jakiro
Author: Marcin Kazmierczak, Sarah Morton, CoinDesk; Compilation: Wuzhu, Bitchain Vision
Marcin Kaźmierczak of Redstone Oracles explains how Bitcoin Layer 2 can enhance the performance of the protocol by deploying enhancements on a separate blockchain while maintaining its integrity.
Last week, many consultants attended the 2024 consensus conference in Austin, Texas.I highlighted the key topics that emerged in this event in the “Expert Q&A”.I look forward to the meeting next year in Toronto, Canada.
Bitcoin Layer 2
Bitcoin has revolutionized the financial world with its decentralized, secure and transparent nature.Even though it is the first cryptocurrency, Ethereum (ETH) has pioneered the development path of the entire decentralized finance or DeFi ecosystem.Now, Bitcoin is following closely behind, opening up the era of development of its own ecosystem.As Bitcoin becomes more popular, challenges related to its scalability and transaction speed have also increased.To solve these problems, the Bitcoin community has developed various Layer 2 blockchains that can improve the efficiency and functionality of the network without changing the Bitcoin itself.
This article explores the concept of Bitcoin Layer 2 in depth, and explores their classification, strengths and expected advancements.By understanding these innovative protocols, users can understand how Bitcoin continues to evolve and maintain its relevance in an increasingly competitive digital environment.Ultimately, Bitcoin is digital gold, and the entire economy is created around it, similar to gold in the physical world.
Q: What is Bitcoin Layer 2 and how are they classified?
answer:They are built on the Bitcoin blockchain.Solve the performance issues and limitations of the Bitcoin blockchain and add programmable capabilities.There are three types of Bitcoin Layer 2:
1. Status channel
Function:Create external channels for transactions that are recorded off-chain and updated as individual transactions on the main network.You can liken it to a dedicated mailing route between houses to optimize the cost of sending letters between houses.
Example:Bitcoin Lightning Network.
2. Side chain
Function:A semi-autonomous network that maintains communication with the main network and can define its architecture.Imagine an optimized city mail system that is regularly synchronized with the central office.
Example:Stacks Network, Rootstock Infrastructure Framework (RIF).
3. Rollups
Function:As the execution layer, transactions are processed in batches and submitted to the consensus layer of the main network for final settlement.Imagine a full-state mail system that updates its delivery status to the central agency every 10 minutes.In the Ethereum ecosystem, examples include Arbitrum, Optimism, zkSync, and Starknet.
type:Optimistic Rollups and ZK Rollups.
For example:Merlin Network, Build On Bitcoiniin, B^2, Bitlayer.
Q: What problems does Bitcoin L2 solve and why are they important?
answer:Bitcoin Layer 2 solves key issues to improve network efficiency and functionality.First, they improve scalability by reducing congestion.Therefore, transaction fees are lower and execution is faster, making Bitcoin more suitable for daily use.L2 also adds the utility of Bitcoin holdings and introduces sophisticated smart contract capabilities to support DeFi, NFT and other Web3 applications.This enhanced programmability helps Bitcoin maintain market relevance.They expand Bitcoin use cases and ensure smoother and more affordable transactions.Ultimately, Bitcoin L2 is important to users as they provide new features for BTC holders such as using lending platforms, earnings solutions, or decentralized exchanges (DEXs).For participants holding important parts of their Bitcoin portfolio, they are alternatives to Ethereum-based solutions.
Q: Comparison of existing Bitcoin L2 and expectations in the field this year.
answer:Comparing Bitcoin Layer 2 requires evaluating their technical classification.It should be determined whether it is a state channel, a Rollup or a side chain.In addition, metrics such as transaction fees, security and decentralized applications (dApps) available on the network are also crucial.The following table represents the major Bitcoin Layer 2 as of June 2024.
* BounceBit is not Layer 2, but Layer 1 Proof of Stake Chain, with BTC as the main currency.
** Babylon is a BTC staking platform that implements a novel way to allow BTC staking.
Looking ahead, we can undoubtedly expect further expansion of Bitcoin Layer 2.Since the scarcity of Bitcoin and the number of Bitcoin will be only about 21 million, it makes sense to fundamentally expand the programmability and functionality of digital gold.The upcoming developments will include reducing transaction costs for the above-mentioned Layer 2, adding more compatibility layers, and implementing well-known primitives on top of Ethereum, such as automated dApps or supporting popular wallets.
Bitcoin’s value has no bottom line or upper limit, and its cumulative market value is currently close to $1.4 trillion.In its current form, Bitcoin blockchain plays a fundamental layer on which innovation can flourish.And today, this is achieved through Layer 2.Looking at the success of Arbitrum, Optimism, Base and zkSync, we can say we will have at least several thriving ecosystems in this category.Therefore, it is crucial to track its development and accept BTC use as one of the fastest growing narratives in 2024.
