The Bitcoin ecosystem welcomes new opportunities, Layer 2 projects are in the spotlight

Recently, the popularity of the inscription project on the Bitcoin network has triggered a series of chain reactions. On one hand, the prices of related tokens continue to reach new highs; on the other hand, problems such as network congestion and skyrocketing transaction fees have also emerged. This situation has prompted the market to start thinking about how inscriptions and Bitcoin can achieve a benign coexistence and development.

Against this backdrop, the trend of "L2" in the Bitcoin ecosystem seems unstoppable. Layer 2 solutions can not only alleviate the "spam transaction" problem but also bring DeFi applications such as Swap, lending, and liquidity mining to the Bitcoin ecosystem through programmability. So, what is the current development trend of the Bitcoin L2 sector? Which early projects are worth paying attention to?

The "L2" Trend of Bitcoin

The surge of inscriptions has provided ordinary users with participation opportunities, but it has also put immense pressure on the Bitcoin network. Network congestion and skyrocketing transaction fees have become the most apparent issues. Since inscription transactions tend to set lower transaction fees, it has led to a backlog of numerous transactions in the memory pool, making it difficult to process them in a timely manner.

Data shows that since February 2023, inscriptions have been the main consumers of Bitcoin block space. The memory pool has continuously been at full capacity, and the network cannot clear it in time. A large number of small UTXO transactions may never be packed on-chain, which not only causes a waste of resources but also sparks controversy over "garbage transactions."

In this case, the advantages of Bitcoin L2 solutions become apparent. They not only alleviate network congestion issues but also bring rich DeFi application scenarios to the Bitcoin ecosystem through smart contracts.

Bitcoin L2 Project Overview

Stacks: Bitcoin smart contract layer

Stacks, as a second layer to Bitcoin, is anchored on the Bitcoin blockchain while introducing smart contract functionality similar to Ethereum. It opens new possibilities for applications such as DeFi and NFTs. However, Stacks uses a centralized mapping approach to achieve BTC cross-chain, which carries certain risks. At the same time, its network Gas uses STX instead of BTC, which may affect miners' participation enthusiasm.

RSK: A general smart contract platform based on Bitcoin

RSK's unique design of merged mining allows miners to mine both Bitcoin and the RSK blockchain simultaneously, increasing profitability. The transaction processing speed and efficiency of RSK surpass that of the Bitcoin mainnet. However, RSK uses smartBTC (RBTC) for cross-chain transactions, which still poses security risks for smart contracts.

BitVM: The Up-and-Coming Bitcoin Smart Contract Star Awaiting Verification

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

BEVM: A Fully Decentralized Bitcoin L2 Solution

BEVM is a BTC Layer 2 that uses BTC as Gas and is compatible with EVM. It achieves decentralized BTC cross-chain through contract addresses hosted by 1000 nodes. BEVM is fully compatible with EVM, allowing BTC to easily realize various decentralized applications, bringing more possibilities to the Bitcoin ecosystem.

MAP Protocol: A peer-to-peer cross-chain interoperable Bitcoin L2 network

MAP Protocol leverages the security mechanism of Bitcoin, enabling seamless interaction of other public chain assets with the Bitcoin network. It offers lower Gas transaction fees and realizes BRC20 cross-chain capabilities. Users can trade BRC20 tokens on SATSAT with low Gas and zero congestion.

Summary

The Bitcoin L2 track is迎来新的发展机遇. This field is currently in its early stages and is expected to produce a number of leading projects worth billions of dollars. As a new problem-solving approach, Bitcoin L2 has enormous imaginative potential and is worth long-term attention.

As the cryptocurrency community recognizes the importance of Layer 2 solutions for the future of Bitcoin, the development cycle of this sector may be quite long. Now is a good time for early positioning, and investors should closely monitor the developments in this field.