate CFN with the DePIN hardware ecosystem. By significantly increasing the number of DePIN hardware nodes, we aim to create a globally distributed, censorship-resistant network capable of supporting the growing demand for fast and low-cost payments. More importantly, by leveraging the security and reliability of DePIN hardware, we can provide Bitcoin-native yield opportunities for end-users contributing BTC, stablecoins, or RGB++ assets to the network liquidity pool.
- Establishing a P2P Application Ecosystem: The ultimate goal of the Common Lightning Network Initiative is to establish a thriving P2P application ecosystem that leverages the Lightning Network and DePIN hardware. By providing a fast, low-cost, and scalable payment infrastructure, we aim to enable a wide range of innovative applications and services, reshaping traditional business models and creating new opportunities for value creation and exchange. This may include Lightning Network-based DEXs, content platforms based on micropayments, and more. We will actively support and incentivize developers and entrepreneurs to build on CFN and DePIN infrastructure, creating a vibrant, self-sustaining P2P ecosystem that drives the application and development of the Lightning Network.
By focusing on these key aspects, the Common Lightning Network Initiative aims to lay a solid foundation for a prosperous P2P economy, enabling individuals and businesses to transact directly, securely, and efficiently without relying on centralized intermediaries.
4.2 Achieving the Trinity#
It is noteworthy that the Common Lightning Network Initiative is not just an isolated project. It is the final piece of a comprehensive, interconnected trinity ecosystem designed to address the core issues plaguing the blockchain industry and realign it with Bitcoin's original P2P vision. This trinity consists of three key components, each addressing specific challenges faced by the industry: participation, ownership, and distribution. As shown in Figure 4, the core part is a pizza (the Venn diagram looks like a pizza), with three overlapping circles representing the key elements of the solutions. The first circle is PoW + Programmable UTXO, addressing the participation issue. The second represents stablecoins, the primary solution for addressing distribution issues. The third represents the Lightning Network, a key innovation for addressing ownership issues.
Figure 4: Bitcoin P2P Trinity Diagram, a Human-Centric Framework
The intersection of the PoW + Programmable UTXO and Lightning Network circles forms the foundation of BTCFi. BTCFi unlocks a wide range of decentralized financial applications and services, driving innovation and value creation within the Bitcoin ecosystem. The intersection of the PoW + Programmable UTXO circle with the stablecoin circle gives rise to a new P2P economy supported by Bitcoin [36], steering the industry toward a service-oriented approach. The intersection of the stablecoin and Lightning Network circles gives birth to PayFi, a Bitcoin-native P2P payment infrastructure. PayFi leverages the stability of stablecoins and the efficiency of the Lightning Network to facilitate smooth, low-cost, and secure P2P transactions, allowing users to engage in direct economic interactions without relying on traditional financial intermediaries. These intersections mutually reinforce each other, creating a virtuous cycle of growth and adoption. BTCFi provides the financial infrastructure and tools necessary for the development of the P2P economy, while the P2P economy generates demand for BTCFi services and drives the development of PayFi. In turn, PayFi serves as a crucial entry point for users to access BTCFi and participate in the P2P economy, further promoting adoption and network effects.
It is important to note that, as described, in our framework, people (users, communities, society) are always the primary consideration, serving as the foundation for all components and processes. In other words, Bitcoin's P2P "marketplace" [38] can accommodate diverse voices and ideas, showcasing the limitless power of the community. This fundamentally differs from the Ethereum model, which centers around smart contracts, with people as mere appendages.
4.3 Web5 = Web2 + Web3#
At the center of this trinity, where the three circles intersect, lies our ultimate goal: to realize Bitcoin's P2P vision and usher in a new era of Web5, a paradigm that combines the best aspects of Web2 and Web3. Web5 is built on the solid foundation of Bitcoin, representing the future of P2P, where users can freely and directly interact, transact, and create value without the constraints of centralized platforms or intermediaries. While the term "Web5" was initially proposed by Jack Dorsey [39], our understanding and vision of Web5 transcend his definition. Although Jack Dorsey's proposal may have been somewhat tongue-in-cheek, we take the concept of Web5 seriously, as it aligns perfectly with our vision for the future of the internet.
