Pseudo demand or the arrival of a real summer? New Bitcoin L2 projects reveal the truth

Why Do We Need Layer2?

After the emergence of blockchain, whether it was the early Bitcoin network or the Ethereum network, despite the rapid development of blockchain technology due to the advantages of peer-to-peer payment systems or smart contracts, the issues of slow on-chain speed and miner Gas fees became prominent, which are the flaws of Layer1.

To improve or even solve the problems existing in Layer1, related technologies and projects of Layer2 have emerged. In general, Layer2 is an independent blockchain network built on top of Layer1, aimed at packaging most transactions of Layer1 onto Layer2 to alleviate pressure and expand capacity.

In the early development of blockchain, decentralization, security, and scalability formed an impossible triangle. Although it is impossible to break this triangle, the complementary nature of Layer1 and Layer2 allows decentralization, security, and scalability to be achieved at different layers of the same network.

The Development Path of Bitcoin Layer2

First, let’s focus on why we need to pay renewed attention to Bitcoin Layer2 in 2024. While Ethereum has prospered through smart contracts and DeFi, the Bitcoin ecosystem has seemed somewhat quiet. However, starting from 2023, with the rise of protocols like BRC20, Atomical, and Runes, there have emerged popular inscriptions such as ORDI and SATS, as well as well-known NFTs like Bitcoin Frog and Runestone.

Behind every phenomenon-level token/NFT is a large-scale Gas War. After a period of development, the number of assets on Bitcoin has indeed increased. Although the BRC20 and Ordinals protocols have shown users and investors the immense potential and playability of the Bitcoin network, the lack of smart contract support means that the Bitcoin network cannot expand more meaningful application scenarios based solely on inscriptions or NFTs.

As developers, there may be a more urgent mindset in 2023 and 2024 to build the infrastructure and network of Layer2 for the Bitcoin network. As the saying goes, "Good things come to those who wait." The construction of Bitcoin Layer2 has long begun, and below we will outline its development path.

In December 2015, Bitcoin Core developers Eric Lombrozo, Chief Technology Officer of Ciphrecx, Bitcoin technology enthusiast Johnson Lau, and BlockStream co-founder Pieter Wuille jointly proposed the Bitcoin scaling improvement proposal—SegWit, or BIP141. This upgrade was implemented in 2017 as a soft fork of the Bitcoin network. One of the most significant advantages brought by the SegWit upgrade was the increase in block capacity.

In January 2018, Bitcoin Core developer Greg Maxwell released the Taproot proposal. Taproot is a major upgrade since SegWit, aimed at enhancing privacy, simplifying transaction verification, improving efficiency, and enabling more complex smart contract processing capabilities.

It is these two extremely important updates that have laid the foundation for the development of Bitcoin Layer2, with mainstream solutions mainly divided into State Channels, Sidechains, Rollup, and PoS expansion.

Overview of Emerging Bitcoin Layer2 Projects

Merlin Chain

Merlin Chain is a Bitcoin Layer 2 solution developed by the team behind Bitmap Tech (formerly known as Recursiverse). Merlin Chain focuses on leveraging Bitcoin's unique properties to unlock its untapped potential. Technically, Merlin Chain integrates zero-knowledge proofs, decentralized oracles, and on-chain BTC anti-fraud modules to support Bitcoin-native assets, users, and protocols.

At the same time, the introduction of the $MERL token provides a mechanism for community members to directly participate in the governance and development of the network, while also offering an economic incentive to promote user and developer participation.

However, recently, after the release of the Merlin Chain token and the opening of the BTC unbonding feature, the operation came too late, resulting in significant losses for some users. Additionally, the number of active users in the Merlin ecosystem has halved, the community has suffered a hacker attack, and user confidence has been shaken, causing the Chain's TVL to drop to $2.4 billion.

Official website: https://merlinchain.io/

B² Network

B² Network is a leading Layer 2 project on BTC and is also an EVM-compatible ZK Rollup. Rollup data and ZK proof verification commitments are recorded on the BTC network, ultimately confirmed through a challenge-response mechanism. The project adopts a modular design architecture, including a Rollup layer and a Data Availability (DA) layer, known as B² Hub. Cleverly, using zk rollup significantly reduces transaction fees, and combined with fraud-proof methods, allows zk commitment proofs to accept user challenges, thus overcoming the limitations of contract verification on Layer 1 BTC.

It ensures security through Babylon's staking and timestamp protocol, effectively avoiding remote attacks. Recently, it also announced a partnership with Polygon Labs to create the first BTC use case integrated with Polygon CDK, meaning that in the future, developers can choose the "Polygon CDK + B² Hub" combination to launch their own BTC rollup.

