This is a guest post from our friends over at Bitcoin Layers. Be sure to bookmark their website for the best data and information in Bitcoin scaling tech.
The tl;dr
The last 12 months saw a resurgence of Bitcoin aligned tech stacks.
Internal documentation from Bitcoin Layers shows over 100 Bitcoin projects came to market in the last 12 months, with around 40 projects directly calling themselves a “bitcoin l2.” Around 17 of those are live and in production.
Some quick points on the recent explosion:
- There’s already been a few rug pulls. For example ZKSats, ran a public token sale and then ran away with people’s funds
- While most projects claim to be rollups, only a small few are planning on using bitcoin for data availability. Most proposed projects are sidechains or rollups to an alternative blockchain
- 57 projects within the ~100 have launched tokens or have announced their intention to launch a token. Some of these projects have rugged users or abandoned development
- Not everything is another blockchain! Ark Labs and Second are building on Ark. Mercury Layer and Spark are developing in the statechain arena
- All projects, except for Statechains, Arks, and Lightning, see users interact with some permissioned custodian, federation, or network, to secure the funds backing their wrapped version of BTC on the network
- That’s why there’s been a huge focus on BitVM and a resurgence on reactivating OP_CAT or other proposals that enable more expressiveness in bitcoin Script
In this post, we’ll be going through some definitions on what a Bitcoin layer is in the first place, make our way through some of the projects like Liquid, BitVM and Lightning, before finishing on some more philosophical takes on what it all means for Bitcoiners.
What’s a bitcoin layer?
First things first, what actually is a bitcoin layer?
No one particularly has a great definition. Is it an L2? Is it merge-mined? Is it using BTC (or a wrapped version) as the tokens it pays fees in? To be honest, the definitions aren’t great things to base this on anyways. Let’s look at some “aligned” layers: Rootstock and Liquid.
Rootstock currently has 2,878 BTC backing RBTC, its native gas token and primary BTC-backed synthetic. It’s merge-mined and pays fees (indirectly, albeit) to bitcoin miners. It’s EVM-compatible and offers all of the fancy toys that Ethereum does.
Liquid is beating it just a bit with 3,790 BTC backing LBTC, its native fee token and primary BTC-backed synthetic. Its execution environment is more expressive than bitcoin script and enables developers to test functionalities that are yet enabled on bitcoin.
The numbers above aren’t pennies. It is a substantial amount of money locked there, roughly $700 million of value. However, compared to Bitcoin on other blockchains like Ethereum or BNB, it’s nothing. There’s over $23 billion of Bitcoin floating around other chains, a similar value to Microstrategy’s holdings.
Plus, they’re all (mostly) blockchains anyways
All new layered protocols are building some rendition of a sidechain, minus Mercury Layer, Spark, Ark implementations, and the Lightning Network. These sideschains include rollups and rollups to other blockchains, or what some term “Validiums.”
One question we’ve left unanswered so far is which system is most aligned with bitcoin? Truthfully, it’s more of a social argument than a technical one. A completely permissioned sidechain might be the most bitcoin-aligned thing out there. Even Ecash protocols–which are completely custodial–are often considered “aligned.”
For our purposes, we look at how users choose to use their Bitcoin, as well as the trust assumptions around these Bitcoin layers.
Layers that are… other blockchains
When people think of “bitcoin layers” they often think of the new “EVM, L2, sidechain things” that are popping up on X.
These protocols are launched with the idea of “progressive decentralization” even if their docs say otherwise. In practice, they launched with a permissioned blockchain environment with plans to “decentralize” and make the infrastructure “more trust-minimized.” Here’s a few popular ones you might have seen:
- Bitlayer, a permissioned sidechain that is a fork of Geth, the Go implementation of Ethereum. Its official bridge is managed by a network of custodians.
- Bsquared Network, a fork of Polygon zkEVM that uses B2Hub, a permissioned fork of Ethermint for data availability managed by a custodian.
- BOB, an EVM-compatible, OP stack rollup using Ethereum for data availability. It’s instantly upgradeable by a centralized multi-sig.
- Stacks, an alternative blockchain that leverages a mix of Proof-of-Burn and Proof-of-Stake for consensus and has multiple bridges with bitcoin, including sBTC, an 11/15 federation.
While not the up to standard for Bitcoiners, the above is common practice in the Ethereum ecosystem. Given this, Bitcoin Layers often considers the track record of teams behind projects to better understand its future potential. For example, BOB’s co-founder is a contributor to the BitVM2 paper. We can use that social proof that BOB will decentralize in the future as the tech matures.
Still, when you look at the technical architectures behind most of these systems, they don’t appear that much different than Ethereum, BNB Smart Chain, and others. When comparing, you find that the systems use some flavor of the EVM, have centralized operators custodying the BTC that backs wrapped BTC tokens on the blockchain, with similar pitches on why their offerings are useful. For example, cbBTC, a BTC wrapper operated by Coinbase, claims to make BTC more useful in DeFi. All the new bitcoin L2s? Same pitch.
Therefore, we strive to evaluate each project in isolation. For the overwhelming majority of bitcoin L2s, there are blockchains, and there are bridges. Sometimes teams build both at the same time.
