Bitlayer Ecosystem Project Review: What Opportunities Exist in Emerging Bitcoin Layer 2?

Author: Eureka Partners

Outlook on Bitcoin Layer2

Bitcoin was originally conceived as an electronic payment system, and to ensure security and stability, the design of a non-Turing complete scripting language limited Bitcoin's ability to execute complex computations. Bitcoin exists more as a digital gold for value storage. With the explosive growth of ecosystems on public chains like Ethereum and Solana, developers have been exploring scaling solutions for the Bitcoin ecosystem to activate the dormant trillions of dollars in assets, but the technical limitations of sidechains, the Lightning Network, and other solutions still exist, leading to a lukewarm response.

The inscription craze spawned by Ordinals in 2023 has expanded the asset forms within the Bitcoin ecosystem and further sparked market discussions about Bitcoin's scalability and programmability. A series of new Layer2 solutions, such as Merlin and B² Network, have emerged, leveraging programmability to create a range of DeFi applications like swaps, lending, and liquidity mining to expand new application scenarios within the Bitcoin ecosystem.

Currently, most Layer2 solutions in the market bridge liquidity to the Ethereum ecosystem, participating in on-chain scenarios like DeFi through coupling with Ethereum. However, many Layer2 withdrawal bridges are essentially multi-signature bridges, and the bridging solutions that rely on multi-signatures often carry trust risks, making it impossible for users to withdraw assets at any time in a trustless manner. For many BTC holders, there is little incentive and trust to bridge BTC assets to the Ethereum ecosystem for uncertain returns, as the security of funds is the cornerstone of all profits. Therefore, the ideal Bitcoin Layer2 should inherit Bitcoin's security characteristics while being able to build a scalable and programmable on-chain financial infrastructure.

High Expectations for Bitlayer as the Core Support of Layer2

As a leader in BTC Layer2, Bitlayer employs layered virtual machine technology (Layered Virtual Machine), combining zero-knowledge proofs (ZKP) and optimistic verification (OP) mechanisms to support a wide range of computational tasks. Additionally, Bitlayer has built a dual-channel, bidirectional locked asset bridge through its innovative OP-DLC and BitVM bridge technology, inheriting the security of Bitcoin's first layer.

Bitlayer's main technical innovation lies in adopting the latest BitVM computing paradigm and OP-DLC bridge.

Compared to other Bitcoin Layer2 solutions, Bitlayer aims to address three core issues faced by Layer2 and proposes corresponding solutions:

▪️ Trustless 2-Way Peg ------ By combining OP-DLC with the BitVM bridge, a new model that transcends traditional multi-signature modes is proposed, achieving trustless bidirectional flow of assets between the Bitcoin main chain and Bitlayer.

▪️ Layer 1 Verification ------ Inheriting Bitcoin's security through BitVM.

▪️ Turing-Completeness ------ Supporting multiple virtual machines, achieving a 100% Ethereum Virtual Machine (EVM) compatible environment.

Token Airdrop (Ready Player One)

In addition to underlying technology, the prosperity of the on-chain ecosystem is also crucial for the development of a chain. To encourage projects like DEX, Wallet, NFT Marketplace, Lending, LSD, Bridge, and Stablecoin to build on Bitlayer, on March 29, Bitlayer officially announced a series of ecosystem incentive programs, with the first phase, Ready Player One, distributing $50 million worth of public chain token rewards to ecosystem builders and project parties. According to official data, as of now, Ready Player One has attracted over 800 projects to sign up, and users can actively participate in voting to earn "top player" activity points before the voting ends on May 10. Meanwhile, the registered project teams can accumulate popularity points, which will help them secure a favorable position in the Bitlayer official leaderboard to compete for more developer airdrop rewards and grants.

Overview of Bitlayer Ecosystem Native Projects

Native Definition: Exclusive projects deployed only on Bitlayer, cross-chain and multi-chain projects are not included.

Pumpad

Pumpad is Bitlayer's native Launchpad project. According to official sources, Pumpad is a one-stop Launchpad for the BTC ecosystem that issues VGA assets based on the IPOS standard. After asset issuance, Pumpad can help issuers automatically add liquidity to DEX and deploy automated market maker protocols. It can be said that Pumpad is a platform that provides full-cycle services for project parties, not just IDO services.