Figure 5: Layered Scheme of Web5 and Our Focus Areas
For a long time, we have been searching for a term that accurately expresses the ecosystem we are building, one that fundamentally differs from Ethereum's approach. Before Jack Dorsey introduced Web5, we lacked a suitable term to articulate our goal of creating a decentralized future distinct from Web3. The emergence of Web5 aptly describes our vision. The equation "Web5 = Web2 + Web3" succinctly encapsulates our belief that the future lies not in putting everything on the blockchain but in combining the best aspects of Web2 and Web3. Furthermore, there are many ways to achieve this integration. For example, account abstraction (AA) and passkeys can be used, while Nostr represents another method of connecting Web2 and Web3. If there is a spectrum with P2P on one end and centralization on the other, these solutions occupy the middle ground of that spectrum. Ultimately, the term "Web5" is not only meaningful but also engaging and thought-provoking. At first glance, it may seem like a lighthearted joke. However, upon further reflection, this concept reveals its profound implications and potential, making "Web5" an ideal slogan for our vision.
Regarding the realization of Web5, Jan Xie, Chief Architect of Nervos, provides a layered scheme [40], which is based on the unique combination of Bitcoin's core features and the innovative technologies developed within the CKB ecosystem. As shown in Figure 5, the foundation of this stack is the Bitcoin base layer, which is the most secure and reliable asset issuance platform. However, Bitcoin's limited programmability means that users cannot fully leverage these assets beyond simple ownership and transfer. To unlock the full potential of Bitcoin-based assets, we introduce a programmable layer above the base layer. This is where the RGB++ Layer comes into play, serving as the financial hub for issuing assets on the Bitcoin chain. To ensure a secure and efficient connection between the base layer and the programmable layer, we adopt the homomorphic binding technology of the RGB++ protocol, enabling seamless cross-chain interoperability without the need for bridges, eliminating a major pain point in current cross-chain solutions.
On this foundation, we can now build additional layers that focus on scalability, privacy, and usability. One solution is to use Client-Side Validation (CSV) technology, which processes transactions and updates states off-chain by creating a "Merkle tree," while still maintaining the security guarantees of the underlying blockchain. Other technologies, such as Open Transactions, Chaumian e-cash, and P2P marketplaces, can further enhance the capabilities of the Web5 stack, supporting a wide range of use cases and applications. To connect all these components and provide a seamless user experience, we introduce channels. Channels serve as bridges between the components of the Web5 protocol stack and connect Web2 and Web3 technologies, with the Lightning Network being one such channel.
The primary advantage of Web5 lies in P2P payments and social networks. With the next-generation public Lightning Network CFN, we can achieve fast, secure, and low-cost P2P payments across different blockchains and assets. By integrating CKB with Nostr through RGB++, we can create a smooth and user-friendly experience for P2P social interactions and micropayments [41]. We believe these areas will create countless opportunities.
4.4 Use Cases#
To realize Web5, we are building the RGB++ Layer and stablecoins. The CFN and Common Lightning Network Initiative are the final pieces that bring these elements together. Additionally, we have witnessed the growth of the first RGB++ asset, Seal, with the Seal community driving the adoption and development of the trinity. Let us illustrate further with three use cases:
P2P Economy — Decentralized Cloud Storage with Lightning Network Incentives. In this business model, users needing storage services can enter into smart contracts with cloud storage providers on the RGB++ Layer, agreeing to pay for storage capacity and bandwidth based on usage. The platform utilizes CFN to facilitate fast, low-cost payments between users and cloud storage providers, automatically triggering payments based on actual usage. In turn, cloud storage providers are incentivized to offer reliable, high-quality storage services, as they can receive compensation directly from users via the Lightning Network. This creates a virtuous cycle of supply and demand, where users benefit from low-cost, secure storage solutions, while cloud storage providers earn income for their contributions to the network. Users retain complete control over their data, granting or revoking access as needed. This decentralized cloud storage platform addresses the limitations of traditional P2P file-sharing networks, such as lack of incentives, free-riding, poor performance, and the dilemma of centralized platform control [42], [43], leveraging the power of the Lightning Network and smart contracts to rebuild a robust, self-sustaining P2P economic system.
