Bitcoin ecosystem is flourishing, L2 projects have become the new focus.

Recently, the popularity of the inscription project has driven the prosperity of the entire Bitcoin ecosystem, with related tokens reaching new highs in their price increases, and also spurring the rise of the inscription concept on other public chains. However, the criticisms from Bitcoin core developers regarding inscriptions have prompted market reflection, leading people to explore how inscriptions and the Bitcoin ecosystem can achieve a healthy coexistence and development.

Against this backdrop, the trend of Bitcoin's L2 is becoming increasingly evident. L2 solutions not only alleviate the criticized "garbage transaction" problem but also bring a wide range of DeFi applications such as Swap, lending, and liquidity mining to the Bitcoin ecosystem through programmability, showing great potential. So, what is the current development trend of the Bitcoin L2 track? What early projects are worth paying attention to?

The Inevitable Trend of Bitcoin L2

The continued rise of the inscription craze has made it exceptionally difficult to manually participate in new projects. From a narrative perspective, inscriptions indeed provide more ordinary investors with opportunities to participate, breaking the traditional dominance of large capital in projects.

However, the rise of inscriptions has also put considerable pressure on the Bitcoin network. The most obvious issue is network congestion and a surge in transaction fees. Since inscription transactions typically set lower fees, they are easily crowded out by more urgent Bitcoin transfers, causing a backlog of transactions in the mempool.

Data shows that since the emergence of inscriptions, the Bitcoin mempool has been constantly full and unable to clear in a timely manner. In this situation, a large number of small inscription transactions may never be packaged onto the chain, effectively becoming a type of "garbage transaction" similar to a DDoS attack, long occupying network resources.

It is precisely because of these issues that Bitcoin client developers have made sharp criticisms of inscriptions. As the market scale of inscriptions continues to expand, the resistance faced by traditional main chain issuance models is also increasing.

In contrast, the advantages of Bitcoin L2 solutions become prominent. It not only alleviates network congestion by bundling transactions to L2, but also brings rich DeFi application scenarios to the Bitcoin ecosystem through smart contracts, including Swap, lending, and liquidity mining.

Bitcoin L2 Projects to Watch

With the booming DeFi application layer built on the Bitcoin ecosystem becoming a new hotspot, Bitcoin L2 projects have also become a key track to carry new expectations. In addition to well-known projects like Stacks, RSK, and Liquid, new solutions such as BitVM and BEVM also offer innovative ideas.

Stacks: Bitcoin smart contract layer

Stacks, as a second layer of Bitcoin, is anchored to the Bitcoin blockchain while introducing smart contract functionalities similar to Ethereum. It opens up new possibilities for applications such as DeFi and NFTs by permanently settling transactions on the Bitcoin blockchain.

Stacks has its own independent chain, compiler, and programming language, running in sync with Bitcoin to ensure transaction integrity. However, its cross-chain mechanism has certain centralization risks. Additionally, using its own token STX as Gas, rather than directly using BTC, may affect miners' participation enthusiasm.

RSK: A general smart contract platform based on Bitcoin

RSK is a smart contract platform secured by the Bitcoin network that supports the migration of Ethereum applications to the Bitcoin ecosystem. Its uniqueness lies in the use of a merged mining mechanism that allows miners to mine both Bitcoin and RSK simultaneously, enhancing profitability.

The block generation speed and transaction processing capability of RSK are superior to the Bitcoin mainnet. However, its use of smartBTC (RBTC) as a bridge token still poses certain smart contract security risks.

BitVM: The New Star of Bitcoin Smart Contracts

BitVM aims to achieve Turing-complete Bitcoin contracts without changing the opcodes. Its innovations include introducing state through Bit Commitments, using logic gates for verifiability, and keeping the Bitcoin network lightweight.

However, BitVM currently has limited functionality and mainly remains in the theoretical stage. Its potential use cases include bidirectional hooks with sidechains, similar to the Rollup logic on Ethereum. However, since smart contracts run off-chain and do not share state, true decentralized BTC cross-chain has not yet been realized.

BEVM: Decentralized Bitcoin L2 Solution

BEVM is a Bitcoin L2 that uses BTC as Gas and is compatible with EVM. It achieves fully decentralized asset management through an innovative cross-chain mechanism, while supporting the rapid deployment of various DeFi applications.

The advantage of BEVM lies in its full compatibility with EVM, allowing Ethereum DApp developers to seamlessly migrate and quickly build various DeFi applications within the Bitcoin ecosystem. This brings more possibilities to the Bitcoin ecosystem and is currently a relatively decentralized and convenient solution.

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

MAP Protocol utilizes the security mechanism of Bitcoin to achieve seamless interaction between assets on other public chains and the Bitcoin network. It not only enhances network security but also enables cross-chain capabilities of BRC20.

Compared to the Bitcoin main chain, MAP Protocol offers lower transaction fees, which can be as low as 35% of some mainstream platform costs. Users can trade BRC20 tokens on it with low Gas and zero congestion, and roll back to the Bitcoin main chain through Rolluper.

Conclusion

As the crypto community increasingly recognizes the importance of L2 solutions for the future of Bitcoin, the entire Bitcoin L2 space is ushering in new development opportunities. This field is still in its early stages and holds enormous potential.

Especially those most innovative L2 solutions and their derivative application scenarios are likely to give birth to billion-dollar leading projects, just like Arbitrum and Optimism in 2021.

Bitcoin L2, as a new solution, offers a whole new realm of imagination. It is still in the blue ocean stage, containing untapped dividends, and is worthy of long-term attention from investors.