When it comes to the second layer network of public chains, perhaps more people are actually involved in Ethereum’s Layer2 network (abbreviated as Layer2). Projects such as Arbitrum, Optimism, zkSync, and Stark in Ethereum’s Layer2 have successively released tokens, bringing both joy and worry to different people. However, Layer2 is not exclusive to the Ethereum ecosystem. Bitcoin Layer2 is also showing great potential.
Why do we need Layer2?
After the emergence of blockchain, whether it is the early Bitcoin network or the Ethereum network, although they have rapidly developed due to the advantages of peer-to-peer payment systems and smart contracts, the slow speed and high gas fees of on-chain transactions have become prominent issues, which are the shortcomings of Layer1.
In order to improve and even solve the problems of Layer1, related technologies and projects of Layer2 have emerged. In general, Layer2 is an independent blockchain network built on top of Layer1, with the goal of offloading most of the transactions from Layer1 to Layer2 to reduce pressure and increase capacity.
In the early development of blockchain, decentralization, security, and scalability formed an impossible triangle. Although this triangle cannot be broken, the complementary relationship between Layer1 and Layer2 allows 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 pay attention to Bitcoin Layer2 in 2024. While Ethereum has achieved true prosperity with the issuance of tokens through smart contracts and the rise of DeFi, the Bitcoin ecosystem has been relatively quiet. However, things change over time. Starting from 2023, with the rise of protocols such as BRC20, Atomical, and Runes, as well as the emergence of popular assets like Ordi and SATS, and well-known NFTs like Bitfrog and Runestone, each phenomenon has led to a gas war. After a period of development, there are indeed more assets on the Bitcoin network. Although BRC20 and Ordinals protocols have shown users and investors the huge potential and gameplay of the Bitcoin network, due to the lack of support for smart contracts, Bitcoin network can only expand limited meaningful use cases with NFTs and inscriptions.
Therefore, as developers, perhaps in 2023 and 2024, there will be a more urgent mindset to build the infrastructure and network for Bitcoin Layer2. As the saying goes, “Good things come to those who wait.” The construction of Bitcoin Layer2 has already begun, and the following will summarize its development path.
In December 2015, Bitcoin Core developers Eric Lombrozo, Johnson Lau, and Pieter Wuille jointly proposed a Bitcoin scaling improvement proposal called SegWit, which is BIP141. This upgrade was implemented in 2017 as a soft fork in the Bitcoin network. One of the most significant advantages brought by the SegWit upgrade is the increase in block capacity.
In January 2018, Bitcoin Core developer Greg Maxwell released the Taproot proposal. Taproot is a major upgrade after SegWit, aiming to improve privacy, simplify transaction verification, improve efficiency, and enable more complex smart contract capabilities.
It is these two important updates that lay the foundation for the development of Bitcoin Layer2, with mainstream solutions mainly including state channels, sidechains, rollups, and PoS extensions.
Overview of emerging Bitcoin Layer2 projects
Merlin Chain
Merlin Chain is a Bitcoin Layer2 solution 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. Technically, 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 community members to directly participate in the governance and development of the network. It also provides economic incentives to promote user and developer participation.
However, with the recent release of the Merlin Chain token and the opening of the BTC unstaking function, some users suffered heavy losses due to the late operation. In addition, the active user count of the Merlin ecosystem has halved, and the community has experienced hacker attacks, leading to a loss of user confidence. The TVL of the Chain has dropped to $2.4 billion.
B² Network
B² Network is a leading Layer2 project on Bitcoin and an EVM-compatible ZK Rollup. Rollup data and ZK proof verification commitments are recorded on the Bitcoin network and confirmed through a challenge-response mechanism. The project adopts a modular design architecture, including the Rollup layer and the Data Availability (DA) layer, namely B² Hub. Cleverly, it greatly reduces transaction fees using zk rollup and combines methods similar to fraud proofs to allow zk commitment proofs to be challenged by users, thereby solving the limitation of contract verification on Bitcoin Layer1.
It ensures security through Babylon’s staking and timestamp protocols, effectively avoiding remote attacks. It recently announced a collaboration with Polygon Labs to build the first BTC use case integrated with Polygon CDK. This means that developers can choose the combination of “Polygon CDK + B² Hub” to launch their own BTC rollup in the future.
