Why do we need Layer2?
After the emergence of blockchain, whether it is the early Bitcoin network or the Ethereum network, at the beginning of the design, although the advantages of peer-to-peer payment system or smart contracts allowed blockchain technology to develop rapidly, the problems of slow chain speed and miner gas fees were also more prominent, and this is the defect of Layer1.
In order to improve or even solve the problems of Layer1, Layer2 related technologies and projects came into being. In general, Layer2 is an independent blockchain network built on Layer1, and its purpose is to package most of Layer1 transactions into Layer2 to reduce pressure and expand capacity.
In the early days of blockchain development, decentralization, security, and scalability formed an impossible triangle. Although it is impossible to break this impossible triangle, the complementary Layer 1 and Layer 2 also allow decentralization, security, and scalability to be achieved at different layers of the same network.
The development path of Bitcoin Layer2
First, let's take a look at why we need to re-emphasize Bitcoin Layer2 in 2024. At a time when Ethereum is issuing coins through smart contracts and DeFi is bringing about a truly prosperous ecosystem, the Bitcoin ecosystem is a little quiet. Starting from 2023, with the rise of BRC20, Atomical, Runes and other protocols, hot market inscriptions such as ORDI and SATS, as well as well-known NFTs such as BitFrog and Runestone, were born.
Behind every phenomenal token/NFT is a large-scale Gas War. After a period of development, there are indeed more and more assets on Bitcoin. Although BRC20 and Ordinals protocols allow users and investors to see the huge potential and gameplay of the Bitcoin network, due to the lack of support for smart contracts, the Bitcoin network cannot expand more meaningful application scenarios with inscriptions or NFTs alone.
As a developer, perhaps in 2023 and 2024, there will be a more urgent mentality to build the infrastructure and network of Layer2 of the Bitcoin network. As the saying goes, "Good food is never too late", the construction of Bitcoin Layer2 has already begun, and the following will sort out its development path.
In December 2015, Bitcoin Core developer and Ciphrecx CTO Eric Lombrozo, Bitcoin technology enthusiast Johnson Lau, and BlockStream co-founder Pieter Wuille jointly proposed a Bitcoin expansion improvement proposal - SegWit, or BIP141. The upgrade was implemented in 2017 and was introduced as a soft fork of the Bitcoin network. One of the most significant advantages brought by the SegWit upgrade is the increased block capacity.
In January 2018, Bitcoin Core developer Greg Maxwell released the Taproot proposal. Taproot is a major upgrade since SegWit, designed to improve privacy, simplify transaction verification, increase efficiency, and enable more complex smart contract processing capabilities.
It is precisely because of these two extremely important updates that Bitcoin Layer2 has a foundation for development. The mainstream solutions are mainly divided into state channels, side chains, Rollup, PoS extensions, etc.
List of New Bitcoin Layer2 Projects
Merlin Chain
Merlin Chain is a Bitcoin layer 2 solution developed by the team behind Bitmap Tech (formerly known as Recursiverse). Merlin Chain focuses on leveraging Bitcoin's unique properties and aims to unlock its untapped potential. Technically, Merlin Chain integrates zero-knowledge proofs, decentralized oracles, and on-chain BTC fraud prevention modules to support Bitcoin native assets, users, and protocols.
At the same time, the introduction of the $MERL token provides Merlin Chain with a mechanism through which community members can directly participate in the governance and development of the network, while also providing an economic incentive to promote user and developer participation.
However, recently, after Merlin Chain released its token, it opened the BTC unstaking function, but the operation came late, causing some users to suffer heavy losses. In addition, the number of active users of Merlin ecological projects has halved, the community has been attacked by hackers, user confidence has been frustrated, and Chain's TVL has fallen to US$2.4 billion.
Official website: https://merlinchain.io/
B² Network
B² Network is a leading Layer 2 project on BTC and an EVM-compatible ZK Rollup. Rollup data and ZK proof verification commitments are recorded on the BTC network and ultimately confirmed through a challenge-response mechanism. The project adopts a modular design architecture, including a Rollup layer and a data availability (DA) layer, namely the B² Hub. Ingeniously, the use of zk rollup significantly reduces transaction fees, and combined with a method similar to fraud proofs, zk commitment proofs accept user challenges, thus solving the limitation of BTC's first layer that cannot verify contracts.
It is secured through Babylon’s staking and timestamping protocols, effectively preventing remote attacks. It was also recently announced that it is cooperating with Polygon Labs to create the first BTC use case integrating Polygon CDK, which means that in the future, developers can choose the "Polygon CDK + B² Hub" combination to initiate their own BTC rollup.
