Bitcoin Layer-2 Track Overview: Scaling Solutions You Must Know by 2025

Bitcoin, as the cornerstone of the crypto world, has its underlying blockchain technology transforming the financial landscape. However, as adoption rises, the bottlenecks in scalability and transaction efficiency become increasingly apparent. Layer-2 networks have emerged to address these limitations by building secondary frameworks on top of the main chain. Let’s explore how these innovative solutions are reshaping Bitcoin’s future.

Core Logic of Layer-2 Networks

Layer-2 networks are secondary frameworks built on top of the main blockchain (Layer-1), aiming to enhance scalability and transaction speed. These networks handle transactions off-chain, reducing the burden on the main chain while increasing efficiency. They are key to solving the “trilemma” of blockchain scalability, security, and decentralization.

L2 solutions process off-chain transactions, elevating Bitcoin from a simple store of value to a functional crypto asset capable of supporting complex applications and systems. This upgrade not only boosts transaction throughput but also significantly reduces network fees, driving ecosystem adoption.

Overview of Mainstream Bitcoin L2 Scaling Solutions

Lightning Network

Launch Date: Published in 2015 white paper, operational since 2018

TVL: $234 million+

As a model of Bitcoin’s L2 payment protocol, the Lightning Network establishes payment channels between users to facilitate off-chain transactions. This design breaks through Bitcoin’s main chain limit of 7-10 TPS, theoretically supporting up to 1 million transactions per second.

The network operates by creating payment channels, allowing users to conduct unlimited transactions, with data only written to the Bitcoin blockchain when opening and closing channels. This greatly improves transaction efficiency.

Since the launch of features like Keysend and Wumbo Channels in 2020, the Lightning ecosystem has expanded into gaming, wallets, payments, node management, and infrastructure. Support from industry figures like Jack Dorsey and integration with Twitter for Bitcoin tipping demonstrate its potential for mainstream adoption.

Stacks (STX)

Launch Date: Rebranded in 2020 (originally Blockstack)

Current Data:

• Market Cap: $450.27M
• 1-Year Change: -85.30%

Stacks is a comprehensive blockchain platform designed to inject smart contracts, DeFi, NFTs, and dApps into Bitcoin. Similar to the Lightning Network, it extends Bitcoin’s capabilities while maintaining privacy and security.

The platform uses STX tokens to execute smart contracts and process transactions, with Clarity programming language enhancing contract security. Its Nakamoto upgrade enables deeper integration with Bitcoin, allowing the Stacks network to write directly into the Bitcoin blockchain and introducing sBTC (Bitcoin-pegged assets) to facilitate decentralized asset exchange.

The Stacks ecosystem has gathered DeFi platforms like Alex and Arkadiko, as well as NFT applications like Sigle, demonstrating its support for complex functionalities. These innovations highlight Stacks’ central role in expanding Bitcoin’s economic ecosystem.

Merlin Chain

Merlin Chain, developed by Bitmap Tech, employs ZK-Rollup technology to compress transaction data, enabling faster and cheaper transactions. Its testnet launched in early 2024, with the mainnet imminent.

The platform integrates decentralized oracles and on-chain BTC fraud proof modules, enhancing security and transparency. Its native token MERL, adhering to the BRC-20 standard, underscores its commitment to Bitcoin-native innovation.

Merlin Chain’s EVM compatibility allows seamless interaction with Ethereum dApps, expanding ecosystem utility. Its strong developer community and robust asset ecosystem help maintain asset stability even during market volatility.

Rootstock Infrastructure Framework (RIF)

Launch Date: 2018

Current Data:

• Market Cap: $33.02M
• 1-Year Change: -70.26%

RIF is a suite of decentralized infrastructure protocols built on the Rootstock (RSK) blockchain, designed to accelerate dApp development. RSK, protected by the Bitcoin network, offers Ethereum-level flexibility through EVM compatibility.

Core components include RIF Wallet (cryptocurrency transactions), RIF DeFi Gateway (DeFi service access), RIF Rollup (scalable payments), RIF Relay (gas fee simplification), and RIF Flyover (seamless BTC transfers). RIF tokens serve as utility tokens within the ecosystem for accessing and paying for these decentralized services.

IOVLabs, the organization behind RIF, announced a $2.5 million funding plan at the 2023 Consensus conference to support entrepreneurs and developers building DeFi applications on Rootstock, demonstrating its commitment to inclusive growth of Bitcoin’s financial ecosystem.

Dovi

Launch Date: 2023

Current Data:

• Market Cap: Over $8 million
• 1-Year Change: +61%+

Dovi is a community-driven Bitcoin L2 solution that offers scalable, efficient, and secure smart contract platforms through EVM integration. It supports BRC-20 and ARC-20 tokens, enabling fast and secure cross-chain asset transfers.

The platform allows deployment of Ethereum-style smart contracts and supports a wide range of DeFi applications. Schnorr signature integration enhances the security of Bitcoin multi-signature transactions while optimizing block space efficiency and privacy.

Dovi’s roadmap focuses on community building, ecosystem expansion, and technological innovation. Its potential to improve user experience and transaction efficiency in the Bitcoin ecosystem has gained industry recognition.

CKB Blockchain

Launch Date: L2 version upcoming

Current Data:

• Market Cap: $113.45M
• 1-Year Change: -81.04%

Nervos Network announced plans to promote CKB (Common Knowledge Base) as the first “Proof of Work + UTXO” Bitcoin L2 project, marking a significant development in the blockchain ecosystem.

Designed as an L2 solution atop Bitcoin, CKB inherits Bitcoin’s PoW security features while enhancing scalability and interoperability through a more flexible UTXO model. This dual-layer architecture provides a solid foundation for supporting diverse dApps and token economies, maintaining high security and decentralization.

As the native utility token of the CKB chain, CKB is used for resource management, transaction fees, and network governance. If CKB’s promotion as a Bitcoin L2 succeeds, its utility and demand will grow significantly, especially attracting projects seeking to leverage Bitcoin’s security without sacrificing scalability.

Liquid Network

Launch Date: 2018

TVL: $205 million+

Liquid Network, developed by Blockstream, is a Bitcoin sidechain that enhances transaction speed and privacy. It uses Liquid Bitcoin (L-BTC), pegged 1:1 with BTC, to facilitate faster transactions on the L-BTC network.

Key features include confidential transactions (hiding transfer amounts and asset types) and atomic swaps (trustless asset exchanges). Average transaction confirmation time is only two minutes, far below main chain times.

The network also supports issuing functional tokens, security tokens, stablecoins, and NFTs, expanding Bitcoin’s application scope. Managed by the Liquid Federation, a consortium of crypto businesses, this federated model maintains decentralization while ensuring coordination. It is especially suited for large-volume transactions and high-frequency trading by financial institutions and exchanges, with significant growth potential.

Statechains

Conceptualized: Around 2018, still in development

Statechains represent an innovative approach to scalability through off-chain ownership transfer. Although still very new, they show promise in small payments and privacy enhancement.

Currently experimental, they explore new pathways for Bitcoin scalability. Their real growth depends on real-world implementation and testing, which as of February 2024 still requires substantial development.