AILayer
AILayer is the first Layer2 project on Bitcoin that integrates AI concepts. It is officially defined as a Bitcoin Layer2 network that adopts Web 3.0 + AI applications and supports the Rune protocol. It is the only project in the AI narrative that develops BTC Layer2. With the support of AI, AILayer is the first BTC Layer2 to support innovative assets such as inscriptions and runes. The pledge funds can be withdrawn at any time, making it more flexible and convenient for users. The latest data on the official website shows that the on-chain users of the mainnet are close to one million, and the TVL exceeds $700 million.
Among them, the tokens pledged to AILayer can become PoS verification nodes. Numerous PoS verification nodes will be responsible for maintaining the stable operation and normal block production of the Layer2 network, thereby obtaining continuous block rewards. At the same time, in terms of AI, AILayer provides a decentralized infrastructure for artificial intelligence, providing developers and enterprises with the technology, 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 in the world to sign a contract with a national-level government in Central Asia, following Binance and Tether.
In terms of ecosystem development, more than 100 ecosystem applications and developers have joined AILayer. The AI Odyssey event, which is about to start on the mainnet, and the developer incentive program dedicated to ecosystem construction will be launched soon.
Recently, AILayer announced a partnership with BitFi to launch the first joint airdrop event. Participants will have the opportunity to obtain exclusive BitFi OG passes and enjoy multiple exclusive incentives such as BitFi airdrops and AILayer TVL points. In addition, AILayer has now been integrated into the OKX Web3 wallet. Users can stake and earn points on AILayer through the OKX Web3 wallet.
Bitlayer
Bitlayer is the first Bitcoin Layer2 built on the BitVM paradigm, which is a secure and Turing-complete Bitcoin Layer2 equivalent. Its goal is to bring secure scalability to the Bitcoin ecosystem, promote asset diversity, stimulate innovation, and provide a faster, safer, and more flexible user experience.
Compared with other Bitcoin Layer2 projects, the main technical innovation of Bitlayer lies in the use of the latest BitVM computing paradigm and the OP-DLC bridge, which builds a dual-channel bidirectional locked asset bridge, thereby achieving the same level of security as Bitcoin Layer1.
The latest data on the official website shows that the current total value locked (TVL) on Bitlayer has exceeded $500 million. Nearly a hundred ecological projects have been deployed on Bitlayer, and the number of active on-chain transactions has exceeded one million, making it the fastest-growing Bitcoin Layer2 ecosystem. In terms of market operations, Bitlayer has held two mining festivals, providing users with multiple project token airdrop rewards and more opportunities to obtain generous rewards.
BEVM
BEVM is a fully decentralized Bitcoin Layer2 project that uses BTC as gas and is compatible with the EVM. Its core goal is to expand Bitcoin’s smart contract scenarios, allowing BTC to break free from the limitations of being non-Turing complete and not supporting smart contracts on the Bitcoin blockchain, and allowing BTC to build decentralized applications with BTC as the native gas on BEVM, a Layer2 solution.
Based on the Schnorr signature and Mast contract brought by the Taproot upgrade, it achieves decentralized BTC cross-chain with more than 1000 Bitcoin light nodes, allowing BTC to freely circulate between Layer1 and Layer2 without trust. Meanwhile, the BEVM network uses BTC as gas and is compatible with the EVM.
Recently, to better connect the Ethereum and Bitcoin ecosystems, the BEVM team is building a relay chain compatible with OP-Rollup based on Optimism’s OP Stack, with WBTC as gas. This relay chain will serve as a fully decentralized intermediate layer, introducing mainstream assets (WBTC/ETH/USDC/USDT, etc.) from Ethereum to the BEVM network.
In conclusion
From the represented projects above, Bitcoin Layer2 does not appear homogeneous. Although most of them adopt mature Layer2 technologies such as EVM compatibility, Rollup, and cross-chain capabilities, the focus of each project is different. For example, BEVM focuses on cross-chain experience, Merlin Chain pioneers a new pledge paradigm, and AILayer seizes the AI trend and integrates it deeply, bringing more AI application solutions.
The emergence of Bitcoin Layer2 was originally intended to indirectly break the impossible triangle. However, with various events and changes in the era, it has been given more meaning and attracted more attention from other public chains to build a prosperous Bitcoin ecosystem together. Will Bitcoin Layer2 experience a summer similar to Ethereum Layer2? Perhaps it’s just a matter of time, still waiting for a spark to ignite.