Are more of these alternative blockchain layers coming to market?
There’s a number of protocols that are going to launch with federation models similar to what’s in production today. Botanix, an EVM sidechain, is planning on launching with an 11/15 federation similar to that of Liquid where the federation is responsible for custodying BTC backing the wrapped version on the sidechain and block production.
There’s more to some projects than just the EVM, though. For example, Botanix will be running CometBFT for its consensus mechanism, which means that it can have 1-2 second block times and single-slot finality. In other words, blocks cannot be reorged.
Another style of sidechain coming to market are rollups. Rollups are styles of blockchains that use another blockchain for data availability and consensus.
What makes Rollups important is the trust estimations, or lack thereof. In most designs, users can just run their bitcoin full node and validate that the state for the rollup has been published to bitcoin. Citrea and Strata are the two main projects people think of when talking about bitcoin rollups. You can read more here to learn more about how Bitcoin rollups work.
If we mention Rollups, we have to mention BitVM. Indeed, the major Rollup projects emerged from hype around BitVM. (BitVM showed that it is possible to verify any arbitrary computation, optimistically, on bitcoin. “Optimistically” means that we can challenge incorrect claims related to a specific program.)
To accelerate this development, an alliance of projects contributing to BitVM was formed between ZeroSync, Alpen Labs, Fiamma, Element Labs, BitLayer, and Chainway. These projects all have different goals and objectives for BitVM, but are working together to get an in-production implementation ready in 2025.
It’s not all alternative blockchains
Sometimes people talk about the space and leave out some of the most interesting projects under development.
- Ark is a protocol that was announced last year by Burak, an independent bitcoin developer. Development for the protocol has accelerated with Ark Labs and Second working on their own implementations. It’s essentially a way to exchange UTXOs offchain with the support of a centralized provider (or federation)
- Statechains have also come into production with Mercury Layer being available on mainnet. Statechains enable users to transfer ownership of offchain UTXOs at a low cost. Users trust this entity, the actual operator of the statechain, to settle the transaction to a new owner and not double-spend them. This category of semi-trustedness is growing with Lightspark having announced their own statechain implementation, Spark.
- Lightning remains the most widely used, truly trust-minimized layer 2 in any ecosystem. Whilst the majority of usage is custodial, and a large percentage of self-custodial usage is supported by leveraging centralized parties as channel partners, it does give sophisticated users an opportunity to sovereignly transact off of the L1.
Lighting is obviously the best well known project of those listed above, and arguably of all Bitcoin L2s. Is this the best solution long-term, though? It remains to be seen. Having to make L1 transactions to open and close channels is a significant barrier in terms of scalability While users can unilaterally exit from Lightning, if a user needs to leverage an L2 due to being priced out the L1, Lightning hasn’t proven to be the optimal solution to ensure that less sophisticated users can effectively use and hold their funds off the L1.
Still, do we soft fork?
All of the solutions above can be improved, most notably by making bitcoin Script more expressive. A number of proposals have garnered attention and now there are independent efforts to gauge the developer community’s opinion on a wide number of them.
OP_CAT has garnered the most attention due to its ability to build recursive covenants and verify merkle trees. These two things combined see it able to validate offchain state transitions and build trust-minimized bridges, potentially without the need for operators.
Starknet, a technically renowned rollup on Ethereum, has announced that they will build a bridge, secured by validity proofs, to bitcoin if OP_CAT is activated. To demonstrate how this might work, L2 Iterative has been developing a STARK verifier directly in bitcoin Script on Signet and the bitcoin sidechain, Fractal.
Other proposals, like OP_CTV, have additionally regained traction due to being more limited in expressivity (so a somewhat more conservative choice), but still improving all scaling protocols that utilize PSBTs by removing the need to emulate covenants, and also enabling more robust self-custody solutions via covenants.
And whilst projects like BitVM2 aim to verify arbitrary computation without a soft fork, the whitepaper states that a number of covenant and transaction introspection proposals can improve it.
Is all of this bullish?
There’s a lot of skepticism for the above. And we didn’t even review projects like Babylon or covenant dependent projects like Starkeware’s Starknet, which don’t quite fit into the categories above yet certainly merit interest.
While the narrative of a “renaissance” might be overstated, there’s undeniable momentum in the development and exploration of Bitcoin-aligned tech. Projects like Lightning, Rootstock, Liquid, and emerging Rollup solutions show the ecosystem’s drive toward enhancing scalability, trust assumptions, and usability for Bitcoin holders.
However, this progress comes with cautionary tales: custodial risks, rug pulls, and the challenges of aligning new protocols with Bitcoin’s core ethos. The push for more expressive Bitcoin Script through proposals like OP_CAT and OP_CTV offers hope for a more trust-minimized future, but these changes demand community consensus and careful implementation.
Ultimately, whether these advancements are “bullish” depends on how they balance innovation with Bitcoin’s foundational principles of decentralization, security, and user sovereignty. For now, Bitcoin layers are a space to watch—teeming with potential, but requiring critical scrutiny to ensure they align with the broader vision for Bitcoin’s growth and resilience.
