Crypto giant Grayscale is announcing a "rebirth" in Bitcoin development, noting several new L2 layers to watch out for. Grayscale analyst Michael Zhao argues that these technologies could bring new applications for Bitcoin and stimulate demand for BTC.

Among the "most anticipated" new Bitcoin applications, Zhao cited the Bitcoin Virtual Machine (BitVM), a new computing model for verifying transactions in Bitcoin that opens the network to smart contract functionality more familiar to Ethereum.

One of the leading projects on BitVM is Bitcoin optimistic rollups, allowing users to group fast, low-cost transactions off-chain before settling them back into Bitcoin.

Grayscale also highlighted Spiderchains technology developed by Botanix Labs. Spiderchains are L2 layers secured by Bitcoin (BTC) stake in decentralized multi-signature wallets.

Babylon is expanding the world of Bitcoin "staking" through its BTC re-staking technology. This will allow BTC holders to stake their coins and earn income from using them to power other blockchain networks, such as Solana or Ethereum.

Finally, projects like Taproot Assets are looking to bring tokenization - specifically stablecoins - to one of Bitcoin's most popular current L2s: the lightning network.

Grayscale believes that Bitcoin's underdeveloped smart contract ecosystem could be a huge untapped market.