A look at the Bitcoin Layer 2 landscape: Sidechains and Rollups become mainstream, and top projects easily attract tens of millions of dollars

Written by: Weilin, PANews

Bitcoin Layer2 is to improve BitcoinBlockchainThe second layer outside the main chain is built to improve scalability, functionality and transaction efficiencyBlockchainAlthough it is often compared with Ethereum Layer2, Bitcoin's expansion will not be possible until the experimental BRC20 based on the Ordinals protocol in May 2023.TokenOnly when the standard becomes popular can more people believe that Bitcoin can not only issue coins, but also realize more complex and sustainable application scenarios.

Currently, according to statistics from l2.watch, there are more than 80 Layer2 projects focusing on Bitcoin expansion. In this article, PANews will sort out the main Layer2 projects that follow different technical routes and introduce the latest project dynamics and financing of Bitcoin Layer2.

The main technical route of Bitcoin Layer 2 at present

State Channels

State channels allow users to establish end-to-end encrypted channels, facilitating multiple off-chain transactions between two or more parties, ensuring that only the first and last transactions are recorded in Bitcoin.BlockchainInstead of broadcasting each transaction to the mainBlockchainTherefore, the state channel can support a larger transaction throughput with the lowest possible gas fee.

Representative project: Lightning Network

Sidechain

侧链是与主链并行运行但是分开的、独立的区块链，允许用户将资产（比特币）从主区块链转移到侧链。当比特币转移到侧链后，用户可以使用这些资产进行智能contract,TokenIssue or implement a new consensus mechanism. The sidechain verifies the information on the Bitcoin main blockchain and performs subsequent operations.Xiaobai NavigationA two-way peg connects the sidechain to the Bitcoin blockchain.

Representative projects: Old projects include Rootstock and Stacks; new projects include BEVM, Merlin Chain, Fractal Bitcoin, Liquid Network, Mint layer, Babylon, Bison, Botanix, Core, BounceBit,AILayer, etc.

Rollup

Rollup moves multiple off-chain transactions from the main Bitcoin blockchain to an independent network, processes them, and then submits a compressed transaction back to the chain. Unlike sidechains, Rollup periodically submits blocks to the main chain, thereby inheriting the main chain’sSafetyThe common types of Rollup include optimistic rollups, ZK-Rollups, and sovereign rollups.

Representative projects: B Network, Bitlayer, BOB, Citrea, QED Protocol, Zulu Network, GOAT Network, Mezo, Bitfinity Network, Arch Network, etc.

UTXO+ Client Verification

UTXO+ client verification is a scaling solution for the Bitcoin UTXO (unspent transaction output) account model. It attempts to perform off-chain ledger calculations based on Bitcoin UTXO and ensure the authenticity of the ledger through client verification.

In 2016, Peter Todd proposed the concepts of single-use seal and client-side validation, which led to the birth of the RGB protocol.

The idea of RGB++ is similar to RGB, which calculates, executes and verifies transactions off-chain and then settles on the Bitcoin chain. Nervos takes advantage of the same POW+UTXO structure as Bitcoin and combines it with the innovative "isomorphic mapping" technology to successfully replace the client verification of the RGB protocol with CKB. In this way, Nervos maintainsSafetyWhile maintaining the same functionality as Bitcoin, it also expands the functionality and flexibility of the RGB protocol.

Representative projects: RGB, RGB++ (UTXO Stack)

Note: In addition to the above technical routes, there is also a classification method that mentions the Layer2 technical path BitVM, whose representative projects are Bitlayer and Citrea. This article classifies these two projects as Rollup. In simple terms, BitVM is a computing model that allows developers to run complexcontract, without changing its basic rules. Since the BitVM concept was proposed and the white paper was published in October 2023, it has attracted much attention from Bitcoin users.CommunityUnder BitVM, computations will be performed off-chain and verified on-chain, similar to the optimistic rollup mechanism on Ethereum.

Bitcoin Layer2 Major Project New Progress

Lightning Network

The Lightning Network was first proposed in 2015 and began to be fully implemented in 2018.contractApplications can perform more transactions. The Lightning Network uses Revocable Sequential Maturity Contracts (RSMC) and Hashed Time Lock Contracts (HTLC) to solve the confirmation and payment channel problems of off-chain transactions.