In terms of positioning, Pumpad proposes two concepts:

1️⃣ IPOS: Initial Pump Offering Standard refers to a complete service package for IDO, including mechanisms for IDO, market cap management, etc., aimed at allowing project parties to manage affairs before and after token issuance with minimal operational costs.

2️⃣ VGA: Value-Growing Asset Building indicates that assets issued on Pumpad will follow IPOS to ensure that project parties cannot run away or withdraw funds, and earn a certain commission income through this model.

Currently, there are no specific details regarding the above two concepts. Additionally, Pumpad's Pump Point is used to incentivize loyal and active users, which may be used for airdrops or priority launches of Pumpad's own platform tokens in the future.

Specifically, Pumpad has two main businesses:

1️⃣ Launchpad: Pumpad's Launchpad will support various issuance methods, including oversubscription lotteries, weighted allocations, and first-come-first-served IDO methods.

2️⃣ Airdrop: Pumpad's Airdrop module allows users to receive airdrop incentives, and project parties can customize airdrop activities to incentivize different types of users.

As of May 10, Pumpad ranks 19th on the Bitlayer Dapp Leaderboard and is first in its category. Other Launchpads have not seen Bitlayer's attention or retweets, indicating that Pumpad has a strong sense of "orthodoxy." The first project the platform is collaborating with is $CBD, which will also be mentioned later as MEME, creating a powerful partnership with "No.1 MEME + No.1 Launchpad," potentially achieving "left foot stepping on the right foot to reach the sky."

Official Twitter: https://twitter.com/pumpad_io

Macaron

Macaron is the first native DEX on Bitlayer. Macaron provides users with a range of tools, including liquidity farming, staking incentives, trade-to-earn, and airdrops to enhance user returns.

With the technical and ecological support of Bitlayer, the Macaron team has been dedicated to creating an excellent product, making Macaron DEX safer, cheaper, and faster. As Bitlayer's native DEX, Macaron will serve as a trading platform for Bitlayer ecosystem assets and mainstream BTC assets, with the following advantages:

1️⃣ Industry-leading security: Utilizing multi-signature protocols and other technologies to ensure fund security, Macaron can provide users with round-the-clock protection.

2️⃣ Advanced AMM algorithm: Macaron's unique AMM algorithm ensures that asset trading is conducted efficiently at lightning speed, maximizing liquidity while minimizing slippage and optimizing yields.

3️⃣ Liquidity provider rewards: When users provide liquidity, Macaron will reward them. Rewards will be calculated and distributed based on the fees collected. Macaron rewards can help the team continuously improve the trading experience for liquidity providers.

4️⃣ Trading rewards: Macaron's Trade-to-earn reward program introduces a revolutionary trading incentive model. A certain proportion of tokens in Macaron's governance token will be distributed to users as rewards.

5️⃣ Low Gas fees: Thanks to Bitlayer's excellent underlying features, Macaron, as a native DEX, can achieve low fees, lightning-fast confirmations, and seamless trading with high performance.

6️⃣ Seamless user experience: Macaron DEX's advanced AMM algorithm and outstanding features ensure that users can enjoy a seamless trading experience, including liquidity staking, just like experiencing a true top-tier CEX.

Macaron offers users a comprehensive incentive program, mainly including a points system, Macaron NFT, and DeFi yields based on Macaron's native DeFi, such as trading rewards, LP incentives, staking rewards, etc. The points system consists of social points and DeFi points, with different methods for acquiring the two types of points and different future exchange ratios for becoming mainnet tokens. Macaron NFT is a PFP NFT launched by the platform, with rights including future airdrops, governance rights, and a series of empowering rights. Native DeFi yields include stable asset earnings from trading, staking, and adding liquidity on Macaron. More information about Macaron activities can be found through Macaron's official social media.

As of May 10, Macaron ranks 2nd on the Bitlayer Dapp Leaderboard, second only to the stablecoin bitSmiley. The Twitter account already has 49.2k followers, indicating high popularity.

