The Bitcoin ecosystem welcomes the L2 wave, which projects are worth following?

Recently, the rise of the inscription project has sparked a new wave of enthusiasm in the Bitcoin ecosystem. At the same time, inscription trading has also put significant pressure on the Bitcoin network, raising concerns about network congestion and "spam transactions". Against this backdrop, the trend of L2 development in the Bitcoin ecosystem is accelerating, and a number of Layer 2 projects aimed at enhancing Bitcoin's scalability and programmability have emerged.

The L2 Trend of Bitcoin

The large influx of inscription transactions has led to severe congestion on the Bitcoin network. Data shows that since February 2023, inscriptions have been the main consumers of Bitcoin block space, and the Bitcoin mempool has been in a state of long-term saturation. A large number of small UTXO transactions are piling up in the mempool, potentially never to be packed onto the chain, which not only causes a waste of network resources but also triggers controversy over "spam transactions."

In this context, the advantages of Bitcoin L2 solutions are gradually becoming apparent: on the one hand, L2 can alleviate the pressure on the main network by bundling transactions to the second layer network; on the other hand, L2 can also introduce smart contract functionality to Bitcoin, opening up more application scenarios such as DeFi and NFTs. Therefore, building a thriving Bitcoin L2 ecosystem has become a hot direction in the current market.

Bitcoin L2 Project Review

Stacks: Bitcoin smart contract layer

Stacks, as an independent Layer 2 protocol, introduces Ethereum-like smart contract functionality while remaining anchored to the Bitcoin blockchain. This enables applications such as DeFi and NFTs to be implemented within the Bitcoin ecosystem. However, Stacks uses its own token STX as Gas and employs a centralized mapping method for BTC cross-chain transactions, which carries certain risks. Currently, the user activity and capital scale of Stacks still lag significantly behind mainstream L2s on Ethereum.

RSK: a smart contract platform based on Bitcoin

RSK uses the same PoW consensus as Bitcoin, but with faster block generation and higher transaction processing capacity. Its main feature is supporting merged mining, allowing Bitcoin miners to mine RSK without additional investment, thereby increasing their earnings. However, RSK issues smartBTC anchored to BTC, which still faces smart contract security risks.

BitVM: An innovative but yet to be validated solution

BitVM attempts to achieve Turing-complete smart contracts without modifying the underlying Bitcoin code. Its core innovations include introducing state through Bit Commitments and achieving verifiability via logic gates. However, BitVM is still in the theoretical stage, and its available functionality is very limited; future developments remain to be seen.

BEVM: A decentralized Bitcoin L2 solution

BEVM is a Layer2 network that uses BTC as Gas and is compatible with EVM. Its greatest feature is the realization of a fully decentralized BTC cross-chain, allowing for seamless migration of DApps from the Ethereum ecosystem. This enables various DeFi applications to quickly land on BEVM, bringing more possibilities to the Bitcoin ecosystem.

MAP Protocol: supports cross-chain interoperability Layer 2

MAP Protocol aims to achieve peer-to-peer cross-chain interoperability between Bitcoin and other public chains. It also provides a low Gas, low congestion trading environment for BRC20 tokens and supports rollback to the Bitcoin mainnet. This offers a new solution for inscription transactions.

Summary and Outlook

The Bitcoin L2 track is still in its early stages, but it has already shown great potential for development. In the future, a number of leading projects with valuations in the billions of dollars are likely to emerge. For investors, the Bitcoin L2 track is currently still a blue ocean, containing rich investment opportunities that are worth long-term follow.