The Lightning Network has received widespread attention and adoption, but the Lightning Network is mainly focused on Bitcoin payment scenarios. On July 23 this year, Lightning Network developer Lightning Labs announced the release of an important update to Taproot Assets on the Lightning Network, enabling the Lightning Network to support multi-asset transfers in addition to BTC. Lightning Labs believes that this update is of great significance and can help bring the trillion-dollar stablecoin market into Bitcoin and Bitcoinize the U.S. dollar and world financial assets.

Stacks

Stacks (formerly Blockstack) was first proposed in 2013 and had its first blockchain implementation in 2017.TokenStacks Network uses the Proof of Transfer (PoX) consensus mechanism, which is an adaptation of the Proof of Burn concept and involves miners transferring Bitcoin to ensure the stability of the Stacks blockchain.Safety, and get rewards.

On August 28, after months of delays, Stacks launched its long-awaited Nakamoto upgrade. The upgrade will increase the block production rate of the Stacks network by 120 times, reducing Bitcoin's confirmation time from an average of 10 minutes to just seconds. The upgrade also prepares Stacks to launch sBTC, a "programmable Bitcoin asset" that enables users to bridge their BTC to the Stacks network in a relatively decentralized manner. sBTC is expected to be code-completed in September.

Rootstock

Rootstock (RSK) was first proposed in 2015 and officially launched in 2018. In addition to Rootstock, the team has also developed various products based on RSK, including DEX,wallet, domain name services, etc. These dApps are built on top of common protocols and cover payment, storage, computing, communication, and gateways/bridging. The goal is to build a comprehensive RIF ecosystem (RSK infrastructure framework) and unify it under RIF OS technology.

The Rootstock team closely monitors progress in the Bitcoin ecosystem, especially BitVM technology, which is the basis of their upcoming BitVMX initiative. In addition, from 2024 to 2025, the team is focused on developing the RBTC super application, consolidating their recent progress in DeFi tools on the Rootstock network.

Merlin Chain

Launched by Bitmap Tech in February this year, it is a Bitcoin Layer2 solution that integrates the ZK-Rollup network, decentralized oracle, and on-chain BTC fraud prevention module. Bitmap Tech's Metaverse platform, Bitmap.Game, and asset protocol BRC-420 asset protocol have received very good responses in the market this year.

8 月末，ZK 互操作基础设施 Polyhedra Network 宣布已通过 LayerZero 将其去中心化验证网络（DVN）与 Merlin Chain 进行集成，集成完成后 Merlin 的 100 多个应用生态系统可以从 ZK 安全互操作性中受益。

On September 9, Merlin Chain released its semi-annual report, reviewing its growth trajectory in the first half of 2024, including: $1.2 billion TVL, $16 billion bridging volume, 1.9 million on-chain addresses, 12.7 million transactions; 50 days after the mainnet was launched, TVL exceeded $3.9 billion (88% is native assets such as BTC, Ordinals), and the market value of M-BTC reached $1.2 billion in the first half of the year; asset trading volume exceeded $3 billion, and DEX liquidity exceeded $78 million. It is reported that Merlin Chain plans to continue to invest in technology, ecology andCommunityWe will continue to work hard in these three aspects to promote the sustainable development of the Bitcoin ecosystem.

Fractal Bitcoin

Fractal Bitcoin improves transaction processing capabilities and speed by recursively creating an infinite expansion layer on the BTC main chain using BTC core code, while maintaining full compatibility with the existing Bitcoin ecosystem. Data shows that the block confirmation time of the Fractal network is about 30 seconds, and the transaction processing capacity is said to be 20 times that of the BTC main chain.

The development team behind it, Unisat, has been attracting market attention. The team is composed of developers who are proficient in Bitcoin technologies such as SegWit, Lightning Network and TapRoot. The team's previous projects have also achieved good results in the BRC20 trading market, and the issued token $PIZZA has also performed well in the market. Investors includeBinanceand OKX.

On September 9, the mainnet of Fractal Bitcoin was officially launched, bringing heat to the Bitcoin ecosystem again. As of 5 pm on September 12, the number of FB holding addresses in the entire network reached 200,165, an increase of 79,484 in the past 24 hours, and the number of active addresses reached 118,454.