Official Twitter: https://twitter.com/macarondex

Cat Driving Bitcoin ($CBD)

Cat Driving Bitcoin ($CBD) is a native MEME token on the Bitlayer chain. The project's visuals are primarily based on cats and driving elements, aligning with the overall Bitlayer theme. According to official sources, $CBD aims to disrupt the meme economy by building MEME CBD—a prosperous, modern, skyscraper-filled Bitcoin world. $CBD is committed to becoming the largest community asset on Bitlayer, promoting Bitcoin as the best human asset on Earth. It has already attracted attention from Bitlayer and Macaron's official Twitter.

As of May 10, $CBD ranks 3rd on the Bitlayer Dapp Leaderboard, making it the top in the MEME category. Compared to the previous data of $BONE, which ranked 9th in the MEME category, $BONE's official Twitter has been followed by bitSmiley and Bitlayer, accumulating 12.2k followers and experiencing a 10-fold increase within 24 hours after listing. In contrast, the potential of $CBD should not be underestimated.

In the token model, unlike $BONE, which airdropped most tokens to bitSmiley testnet users, $CBD leans towards a celebratory airdrop model: 70% for airdrops, 20% for liquidity, and 10% for the treasury.

According to current information, $CBD will airdrop to four types of users:

1️⃣ Holders of Bitlayer helmet NFTs who have completed some cross-chain interactions.

2️⃣ Holders of BTC-related assets who have recently executed BTC transactions.

3️⃣ Participants in the community ecosystem, such as voting and co-building.

4️⃣ Holders of other assets in the Bitlayer ecosystem.

It is worth noting that the $CBD airdrop channel is not conducted by the project party itself but through Pumpad. Additionally, based on the above rules, holders of Bitlayer helmet NFTs currently have the clearest participation rules. More airdrop rules can be followed through official social media updates.

Official Twitter: https://twitter.com/catdrivebitcoin

TrustIn Finance

TrustIn Finance is a native permissionless lending protocol on Bitlayer, driven by a Bitcoin security-equivalent Layer2 solution based on BitVM.

TrustIn Finance adopts the following designs:

1️⃣ Floating Interest Rates: In TrustIn Finance, the interest rates for lenders and borrowers are determined based on the usage of funds in the market. This maximizes the likelihood of participants obtaining the most favorable rates while ensuring the safety of funds in the liquidity pool.

2️⃣ Risk Isolation: To simplify the protocol and enhance security, TrustIn Finance isolates asset pools based on different underlying assets to prevent large-scale defaults from overwhelming the protocol and mitigate potential uncontrollable consequences.

3️⃣ Reserve Fund: The reserve fund is another important safety measure introduced by TrustIn Finance, aimed at addressing potential debt loss issues within the protocol. TrustIn Finance allocates a portion of borrowing interest as reserves based on the reserve coefficient, further ensuring the safety of assets within the protocol.

4️⃣ Early Contributor Incentive Mechanism: TrustIn Finance aims to grow together with every participant and is committed to incentivizing all contributors. Specific incentive mechanisms will be further notified by the official team.

TrustIn Finance is expected to announce a points incentive program soon, where users can earn points by depositing or interacting with assets. Points will serve as an important reference for the airdrop of TrustIn Finance governance tokens, distributed to users holding points according to a certain ratio. More information can be found through TrustIn Finance's official social media.

As of May 10, TrustIn Finance ranks 6th on the Bitlayer Dapp Leaderboard, with vote counts close to Nekoswap. The Twitter account has 38.1k followers.

Official Twitter: https://twitter.com/TrustIn_Finance

Nekoswap

Nekoswap is the first native decentralized rune and token cross-chain exchange on Bitlayer.

NekoRunes will become the first rune asset token on Neko swap. NekoSats promises a fair launch, with the project party holding only 2% of $RNeko, while all other tokens will be airdropped and added to the liquidity pool. Additionally, Neko will attempt to solve the circulation issue of Layer 1 and Layer 2 rune assets through mapping; if the technical time cost is too high, other methods will be employed to realize rights monetization. Regarding the rights of token holders, Nekoswap has made a series of commitments, including that Nekosats holders will permanently share in the trading fee dividends of Nekoswap.

Nekoswap's work is progressing closely, and there is currently no official website or documentation. Nekoswap aims to become a fully community-driven, fair, transparent, and decentralized exchange, including features such as Swap, liquidity pools, Farm, Launchpad, and rune trading. In the future, for the integration, deployment, and development of public chains, the project party states that they will refer to community opinions and decide on development directions through voting, AMAs, and other methods. More information can be found through Nekoswap's official social media.

