Bitcoin Layer2 Development Prospects Analysis

Bitcoin, known as "digital gold," welcomed a brand new asset type called inscriptions in 2023. Inscriptions can be likened to products processed from gold, possessing unique value. This native asset issuance method quickly gained market popularity, giving rise to protocols such as BRC20, Atomical, Runes, as well as well-known inscriptions and Bitcoin native NFTs like ORDI and SATS.

The Bitcoin ecosystem is once again迎来春天, attracting a large amount of capital, users, and developers. However, the limitations of Bitcoin as Layer 1 are gradually becoming apparent: it does not support smart contracts and is difficult to expand into richer application scenarios; network performance and miner fees have become obstacles to development. This has prompted people to turn their attention to the Bitcoin scaling track, initiating a craze for Bitcoin Layer 2.

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

The Merlin Chain launched by the Bitmap Tech team has become a popular project, with the TVL surpassing $3 billion after the staking activity went live. However, the MERL token plummeted rapidly after its listing, and the TVL also dropped significantly, raising doubts about Bitcoin Layer2.

In fact, the development of the blockchain industry has been exploring forward amidst doubt and recognition. As a pioneer, Ethereum's Layer 2 development experience is worth learning for Bitcoin.

Looking Back at the Path of Ethereum Scalability

1. Learning and Exploration

Ethereum initially drew on Bitcoin's experience to explore solutions like state channels, the Lightning Network, and sidechains. While state channels and the Lightning Network can improve efficiency, their application scenarios are limited. Sidechains support smart contracts, but there are data availability issues.

2. The willow is dark and the flowers are bright.

The Plasma framework proposed in 2017 improved sidechain design, but still had issues. In 2018, Rollup technology was born, solving key problems and initiating a Layer 2 explosion. Projects like Optimism and Arbitrum rapidly developed, building ecosystems.

3. A hundred flowers bloom.

Layer 2 has successfully attracted more teams to explore. The one-click launch of Layer 2 tools such as OP Stack promotes the prosperity of the Layer 2 ecosystem. Currently, there are more than 50 Layer 2 projects that have entered a thriving development stage. At the same time, new solutions such as decentralized orderers are also being explored.

The Dilemma and Breakthrough of the Bitcoin Ecosystem

1. The current scalability dilemma of Bitcoin

Bitcoin Layer 2 development started relatively early, but there has not yet been a widely recognized solution. The Lightning Network, Liquid Network, RSK, RGB, Stacks, and others all have shortcomings. Currently, many projects have received funding, but they generally face technical bottlenecks or insufficient levels of decentralization.

2. Possible breakthrough directions in the Bitcoin ecosystem

Emerging projects such as BEVM and Mezo are attracting attention. BEVM implements a trustless solution based on Taproot Consensus, while Mezo utilizes tBTC as a foundation to build Layer2. These new solutions bring fresh ideas for the development of Bitcoin Layer2.

Outlook

Despite the challenges, the development prospects of Bitcoin Layer 2 remain bright. More trustless, native, and secure projects are needed to promote a flourishing ecosystem. With technological breakthroughs and ecosystem improvements, Bitcoin Layer 2 is expected to usher in a true explosion, becoming a trillion-dollar track.