When it comes to the second layer network of public chains, perhaps the one that more people are actually participating in is Ethereum’s second layer network (referred to as Layer2). For example, Ethereum’s Layer2 projects Arbitrum, Optimism, zkSync, and Stark have successively released tokens, leaving some people happy and some people worried. However, Layer2 is not exclusive to the Ethereum ecosystem, and the Bitcoin Layer2 seems to be cultivating more carefully.
(Background: Bitcoin’s L2 network Stacks detailed: How do ETFs pass and how does BTC halving ignite STX?)
Why do we need Layer2?
After the emergence of blockchain, whether it’s the early Bitcoin network or the Ethereum network, the slow speed and high gas fees for miners have been more prominent issues due to the limitations of Layer1.
In order to improve or even solve the problems of Layer1, related technologies and projects for Layer2 have emerged. In general, Layer2 is an independent blockchain network built on top of Layer1, with the aim of offloading most transactions from Layer1 to Layer2 to reduce pressure and expand capacity.
In the early stage of blockchain development, the impossibility triangle of decentralization, security, and scalability was established. Although this impossibility triangle cannot be broken, Layer1 and Layer2 complement each other, allowing decentralization, security, and scalability to be achieved in different layers of the same network.
The development path of Bitcoin Layer2
First, let’s focus on why we need to re-focus on Bitcoin Layer2 in 2024. As Ethereum has ushered in a prosperous ecosystem through the issuance of smart contracts and DeFi, the Bitcoin ecosystem has been relatively quiet. Starting from 2023, with the rise of protocols like BRC20, Atomical, and Runes, as well as popular market names like ORDI and SATS, along with well-known NFTs like Bitfrog and Runestone, every phenomenon-level token/NFT has led to a large Gas War. After a period of development, the number of assets on Bitcoin has indeed increased, but due to the lack of smart contract support, the Bitcoin network can only rely on tokens or NFTs to expand the application scenarios.
As developers, perhaps in 2023 and 2024, there is a more urgent need to build the infrastructure and network for Bitcoin Layer2. The construction of Bitcoin Layer2 has already begun, and below we will review its development path.
In December 2015, SegWit, a Bitcoin capacity expansion proposal, was jointly proposed by Bitcoin Core developers, Ciphrecx CTO Eric Lombrozo, Bitcoin technology enthusiast Johnson Lau, and BlockStream co-founder Pieter Wuille. This upgrade was implemented in 2017 and introduced as a soft fork into the Bitcoin network. One of the most significant advantages brought about by the SegWit upgrade was an increase in block capacity.
In January 2018, Bitcoin Core developer Greg Maxwell released the Taproot proposal. Taproot is a major upgrade after SegWit, aimed at improving privacy, simplifying transaction verification, increasing efficiency, and enhancing the ability to process more complex smart contracts.
It is these two important updates that have laid the foundation for the development of Bitcoin Layer2, with mainstream solutions mainly divided into state channels, sidechains, rollups, and PoS extensions.
New cutting-edge Bitcoin Layer2 projects overview
Merlin Chain
Merlin Chain is a second-layer solution for Bitcoin developed by the team behind Bitmap Tech (formerly known as Recursiverse). Merlin Chain focuses on leveraging the unique properties of Bitcoin to unleash its untapped potential. From a technical perspective, Merlin Chain integrates zero-knowledge proofs, decentralized oracles, and on-chain BTC anti-fraud modules to support Bitcoin-native assets, users, and protocols.
At the same time, the introduction of the $MERL token provides a mechanism for Merlin Chain, allowing community members to directly participate in the network’s governance and development, and also provides economic incentives to promote user and developer participation.
However, with the recent release of the Merlin Chain token and the opening of BTC unstaking, some users suffered heavy losses due to late operation. In addition, the active user volume of the Merlin ecosystem halved, and the community suffered from hacker attacks, leading to a decline in Chain’s TVL to $2.4 billion.
Official website:
https://merlinchain.io/
B2 Network
B 2 Network is a leading Layer 2 project on BTC, and is also an EVM-compatible ZK Rollup. Rollup data and ZK proof verification commitments are recorded on the BTC network and ultimately confirmed through challenge-response mechanisms. The project adopts a modular design architecture, including the Rollup layer and the Data Availability (DA) layer, namely B 2 Hub. Cleverly, the use of zk rollup significantly reduces transaction fees and combines methods similar to fraud proofs to allow zk commitment proofs to be challenged by users, thereby solving the limitations of BTC Layer1’s inability to verify contracts.
It ensures security through the Babylon pledge and timestamp protocol, effectively avoiding remote attacks. It has recently announced a collaboration with Polygon Labs to create the first BTC use case integrated with Polygon CDK, meaning that developers can choose the “Polygon CDK + B 2 Hub” combination to launch their own BTC rollup in the future.