As of May 10, Nekoswap ranks 4th on the Bitlayer Dapp Leaderboard, with 23k followers on Twitter.

Official Twitter: https://twitter.com/NekoSwap

BitMagic

BitMagic is the native NFT Marketplace on Bitlayer. It is dedicated to driving innovation in the Bitcoin NFT ecosystem and aims to address the challenges faced by NFTs in circulation within the Bitcoin network, such as reducing transaction costs and enhancing asset liquidity. Through a comprehensive platform that combines NFT issuance and trading markets, BitMagic optimizes the full lifecycle management of NFTs, significantly enhancing user experience and ecological value creation.

In the near future, BitMagic will introduce an NFT cross-chain bridge and a points system, which will not only facilitate the circulation of Layer 1 assets to Layer 2 but also stimulate user trading enthusiasm through incentive mechanisms. Additionally, BitMagic will provide rewards for cross-chain activities of high-quality Layer 1 projects and native assets to ensure that more assets are fully utilized on Layer 2, accelerating the development of the Bitcoin Layer 2 NFT ecosystem.

BitMagic is closely integrated with Bitlayer's BitVM technology, focusing on process optimization, cost reduction, and innovative trading incentive schemes to provide users with an unprecedented Bitcoin NFT trading experience, laying the foundation for explosive growth in the Layer 2 BTC NFT ecosystem.

BitMagic is expected to launch its OG NFT soon, with holders enjoying special rights such as future airdrops and priority access to Launchpad projects, and plans to issue platform tokens in the future. This series of multiple rewards aims to incentivize active traders and NFT holders on the platform. More information can be found through BitMagic's official social media.

As of May 10, BitMagic ranks 106th on the Bitlayer Dapp Leaderboard, with 21.4k followers on Twitter.

Official Twitter: https://twitter.com/bitmagic_nft

Ecosystem Project Puzzle

On March 29, Bitlayer launched its ecosystem incentive program, announcing a $50 million budget to incentivize early builders and contributors. As of the article's deadline (May 10), a total of over 280 projects have been deployed on Bitlayer.

It can be seen that Bitlayer's ecosystem is rapidly expanding, with more and more projects continuously entering Bitlayer. This gives Bitlayer a significant advantage in the current fierce competition among BTC Layer2 solutions.

Where is the Endgame for Bitcoin Layer2?

In the current fierce competition in the Bitcoin Layer2 space, we summarize three core solutions: rollup systems (emphasizing Layer1 verifiability), sidechain systems (emphasizing solution maturity), and client verification (emphasizing Layer1 native DA). Undoubtedly, the market has not yet determined a winner, but we believe that the greatest value of Bitcoin lies in its Layer1 security. Therefore, whether Layer2 can inherit this security is crucial. Although client verification can largely ensure that all ledger records occur on Layer1, the trust cost for users is inherent and thus unavoidable. Rollup systems aim to ensure that user trust costs are controlled through various modular solutions while maintaining Layer1 verifiability. Therefore, from this value system perspective, we believe rollup systems will ultimately outperform the other two.

Among rollup systems, Bitlayer considers the issues comprehensively, emphasizing Bitcoin's verifiability through the BitVM solution and adding fraud proof to the original DLC bridge to ensure oracle trust. Although current cross-chain bridge solutions still require external trust in oracles, they are nearly equivalent in security to the "rollup" native bridges.

Moreover, the prosperity of the Bitlayer ecosystem is pushed to its peak under the expectations of the leaderboard tokens. Many native projects have already joined the ecosystem construction, including DEX, permissionless lending protocols, MEME, and more. As of now, the Bitlayer ecosystem has attracted over 280 projects.

At this early stage of the bull market, Eureka Partners maintains an optimistic yet cautious attitude towards the overall development of Bitcoin Layer2. Although the current market is weak, we believe that when liquidity is abundant, market enthusiasm will still reflect in the Bitcoin ecosystem, including Bitcoin-related assets and Layer2. At that time, Bitlayer will undoubtedly be an ecosystem not to be missed.