The Bitcoin ecosystem is booming. Which Layer 2 projects are worth paying attention to?

What is the current development trend of the Bitcoin L2 track, and what early passwords are hidden in it that deserve attention?

Written by: Web3CN

In the past three months, the first batch of inscription projects such as Ordinals has set the entire track on fire, and the increase in inscription-related star tokens has also continued to set new records. This has also given rise to SATS, RATS and even other public chain inscription concepts. hot.

At the same time, Bitcoin Core core developer Luke Dashjr’s fierce criticism of inscriptions such as ORDI poured cold water on the entire inscription market. At the same time, it also caused the market to have new doubts about how to develop a healthy relationship between inscriptions and Bitcoin. Think and explore.

Against this background, the wave of “L2ization” of the Bitcoin ecosystem seems to be unstoppable, especially since L2 not only solves the much-criticized “junk transaction” problem of Bitcoin, but also creates Swap, lending, and liquidity mining with the help of programmability. A series of DeFi applications such as mining have broad prospects. So what is the current development trend of the Bitcoin L2 track, and what early passwords are hidden in it that deserve attention?

The “L2” trend of Bitcoin

As the Bitcoin inscription track continues to be popular, manual participation in new inscription projects on the chain has quickly been rolled into a red sea. From a narrative perspective, inscription is indeed different from many previous large-scale investment and financing projects and the traditional narrative logic dominated by VCs. Give the general public outside of OG and Giant Whales the opportunity to participate.

However, the Bitcoin network at the center of the inscription craze is also facing many problems. The most intuitive one is “network congestion and surge in handling fees” - because inscriptions are similar to NFTs, allowing users to record various data on the blockchain, but Overall, since Bitcoin transaction fees are paid based on data size, Inscription users tend to set relatively low transaction fees.

This also means they are willing to wait longer for confirmation, which can easily lead to inscription-type transactions being replaced by more urgent Bitcoin transfers.

Against this background, these massive inscription transactions, which are all willing to queue up, have overwhelmed the Bitcoin memory pool (the place where all valid transactions that have not been officially added to the network are stored).

According to statistics from crypto KOL bitrabbit.btc, Bitcoin has accumulated 87 million UTXOs in the past 14 years, but after BRC20 started trading on April 24, it soared to 140 million in about 7 months—and more than 50 million new UTXOs were added. , 40 million are extremely small transactions of 100-1000 satoshis.

As can be seen from the above figure, since its launch in February 2023, Inscription has been the main consumer of Bitcoin block space, and the Bitcoin memory pool began to be fully loaded in February and continues to this day.

This has also resulted in the Bitcoin network being unable to clean up its memory pool. As of the time of publication, it is also at a high level in BTC history since data records are available.

According to the current actual situation of the Bitcoin network, especially in order to prevent dust attacks, the Bitcoin transaction in a single UTXO is limited to no less than 546 satoshis, which means that most of the tens of millions of inscription transactions are pending small transactions. , in fact, it is equivalent to spam transactions of DDoS attacks, which may not be packaged and broadcast on the chain for a lifetime.

“Most of these small UTXOs will never be spent, but will always lie in Bitcoin nodes. In the next few decades or hundreds of years, it will cause tens of billions of dollars in waste of hardware and power resources to the BTC network.” .

This is also the main reason why Luke Dashjr, the developer of the Bitcoin client Bitcoin Core, publicly launched a sharp attack on ORDI, Inscription and BRC20 - “Inscription is using the Bitcoin Core vulnerability to send spam information to the blockchain.”

Therefore, as the inscription market exceeds billions of dollars and its growth momentum continues unabated, inscription projects issued on the traditional Bitcoin main chain are limited by network congestion and accusations of “junk transactions”, and the issuance model will become increasingly unsustainable. , which will be a key obstacle to limiting further expansion of its size.

The advantages of the Bitcoin L2 track in comparison are highlighted - it not only solves the problems of network congestion and “junk transactions” by packaging transactions into L2, but also uses the programmability of new smart contracts to provide Bitcoin with The currency ecosystem has created a series of DeFi application scenarios including Swap, lending, liquidity mining, and staking.