RGB++

Recently, the first over-collateralized stablecoin protocol based on RGB++, Stable++, was launched, using BTC and CKB as collateral while minting a stablecoin pegged to the US dollar, RUSD. By leveraging RGB++'s advanced Leap function, Stable++ enables seamless asset transfer within the Bitcoin ecosystem.

In addition, on August 23, the next-generation public lightning network Fiber Network, built on Nervos CKB and off-chain channels, was launched. It can provide fast, low-cost and decentralized multi-currency payments and peer-to-peer transactions for RGB++ assets.

Babylon

On August 22, Bitcoin staking protocol Babylon launched the first phase of the Bitcoin staking mainnet, bringing a third local use case for Bitcoin assets in addition to value storage and simple payments: staking to protect the PoS network and earn rewards. The launch of the first phase of the Babylon staking mainnet caused a surge in Bitcoin network gas that night, but it also triggered more market thinking about the benefits of Bitcoin staking projects.

BNetwork

BNetwork was founded in 2022. It is a Bitcoin Layer2 network developed based on ZK-Rollup. It is compatible with EVM and can achieve seamless deployment by EVM ecosystem developers. DApps. On August 28, B Network reached a strategic cooperation with Aptos and Echo Protocol to promote BTCFi's expansion into the Move ecosystem. This cooperation is BTCFi's first attempt in the Move ecosystem.

Bitlayer

On March 29, Bitlayer announced the launch of a $50 million ecological incentive program to promote the development of its mainnet ecosystem.

On September 2, Bitlayer announced its Ecosystem Application Center——DApp The Bitlayer App Center is officially launched. The Bitlayer App Center aims to create a one-stop platform for users to explore and experience innovative applications in the Bitlayer ecosystem. App Center is an important portal of the Bitlayer ecosystem, bringing together the latest and most popular applications in the ecosystem.

Funding of Bitcoin Layer2 in the past 5 months

In the past five months, the BTC Layer2 track has also seen frequent investment and financing, with 14 public financings totaling more than $71.1 million. The highest financing amount was $21 million raised by Mezo in the A round.

On August 22, Bitcoin L2 Project Ark Labs raised $2.5 million in the Pre-Seed round; on August 22, Bitcoin Lightning Network payment startup TMRW announced the completion of a $1.3 million Pre-Seed round of financing; on July 26, Bitcoin scaling network Mezo completed a $7.5 million financing, led by Ledger Cathay Fund. In addition, Bitlayer, BOB, and QED Protocol have also shown good "money-making" capabilities and are favored by capital.

Currently, VCs active in the Bitcoin Layer2 field include Draper Dragon, ABCDE Capital, Ledger Cathay Capital, Waterdrip Capital, Polychain, etc. Some investment institutions familiar to domestic users, such as Hashkey Capital, OKX Ventures, and Binance Labs, also have a lot of layouts.

In general, there are many Bitcoin Layer 2 projects, and even "inflation" has appeared. The technical routes adopted by various projects are different. Well-known Bitcoin Layer 2 projects such as Stacks and Rootstock were established relatively early and have been exploring related technologies for a long time, but the projects currently lack more highlights. With the maturity of the Bitcoin basic protocol, projects such as Merlin, RGB++, and Babylon have made the Bitcoin ecosystem more capable of doing more things, which has also brought more possibilities for the development of Layer 2.

Despite this, the development of Bitcoin Layer2 also faces some bottlenecks. In the view of Haotian, an independent researcher at CryptoInsight, the chaos in the BTC layer2 market has not really brought significant growth to the BTC ecosystem. When the market is silent, there are disputes from time to time about whether BTC layer2 is a false proposition. Although "no standards" give BTC layer2 more possibilities for "borrowing", stitching the mature expansion plan directly to the BTC mainnet, which is already very limited, may not be able to give back the expansion gains of the second layer to the mainnet. Instead, it will harm the BTC mainnet user group due to security and stability issues. In his view, the prosperity of BTC layer2 in the no-standard stage is about to pass, and BTC layer2 will move towards a higher technical threshold.

As Haotian said, the narrowing of Layer2 technical standards may be a trend in future development. At present, challenges and opportunities coexist. In the future, we still look forward to the emergence of more Layer2 projects that can "break through" and bring more innovation and surprises to crypto users and the market.

The article comes from the Internet:A look at the Bitcoin Layer 2 landscape: Sidechains and Rollups become mainstream, and top projects easily attract tens of millions of dollars

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