Bitcoin Layer2 Explosion Eve: What Can We Learn from the Development of Ethereum L2?

In 2023, Bitcoin welcomed a new era of inscription assets through the Ordinal protocol. This native asset issuance method quickly gained market popularity, not only giving rise to protocols such as BRC20, Atomical, and Runes, but also spawning well-known inscriptions like ORDI and SATS, along with numerous Bitcoin-native NFTs.

The Bitcoin ecosystem is once again迎来春天, attracting a large amount of capital, users, and developers. However, with development, the limitations of Bitcoin as Layer1 are gradually becoming apparent: it does not support smart contracts and is difficult to expand to more diverse application scenarios; performance and miner fees have also become significant obstacles to the further development of the ecosystem.

This wave quickly spread to the Bitcoin scaling track, opening up the popular track for Bitcoin Layer 2. Some older scaling solutions have regained attention, and new Layer 2 projects continue to emerge.

From Fandom to Refutation, Where is the Road for Bitcoin Layer 2?

The Bitmap Tech team has launched Merlin Chain amidst the hype. After going live in February 2024, Merlin Chain quickly gained a large TVL, surpassing 3 billion USD within 30 days, reaching a peak of 3.5 billion USD.

However, after the listing of Merlin on April 19, the price of the token MERL quickly fell back, with a drop of over 80%. The TVL also plummeted sharply, currently down to around $1.3 billion. This raises doubts about Bitcoin Layer 2: is it a genuine potential narrative or just a fleeting hype topic?

In fact, the development of the entire blockchain industry is progressing through constant exploration. As a pioneer, Ethereum's Layer 2 development experience is worth learning from. Let's review the expansion journey of Ethereum and look forward to the development of Bitcoin Layer 2.

Looking Back at the Ethereum Scalability Journey

1. Learning and Exploration

Ethereum initially drew on Bitcoin's experience and explored methods such as state channels, the Lightning Network, and sidechains.

State channels open transaction channels outside Layer 1, constantly updating the status. However, it is only applicable to both parties within the channel, requiring continuous online status updates.

The Lightning Network iterates on the basis of state channels, connecting multiple channels into a network. However, as an off-chain network, it is mainly used for transfer payments and does not support smart contracts.

Sidechain technology fills the gaps of the Lightning Network and allows for smart contracts to run. However, due to its independence, there are data availability issues, and it has not been widely recognized.

2. The willows are dark but the flowers are bright.

In 2017, the Plasma framework was proposed, using a subchain structure to form a Merkle tree. However, Plasma still has data availability issues and does not support smart contracts.

In 2018, Rollup technology was born, which compresses all transaction records of the sub-chain and transmits them to the main chain, solving the data availability issue. The proposal of Optimistic Rollup technology led to the successive launch of projects such as Optimism and Arbitrum, which gained widespread recognition.

3. Hundred Flowers Blooming

After the success of Optimism and Arbitrum, more teams are exploring different Layer 2 solutions. Optimism launched OP Stack, Arbitrum launched Orbit, zkSync launched ZK Stack, and Polygon launched CDK, making the release of Layer 2 easier.

Currently, L2beat statistics show over 50 Layer 2 projects, entering a phase of vigorous development. Some teams are starting to explore decentralized sequencer solutions to enhance security.

The Dilemma and Breakthrough of the Bitcoin Ecosystem

1. The current scaling dilemma of Bitcoin

Bitcoin Layer 2 development began before Ethereum, but did not gain widespread recognition. The Lightning Network ( in 2015 ) does not support smart contracts; Liquid Network ( in 2016 ) adopted a centralized solution; RSK ( in 2015 ) did not become mainstream; the RGB protocol ( in 2016 ) has questionable practicality; Stacks ( in 2018 ) faced delays in upgrades; BitVM ( in 2023 ) runs smart contracts off-chain.

Currently, there are very few Bitcoin Layer 2 solutions that are truly recognized by the public; either the technology is hindered, or they are not decentralized enough, and a breakthrough is urgently needed.

2. Possible breakthrough directions in the Bitcoin ecosystem

BEVM achieves a trustless BTC network solution through Taproot Consensus, opening up new technical implementation logic. The BEVM-Stack concept is similar to OP Stack and may bring a new landscape.

Mezo uses tBTC as a foundation, acting as a bridge between Bitcoin and Ethereum. However, the security measures still rely on multi-signature, and the level of decentralization is questionable.

Outlook

Despite the impact of changes in the macro environment, it will not hinder the development of the Bitcoin ecosystem. The BTC Layer 2 track is currently in a difficult uphill period and requires more projects that possess "decentralization", "native" and "greater security" to emerge.

Only by moving in the right direction can the Bitcoin ecosystem truly explode. This trillion-dollar track's magic box has been opened, and we need to embrace expectations, maintain patience, and hold our ground.