Bitcoin L2 project inventory

In general, as building a prosperous DeFi application layer on the current Bitcoin ecosystem has become a new hot narrative, the Bitcoin L2 project has become a key track that carries the new expectations of Bitcoin supporters. In addition to Stacks In addition to familiar old projects such as , RSK, and Liquid, new solutions such as BitVM and BEVM also provide new ideas.

Stacks: Bitcoin smart contract layer

As the second layer of Bitcoin, Stacks is anchored on the Bitcoin blockchain on the one hand. On the other hand, it introduces smart contract functions similar to Ethereum as an independent protocol and settles transactions permanently on the BTC blockchain. Unlocking the programmability of Bitcoin as Bitcoin L2 opens up new possibilities for applications such as DeFi and NFT.

If we look at the overall system, Stacks actually has its own chain, compiler and programming language, and runs in sync with Bitcoin to ensure its transactions and integrity.

However, because it uses the “hook” method to achieve BTC cross-chain - by issuing sBTC on the Stacks network, it is essentially a centralized mapping method, and there is a certain risk of centralized single point.

At the same time, its network Gas uses its main network token STX instead of BTC. Miners participating in Stacks’ network mining will consume the pledged BTC to mine its network tokens. Through this system, miners earn STX coins and transaction fees (transaction fees), and STX stakers earn Bitcoin, which will also cause miners to be hesitant to participate in the choice.

As of the time of publication, compared with the 200,000 daily active users of the popular ETH L2 Arbitrum, the gap is still large, and the current response from both users and funds has been mediocre.

RSK: A universal smart contract platform based on Bitcoin

RSK (Rootstock) is a universal smart contract platform secured by the Bitcoin network, making all Ethereum applications compatible with the Bitcoin blockchain by moving their smart contracts from Ethereum to RSK. Since RSK creates a new block approximately every 33 seconds, it is much faster than Bitcoin’s 10-minute block time. RSK can also process approximately 10-20 transactions per second, which is also faster than Bitcoin’s processing capacity of approximately 5 transactions per second. More efficient.

Compared with other Bitcoin layered solutions, the most unique design of RSK is merged mining - the RSK blockchain uses the same proof-of-work (PoW) consensus algorithm as Bitcoin, but miners can generate more energy than the Bitcoin base layer. Blocks are faster. These RSK blocks are mined through a process called “merged mining.”

Since both blockchains use the same consensus, miners can merge mining and mine for both the Bitcoin and RSK blockchains at the same time, but have Bitcoin and RSK consume the same mining computing power, so the miners contribute The computing power can also mine RSK blocks, which allows merged mining to significantly increase the profitability of miners without investing additional resources.

Merged mining allows RSK to verify transactions, generate blocks and send them to Bitcoin. Through this mining process, users can rest assured that RSK’s smart contracts benefit from the security of the Bitcoin blockchain.

However, since RSK uses smartBTC (RBTC), which is to lock the tokens issued by BTC on Bitcoin at a 1:1 ratio, and bridge it through the vault and smart contract on RSK, it is still difficult to avoid RSK during the entire bridging process. smart contract security risks.

BitVM: The rising star of Bitcoin smart contracts yet to be proven

BitVM is designed to implement Turing-complete Bitcoin contracts without changing the operating code. Key innovations include:

• Introduce status between different UTXO or different scripts through Bit Commitments.
• Verifiability through logic gates: Execution can be verified by deconstructing any problematic program in the virtual machine, and the validity of the execution verified by the prover. This ensures that any false claims can quickly be proven wrong.
• Keep the Bitcoin network lightweight: Similar to Optimistic Rollup on Ethereum, BitVM does not perform a large number of calculations on Bitcoin. Instead, it minimizes on-chain activity and only refutes incorrect executions, acting more as a solver and validator. Only the output of the BitVM program is used in Bitcoin transactions.