Official website:
https://www.bsquared.network/
AILayer
AILayer is the first L2 project to incorporate AI concepts into the Bitcoin Layer and is defined as a Bitcoin Layer2 network that adopts Web 3.0 + AI applications and supports the Rune protocol. It is also the only project in the AI narrative to develop BTC Layer2. With AI’s blessing, AILayer is the first BTC Layer2 to support innovative assets such as runes and runes, with flexible and convenient staking fund support for users to stake and withdraw at any time. The latest website data shows that the mainnet has nearly a million on-chain users and a TVL of over $7 billion.
Staking AILayer tokens can become PoS verification nodes. Many PoS verification nodes will be responsible for maintaining the stable operation of the second-layer network and normal block generation, thereby obtaining continuous block rewards. At the same time, in terms of AI, AILayer provides a decentralized AI infrastructure, providing developers and enterprises with the technical tools and resources to build and deploy decentralized AI applications.
In terms of strategic cooperation, AILayer has signed a strategic cooperation agreement with the Digital Development Department of Kyrgyzstan, becoming the third Web 3.0 project globally to sign a contract with a national government in Central Asia after Binance and Tether.
In terms of ecosystem development, there are currently over 100 ecological applications and developers joining AILayer, and the AI Odyssey event to be launched on the mainnet and the developer incentive program dedicated to ecosystem building will be launched soon.
Recently, AILayer announced a collaboration with BitFi to launch the first joint airdrop event, where participants have the opportunity to receive exclusive BitFi OG passes and enjoy multiple exclusive incentives such as BitFi airdrops and AILayer TVL points. In addition, AILayer has now integrated with the OKX Web3 wallet. Users can stake and earn points on AILayer through the OKX Web3 wallet.
Official website:
https://AILayer.xyz/
Bitlayer
Bitlayer is the first Bitcoin Layer2 built on the BitVM paradigm, aiming to bring secure scalability to the Bitcoin ecosystem, promote asset diversity, and stimulate innovation to provide a faster, more secure, and more flexible user experience.
Compared to other Bitcoin Layer2 projects, the main technological innovation of Bitlayer lies in the use of the latest BitVM computation paradigm and OP-DLC bridge, which builds a dual-channel bidirectional locked asset bridge, achieving the same level of security as the Bitcoin Layer1.
The latest data on the official website shows that the current total locked amount (TVL) on the Bitlayer chain has exceeded $500 million, with nearly a hundred ecological projects deployed on Bitlayer. The number of active on-chain transactions has exceeded 1 million, making it the fastest-growing Bitcoin Layer2 in the ecosystem. In terms of market operations, Bitlayer has held two episodes of the head mine festival, providing users with multiple project token airdrop rewards, as well as more opportunities to earn substantial rewards.
Official website:
https://www.bitlayer.org/
BEVM
BEVM is a fully decentralized BTC Layer2 project that uses BTC as GAS and is compatible with EVM. Its core goal is to expand the smart contract scene of Bitcoin, allowing BTC to break free from the limitations of the non-Turing complete Bitcoin blockchain and non-support for smart contracts, enabling BTC to build decentralized applications on BEVM with BTC as the native GAS.
Based on the Schnorr signature and Mast contracts brought about by the Taproot upgrade, it has implemented a decentralized BTC cross-chain with over 1,000 BTC light nodes, allowing BTC to freely flow between L1 and L2 without the need for trust. At the same time, the BEVM network uses BTC as GAS and is EVM-compatible.
Recently, in order to better connect the Ethereum and Bitcoin ecosystems, the BEVM team is building a relay chain based on OPtimism’s OP Stack, to create a OP-Rollup compatible with WBTC as GAS, which will serve as a fully decentralized intermediate layer to introduce mainstream assets from Ethereum (WBTC/ETH/USDC/USDT, etc.) into the BEVM network.
Official website:
https://www.bevm.io/
In conclusion
From the above representative projects, it is clear that Bitcoin Layer2 does not appear to be homogeneous. Although most of them adopt mature Layer2 technologies such as EVM compatibility, Rollup, and cross-chain, the focus of the projects is different. For example, BEVM focuses on cross-chain experience, Merlin Chain has pioneered a new staking paradigm, and AILayer has encountered and seized the AI trend, integrating deeply with artificial intelligence to bring more AI application solutions.
The original intention of Bitcoin Layer2 was to indirectly break the impossibility triangle, but with various events and changes in the times, it has been given more meaning, attracting more attention to jointly build a prosperous ecosystem for Bitcoin. Will Bitcoin Layer2 have a summer like Ethereum Layer2? Perhaps it’s just a matter of time, and it still needs a spark to ignite.
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