BTCFi — Capturing Market Opportunities with "UTXO Legos." Imagine a scenario where users see the price of Seal on the Bitcoin network skyrocketing, presenting a significant market opportunity. To capitalize on this opportunity, users wish to borrow stablecoins RUSD by using their ccBTC (pegged 1:1 to BTC and issued on CKB) as collateral to purchase Seal immediately. Security is paramount, so users cannot accept centralized cross-chain bridges, and RGB++ addresses this pain point. Executing this transaction within a single block is also an innovation. Here, UTXO Legos refer to the modular and programmable nature of UTXOs, allowing for the creation of complex automated transactions across different blockchains. Based on UTXOs, we can securely connect operations between the CKB and Bitcoin networks, ensuring that collateral locking, stablecoin borrowing, and Seal purchasing occur in an atomic swap: either all operations succeed, or none do. This programmability is a significant feature of UTXOs, allowing for finer control over transaction execution compared to the account-based model used by Ethereum. Finally, the UTXO model typically reduces transaction costs due to its ability to process transaction data more efficiently in parallel, especially when interacting with multiple blockchains. This approach demonstrates how BTCFi can provide a more powerful, secure, and cost-effective alternative to current DeFi solutions.
PayFi — Enabling Smooth P2P Payments with a Lightning Network-Based DEX. One of the most promising applications arising from the fusion of the Bitcoin Lightning Network and CKB CFN is the creation of a Lightning Network-based DEX for BTC, stablecoins, and RGB++ assets. By leveraging CFN's capability for trustless, atomic swaps across the Lightning Network, users can easily exchange BTC and stablecoins like USDT or RUSD within the CKB ecosystem without the need for centralized exchanges or KYC procedures. Essentially, this Lightning Network-based DEX can be viewed as a decentralized, P2P alternative to traditional financial networks like VISA, where nodes act as "bank branches" and earn rewards from their staked liquidity. This DEX enables users to conduct fast, secure, and private P2P transactions (rather than interacting with smart contracts), allowing them to seamlessly switch between the stability of stablecoins and the digital gold standard of BTC. The atomic swap mechanism ensures that both parties receive their respective assets simultaneously, eliminating counterparty risk and enhancing the overall security and reliability of the platform. Furthermore, CFN's multi-asset capability opens up exciting possibilities for instant, zero-fee transactions of RGB++ assets within Lightning channels. For example, users can create markets for trading RGB++ NFTs (DOB) or RGB++ tokens. These markets provide real-time, frictionless trading experiences, enabling creators, collectors, and traders to exchange value directly without incurring high transaction fees or waiting for long confirmation times.
5 Conclusion#
The blockchain industry stands at a crossroads. One path leads to the continuation of the Ethereum model, fraught with centralization and rent-seeking, diverging from the core principles of blockchain. The other path returns to Bitcoin's original vision, empowering individuals and achieving a truly decentralized P2P system.
The choice is clear. We must embrace the Bitcoin renaissance and the innovations it brings, including the RGB++ Layer, CKB Fiber Network, and native stablecoins. We must strive to create a fairer, more sustainable model of value creation and distribution, moving away from the past token-centric model toward a service-oriented future. This future is the future of Web5, which combines the strengths of Web2 and Web3.
The road ahead will be challenging, but the rewards will be immense. Therefore, let us unite as a community, dedicated to the vision of Bitcoin P2P. Let us build, innovate, and create with the passion and foresight of early pioneers. Let us show the world the true power of a P2P future.
The choice is in our hands. The future is in our grasp.
Let us begin.