Swords are coming! In the past 24 hours, runes accounted for 72.7% of all Bitcoin transactions. In the future, it will surely inspire users and institutions to invest in the Bitcoin ecosystem on a larger scale and more frequently, thereby bringing greater impetus to the development and creation of the Bitcoin ecosystem. The surge in transaction volume and network congestion make the L2 solution no longer a test product, but a necessity. It can be foreseen that BTC L2 will become one of the most promising tracks in this round of bull market!
1. What is Bitcoin L2?
In the blockchain, there is an impossible triangle, that is, security, decentralization and scalability. You can only choose two out of the three, not all of them. Bitcoin sacrifices scalability to maximize security and decentralization. Bitcoin Layer2 is an expansion plan for Bitcoin, mainly an upper-level expansion for Bitcoin's scarce application scenarios and relatively inefficient operating efficiency.
Why does Bitcoin need L2?
① The introduction of Ordinals, BRC-20, and now the Rune Protocol has had a profound impact on the BTC network, especially the increase in transaction fees. On the day the Rune Protocol went online, fees increased 6 times, and even if today's GAS fees have dropped, they are still 37 times higher than the same day last year! While higher fees play a vital role in revitalizing the Bitcoin ecosystem, they also reflect the growing demand for block space.
② The surge in BTC network usage has increased the pressure on its infrastructure. Just imagine that according to the latest rate, it costs $20 to initiate a $100 Bitcoin transaction! This poses a huge challenge to the practicality of the Bitcoin network. Excessively high transaction fees will discourage more and more users, which highlights that the Bitcoin ecosystem urgently needs scalable solutions to adapt to growing demand while maintaining transaction feasibility.
3. What is the future development prospect of Bitcoin L2?
① Most of the Bitcoin capital with a market value of 1.3 trillion is dormant and cannot generate benefits. The huge opportunities contained in it are waiting to be explored. The emergence of Ordinals, BRC-20, and Runes has revitalized the developer community. More and more developers are no longer focusing only on Ethereum, but are gradually participating in the construction of the Bitcoin ecosystem, which has laid a solid foundation for the innovation and continued prosperity of the Bitcoin ecosystem.
② According to estimates, in the foreseeable future, Bitcoin L2 has the potential to process more than 25% of all Bitcoin transactions, which means huge development prospects! Although Bitcoin's L2 solution is still in the early stages of development, it is expected to achieve significant growth. The total market value of ETH is $398.9 billion, and the TVL of L2 is $40 billion! The total market value of BTC is $1.31 trillion. If compared with Ethereum, there is a market space of 131.3 billion!
4. What are the Bitcoin L2 projects?
Bitcoin L2 solutions can be specifically divided into the following categories:
Sidechain solutions: @rootstock_io, @Stacks, @Liquid_BTC
Lightning Network: @lightning
Rollup solution: @MerlinLayer2, @BSquaredNetwork
BitVM solution: @BitlayerLabs
RGB: @NervosNetwork
5. What is the sidechain solution?
As the name implies, a sidechain is a chain next to the mainchain. The sidechain solution is to put a box on each of the two chains. To transfer 1 BTC to the sidechain, you need to lock it in the box on the mainchain first, and the sidechain box will release a BTC. If you want to transfer the BTC on the sidechain back, you need to lock the BTC on the sidechain into the box and release the BTC on the mainchain. The advantage is that the sidechain can provide faster and cheaper transactions, reducing congestion on the mainchain.
One of the representative sidechain projects is @rootstock_io, a distributed smart contract platform built on the Bitcoin blockchain. It provides the same security as Bitcoin and similar flexibility as Ethereum. As a sidechain of Bitcoin, it uses the native token#RBTCas the "fuel" of smart contracts, which is anchored to Bitcoin and can be redeemed for Bitcoin at a 1:1 ratio.
6. What is the Lightning Network?
In simple terms, the Lightning Network is a payment channel established between two parties, where only the first and last transactions are placed on the Bitcoin blockchain, and any number of transactions between the first and last transactions will be conducted off-chain, which means that these transactions are not restricted by the Bitcoin protocol. It is equivalent to taking a subway, where you can enter, exit, and stay as many times as you want, but the final charge is based on the starting station.
@lightning - Lightning Labs, the lead developer of the Bitcoin Lightning Network, released Taproot Assets, an asset protocol for#BTCand Lightning that aims to enable stablecoins and real-world assets to be issued on Bitcoin and the Lightning Network.
7. What is the Rollup solution?
Rollup represents a major leap forward in enhancing Bitcoin’s scalability and functionality. In simple terms, it involves executing transactions off-chain, away from the Bitcoin mainnet, and then aggregating or “rolling up” those transactions into a single package, sending the bundled data back to the Bitcoin blockchain for data availability. This is like having a lot of couriers to move, which would take many trips manually, but can be moved in one trip with a cart, saving time and effort.
The recently popular @MerlinLayer2 uses ZK-Rollup technology, which can condense many off-chain transactions into a single transaction, thereby greatly reducing the data burden of the main chain. This technology can not only increase throughput, but also ensure transaction security through cryptographic proofs. It supports multiple Bitcoin protocols, such as BRC-20, etc. It is also compatible with EVM. $MERL is its governance token, with a total market value of $189 million and a current price of $0.84.
8. What is the BitVM solution?
BitVM refers to the Bitcoin Virtual Machine, which creates a virtual space where developers can freely operate any computing program or execute any smart contract, allowing developers to simulate program behavior without imposing any load or changes on the actual Bitcoin network. This provides a lot of new possibilities for contract creation, and because most of the computing work is performed off-chain, it improves the overall efficiency of the network.
@BitlayerLabs is the first BTC L2 solution based on BitVM. It uses layered virtual machine technology and uses zero-knowledge proof and optimistic verification mechanisms to support various types of calculations. In addition, Bitlayer has built a dual-channel two-way locked asset bridge through OP-DLC and BitVM bridge, thereby achieving security equal to Bitcoin's first layer. Recently, Bitlayer received $5 million in financing.
9. What is RGB
RGB is a scalable and confidential Bitcoin and Lightning Network smart contract system that brings the complex programmability and flexibility of smart contract platforms such as Ethereum to the Bitcoin ecosystem. Through RGB, developers can execute complex multi-category smart contracts such as token issuance, NFT casting, DeFi, DA, and more, thereby stimulating innovation on top of Bitcoin's powerful blockchain while maintaining its security.
@NervosNetwork pioneered the RGB++ solution. CKB is the underlying public chain based on the PoW consensus mechanism in the network. Through RGB++, the interoperability between BTC and CKB can be achieved without cross-chain assets, and it is convenient to combine RGB assets with Defi scenarios, which greatly solves the usability problem of the RGB protocol. Its native token $CKB currently has a market value of 872 million US dollars and a current price of 0.0198 US dollars.
Summary: At present, Bitcoin Layer2 is showing a momentum similar to Ethereum Layer2, with various projects entering the market to overcome Bitcoin's "impossible triangle". And because of the prosperity of the Bitcoin ecosystem driven by inscriptions and runes and the participation of more and more developers, it can be foreseen that after L2 solves the scalability of Bitcoin, the Bitcoin ecosystem will accelerate its development in payment, DeFi, NFT and other fields in the future, covering more tracks and users, which is worth looking forward to!
After getting drunk, I don’t know that the sky is in the water, and the boat is full of clear dreams that press down the stars. The above is all about Bitcoin L2. If you like my article today, please give more reposts and likes, I will be very grateful 🙏🙏
