The Bitcoin ecosystem is thriving, and Layer 2 projects have broad prospects.

Recently, the concept of inscriptions has sparked a wave of enthusiasm in the cryptocurrency market. The prices of various inscription-related tokens keep hitting new highs, from SATS and RATS on the Bitcoin network to inscription concepts on other public chains, all of which have been eagerly pursued by the market. However, this prosperity has also brought some issues.

Bitcoin core developer Luke Dashjr has made sharp criticisms of inscription projects like ORDI, prompting the market to rethink the relationship between inscriptions and Bitcoin. Against this backdrop, the trend of "L2ification" in the Bitcoin ecosystem seems to be unstoppable. Layer 2 solutions can not only alleviate the heavily criticized "spam transaction" issue but also support DeFi applications such as swaps, lending, and liquidity mining by providing programmability, presenting a very promising future.

Bitcoin Faces Challenges

The inscription craze has put tremendous pressure on the Bitcoin network. Since inscriptions are similar to NFTs, allowing users to record various data on the blockchain, a large number of low-fee inscription transactions have flooded in, leading to network congestion and a surge in transaction fees. These transactions often set lower fees and are willing to wait longer for confirmation, resulting in a saturated memory pool.

Data shows that Bitcoin has accumulated 87 million UTXOs over the past 14 years, but more than 50 million UTXOs were added in just 7 months, of which 40 million are very small transactions. Most of these small UTXOs may never be spent, yet they will occupy network resources for a long time, causing significant waste.

Advantages of Layer2 Solutions

In the face of these challenges, Bitcoin Layer2 solutions have shown unique advantages:

1. Alleviate network congestion: By bundling transactions to be processed on L2, reduce the pressure on the main chain.
2. Solve the "garbage transaction" problem: avoid a large number of small transactions clogging the mainnet.
3. Enhanced programmability: Supports smart contracts, bringing rich DeFi application scenarios to the Bitcoin ecosystem.

Notable Bitcoin L2 Projects

Stacks

Stacks, as a second layer of Bitcoin, introduces Ethereum-like smart contract functionality while remaining anchored to the Bitcoin blockchain. It has its own independent chain, compiler, and programming language, opening up new possibilities for DeFi and NFT applications. However, Stacks uses a centralized mapping approach to achieve BTC cross-chain, which carries certain risks.

RSK

RSK is a general smart contract platform secured by the Bitcoin network, supporting the migration of Ethereum applications. It utilizes a merged mining mechanism, allowing miners to mine both Bitcoin and the RSK blockchain simultaneously, improving efficiency and profitability. However, RSK uses smartBTC for bridging, which still faces smart contract security risks.

BitVM

BitVM aims to achieve Turing-complete Bitcoin contracts without changing opcodes. It introduces state through Bit Commitments, implements verifiability using logic gates, and minimizes on-chain activity. However, BitVM currently has limited functionality and mainly remains in the theoretical stage.

BEVM

BEVM is a fully decentralized Bitcoin L2 solution that uses BTC as Gas and is compatible with EVM. It achieves secure asset transfers through an innovative cross-chain mechanism and supports the building of various decentralized applications, bringing more possibilities to the Bitcoin ecosystem.

MAP Protocol

MAP Protocol is a Bitcoin L2 network that supports peer-to-peer cross-chain interoperability. It leverages Bitcoin's security mechanisms to achieve BRC20 cross-chain capabilities and offers lower Gas transaction fees. Users can trade BRC20 tokens on it in a cost-effective, congestion-free manner.

Conclusion

The Bitcoin L2 track is in the early stages of development and holds enormous potential. As the cryptocurrency community deepens its understanding of the importance of Layer 2 solutions, this field is expected to give rise to a number of leading projects with market values in the billions of dollars. For investors, the Bitcoin L2 track is undoubtedly a blue ocean worth long-term attention.