Official website: https://www.bsquared.network/

AILayer

AILayer is the first Layer 2 project on Bitcoin to incorporate AI concepts, officially defined as a Bitcoin Layer 2 network that utilizes Web 3.0 + AI applications and supports the Runes protocol. It is also the only project developing BTC Layer2 within the AI narrative. Under the aura of AI, AILayer is the first BTC Layer2 to support inscriptions and innovative assets, with staking funds allowing for flexible staking and withdrawal, making it more convenient for users. The latest data from the official website shows that the number of on-chain users on the mainnet is approaching one million, with a TVL exceeding $700 million.

Staking AILayer tokens can become PoS validation nodes. Numerous PoS validation nodes will be responsible for maintaining the stable operation of the Layer 2 network and normal block production, thus earning continuous block rewards. Additionally, in the AI aspect, AILayer provides a decentralized AI infrastructure, offering developers and enterprises the technology, tools, and resources to build and deploy decentralized AI applications.

In terms of strategic cooperation, AILayer has signed a strategic cooperation agreement with the Ministry of Digital Development of Kyrgyzstan, becoming the third Web 3.0 project globally to sign a contract with a Central Asian national government after Binance and Tether.

In terms of ecosystem development, over 100 ecosystem applications and developers have joined AILayer, and the AI Odyssey event, which will soon launch on the mainnet, along with a developer incentive program aimed at ecosystem building, will also be launched shortly.

Recently, AILayer announced a joint airdrop event with BitFi, where participants will have the chance to receive exclusive BitFi OG passes, enjoying multiple exclusive incentives such as BitFi airdrops and AILayer TVL points. Additionally, AILayer has now integrated with the OKX Web3 wallet. Users can stake and earn points on AILayer through the OKX Web3 wallet.

Official website: https://AILayer.xyz/

Bitlayer

Bitlayer is the first Bitcoin Layer2 built on the BitVM paradigm, designed to bring secure scalability to the Bitcoin ecosystem, promote asset diversity, and stimulate innovation to provide a faster, safer, and more flexible user experience.

Compared to other Bitcoin Layer2 projects, Bitlayer's main technical innovation lies in adopting the latest BitVM computing paradigm and OP-DLC bridge, establishing a dual-channel bidirectional locked asset bridge, thus achieving security equivalent to Layer 1 Bitcoin.

The latest data from the official website shows that the current total locked value (TVL) on Bitlayer has surpassed $500 million, with nearly a hundred ecosystem projects deployed on Bitlayer, and the number of active on-chain transactions exceeding one million, making it the fastest-growing Bitcoin Layer 2 in terms of ecosystem growth. In market operation activities, Bitlayer has held two mining festivals, providing users with multiple project token airdrop rewards, along with more opportunities to earn generous rewards.

Official website: https://www.bitlayer.org/

BEVM

BEVM is a fully decentralized BTC Layer2 project that uses BTC as GAS and is compatible with EVM. Its core goal is to expand the smart contract scenarios of Bitcoin, allowing BTC to break free from the constraints of being non-Turing complete and not supporting smart contracts on the Bitcoin blockchain, enabling the construction of decentralized applications using BTC as the native GAS on BEVM Layer2.

Based on the Schnorr signatures and MAST contracts brought by the Taproot upgrade, it achieves decentralized BTC cross-chain with over 1000 Bitcoin light nodes, allowing BTC to circulate freely between L1 and L2 without trust. Meanwhile, the BEVM network uses BTC as GAS and is compatible with EVM.

Recently, to better connect the Ethereum and Bitcoin ecosystems, the BEVM team is building a relay chain based on OPtimism's OP Stack that is compatible with OP-Rollup using WBTC as GAS. This relay chain will serve as a fully decentralized intermediary layer, bringing mainstream assets from Ethereum (WBTC/ETH/USDC/USDT, etc.) into the BEVM network.

Official website: https://www.bevm.io/

In Conclusion

From the above representative projects, it can be seen that Bitcoin Layer2 does not appear homogeneous. Although most adopt mature Layer2 technologies such as EVM compatibility, Rollup, and cross-chain, the focus of each project is different. For example, BEVM emphasizes cross-chain experience, Merlin Chain has pioneered a new paradigm for staking, and AILayer has seized the AI opportunity, deeply integrating with artificial intelligence to bring more AI application solutions.

The original intention of Bitcoin Layer2 was to indirectly break the impossible triangle, but with various events catalyzing and the changes of the times, it has been endowed with more significance, attracting more attention from other public chains to jointly build a prosperous Bitcoin ecosystem. Will Bitcoin Layer2 experience a summer like Ethereum Layer2? Perhaps it is just a matter of time, still needing a trigger to ignite the explosion.