However, the functions of BitVM are currently extremely limited, and more of them are only in the paper stage. There is only one feasible function called a zero-check function. Although potential use cases in the future include two-way hooks with side chains to achieve scalability, However, the implementation scheme is similar to the Rollup logic on Ethereum:

Run a fraud proof similar to OPR on the BTC script, that is, when there is an objection to an asset transaction, the user can initiate a report. If there is a problem with the transaction, the assets of the dishonest party will be confiscated. Generally, the effective report time It is within 7 days (which can be simply understood as unconditional return within 7 days). However, if the user initiates a report after 7 days, it will be invalid. Even if there is a problem with the asset transaction, it will be automatically saved on the blockchain and continue to run.

BitVM’s smart contract layer runs off-chain, and each smart contract does not share state. BTC cross-chain uses traditional Hash locks for asset anchoring. It does not achieve truly decentralized BTC cross-chain and cannot avoid centralized arbitration. Node’s asset security risks.

BEVM: A fully decentralized Bitcoin L2 solution

BEVM is a BTC Layer2 that uses BTC as Gas and is compatible with EVM. The core goal is to expand the smart contract scenario of Bitcoin and help BTC break through the constraints of the Bitcoin blockchain being non-Turing complete and not supporting smart contracts, so that BTC can be used in BEVM Decentralized applications using BTC as native Gas are built on this Layer 2.

When a user transfers BTC from the Bitcoin main network to BEVM, the user’s BTC will enter the contract address hosted by 1,000 nodes, and then at the same time, new BTC will be generated in BEVM, the BTC Layer2 network, at a ratio of 1:1.

When a user issues an instruction to transfer BTC from BEVM back to the main network, the BEVM network node will trigger the Mast contract, and the 1,000 asset-custody nodes will automatically sign according to the established rules and return the BTC to the user’s address. The entire process will be completely decentralized. Centralized and trustless.

This means that all transactions are transferred from the Bitcoin main chain to run on the Layer 2 network. At the same time, because BEVM is fully compatible with EVM, it can also easily enable BTC to implement various decentralized applications and empower Bitcoin from L2. Ecological sub-projects:

Ethereum DApp developers can directly and seamlessly migrate to BEVM, and quickly build Swap or even on-chain DeFi scenarios such as lending and liquidity staking on BEVM, bringing more possibilities to the Bitcoin ecosystem. Compared with the previous two It is also the most decentralized and convenient.

MAP Protocol: Bitcoin L2 network for point-to-point cross-chain interoperability

MAP Protocol is a Bitcoin Layer 2 network for point-to-point cross-chain interoperability. It utilizes Bitcoin’s security mechanism to enable assets and users of other public chains to interact seamlessly with the Bitcoin network, thereby enhancing the security of the network and Realized BRC20 cross-chain capability.

Compared with the Bitcoin main chain, MAP Protocol can provide lower Gas transaction fees, which can even be as low as 35% of the cost of Unisat and OKX Ordinals platforms.

Therefore, using MAP Protocol’s Bitcoin L2 technology, users can trade inscribed BRC20 tokens on SATSAT with low Gas and zero congestion, and can also roll back to the Bitcoin main chain through Rolluper to trade on Unisat, OKX and Trade on other Bitcoin L1 trading platforms.

Summary

As the broader cryptocurrency community recognizes the importance of Layer 2 solutions in shaping the future of Bitcoin, it also means that the entire Bitcoin L2 track will usher in new development opportunities, and the entire Build cycle will also be very long, and it is now It’s time for early layout.

In particular, the most imaginative L2 solutions and a series of derivative application scenarios, such as Ethereum Layer 2 solutions such as Arbitrum and Optimism in 2021, are destined to eventually produce a number of billion-dollar Bitcoin L2 leading projects. .

Therefore, Bitcoin L2, as a new problem-solving idea, naturally has new enough imagination space. It is still in the early stage of the blue ocean and is in the dividend period of wealth cryptography waiting to be mined. It deserves long-term attention.

Therefore, ETF approval is the biggest catalyst for the cryptocurrency market right now, promising huge upside potential and limited downside. Although there is some liquidity risk, if investor appetite increases significantly, ETFs could improve market conditions across the board.