Official website: https://www.bsquared.network/
AILayer
AILayer is the first L2 project to add AI concepts to the Bitcoin Layer. It is officially defined as a Bitcoin second-layer network that uses Web 3.0 + AI applications and supports the Rune protocol. It is also the only project in the AI narrative to develop BTC Layer2. Under the aura of AI blessing, AILayer is also the first BTC Layer 2 to support innovative assets such as inscriptions and runes at the Bitcoin Layer 2 level. The pledged funds can be pledged and withdrawn at any time, making it more flexible and user-friendly. The latest official website data shows that the number of on-chain users on the main network is close to one million, and the TVL exceeds 700 million US dollars.
Among them, 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 generation rewards. At the same time, in terms of AI, AILayer provides a decentralized artificial intelligence infrastructure, providing developers and enterprises with the technology, tools and resources to build and deploy decentralized AI applications.
In terms of strategic cooperation, AILayer signed a strategic cooperation agreement with the Ministry of Digital Development of Kyrgyzstan, becoming the third Web 3.0 project in the world to sign a contract with a national government in Central Asia after Binance and Tether.
In terms of ecosystem development, more than 100 ecological applications and developers have joined AILayer. The AI Odyssey event that will be launched on the main network and the developer incentive plan dedicated to ecological construction will also be launched soon.
Recently, AILayer and BitFi announced the launch of the first joint airdrop event. Participants will have the opportunity to obtain an exclusive BitFi OG pass and enjoy multiple exclusive incentives such as BitFi airdrops and AILayer TVL points. In addition, AILayer is now connected to the OKX Web3 wallet. Users can stake, earn points, and more on AILayer through the OKX Web3 wallet.
Official website: https://AILayer.xyz/
Bitlayer
Bitlayer is the first Bitcoin security-equivalent and Turing-complete Bitcoin Layer 2 built based on the BitVM paradigm. It aims to bring secure scalability to the Bitcoin ecosystem, promote asset diversity and stimulate innovation to provide better Fast, safer, and more flexible user experience.
Compared with other Bitcoin Layer 2 projects, Bitlayer's main technical innovation is to use the latest BitVM computing paradigm and OP-DLC bridge to build a dual-channel two-way locked asset bridge, thereby achieving security equal to the first layer of Bitcoin.
The latest data from the official website shows that the current total locked value (TVL) on the Bitlayer chain has exceeded US$500 million. Nearly 100 ecological projects have been deployed on Bitlayer, and the number of active transactions on its chain has exceeded 1 million, making it the fastest growing Bitcoin Layer 2 in the ecosystem. In terms of market operation activities, Bitlayer held two first mining festivals, providing users with multiple project token airdrop rewards, as well as more opportunities to obtain generous 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 Bitcoin's smart contract scenarios, allowing BTC to break through the constraints of the Bitcoin blockchain's non-Turing completeness and lack of support for smart contracts, so that BTC can build decentralized applications with BTC as the native GAS on the BEVM Layer2.
Based on the Schnorr signature and Mast contract brought by the Taproot upgrade, decentralized BTC cross-chain is realized with 1000+ Bitcoin light nodes, allowing BTC to flow freely between L1 and L2 without trust. At the same time, the BEVM network uses BTC as GAS and is compatible with EVM.
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 that uses WBTC as GAS and is compatible with OP-Rollup. This relay chain will serve as a completely decentralized middle layer to introduce mainstream assets on Ethereum (WBTC/ETH/USDC/USDT, etc.) into the BEVM network.
Official website: https://www.bevm.io/
Final Thoughts
It can be seen from the above representative projects that Bitcoin Layer2 does not appear to be homogenized. Although most of them adopt relatively mature Layer2 technologies such as compatibility with EVM, Rollup, and cross-chain, the focus of the projects is different. For example, BEVM focuses on cross-chain experience, Merlin Chain has created a new paradigm for staking, and AILayer has encountered and seized the AI trend, deeply integrated with artificial intelligence, and brought more AI application solutions.
The original intention of Bitcoin Layer2 was to indirectly break the impossible triangle, but with the catalysis of various events and the changes of the times, it has been given more significance, attracting more attention from other public chains to jointly build a prosperous Bitcoin ecosystem. Will Bitcoin Layer2 have a summer like Ethereum Layer2? Perhaps it is just a matter of time, and it still needs a fuse to detonate.
