Many projects have chosen to build on Bitcoin L2, or integrate existing solutions from other projects, rather than consider further congestion of L1 to be the optimal solution for these solutions.

🔻Even if one argues that Bitcoin should only be used for monetary transaction purposes, L2 is still needed. Last year, 152 million transactions took place on Bitcoin.

If we expect at least 2% of the world's population, or 160 million people, to make 10 Bitcoin transactions per year, that's 1.6 billion transactions.

Further, Bitcoin only recently broke the 1 billion transaction mark. If users are already complaining about rising fees driven solely by transaction volume, then there is clearly a problem.

If true global mass adoption is indeed the goal of Bitcoin, then it is clear that at least some Bitcoin scaling solution is necessary.

When we consider these factors together, the need for a strong Bitcoin scaling solution becomes obvious.

However, we should note that the current Bitcoin L2s are still relatively new narratives in the industry, and it is unclear whether they will ultimately win out as the optimal solution, or if a new winner will emerge in the next few years.

(2) Potential market space for BTC L2 🔻

To consider the potential market space for Bitcoin L2 opportunities, we can refer to Ethereum, which is the largest smart contract L1 and adopts an L2-centric scaling solution (rather than Solana, which is more focused on scaling L1 itself)

Ethereum's current market value is about $446 billion, and its various L2 solutions have a TVL of about $450, that is, L2 solutions account for about 10% of Ethereum's total market value.

Similarly, Bitcoin's current market value is about $1.4 trillion, and its relatively small L2 solutions currently have a TVL of about $2 billion. This accounts for about 0.13% of Bitcoin's market value.

The TVL of the leading Ethereum L2 Arbitrum One is about $18 billion, accounting for about 40% of Ethereum L2. By inference, if the Bitcoin L2 market grows to about $14 billion, the largest L2 may be about $6 billion.

📍If the Bitcoin L2 market grows to similar proportions as Ethereum (i.e. 10% of Bitcoin’s value in L2), then the TVL of the largest Bitcoin L2 could exceed $60B.