Layer-2 scaling has been a hot topic in the blockchain community in recent years, but usually it refers to scaling on Ethereum. But with the social app Damus bursting out to bring spotlight to the Bitcoin Lightning Network, and the Ordinal protocol making NFTs on the Bitcoin network a hot topic of hype, the Bitcoin network ecology has recently forced the community to turn their attention to it.
Layer-2 on Bitcoin Network
As the first blockchain network to start running, the Bitcoin network has numerous problems such as slow block time and limited transaction processing, resulting in the Bitcoin network not being able to meet the needs of mass usage, like the popularity of DeFi and GameFi on other networks has also failed to materialize on the Bitcoin network.
Compared to the prosperity of ecologies such as Ethereum and Solana, there really aren’t many projects on Bitcoin ecology that are notable. For example, the TVL of the entire Ethereum ecology currently reaches a market cap of around $30 billion, but the market cap of the entire Bitcoin ecology is estimated to be around $200 million, a far cry.
In order to make the Bitcoin network better and more widely used in reality, the community and developers have been building different “Layer-2” solutions for the Bitcoin network. In this article, we will briefly introduce four of them: Lightning Network, Stack, Liqiud, and RootStock(RSK).
RootStock: Build on Bitcoin,
RootStock is a Bitcoin sidechain that extends with additional features such as smart contracts without changing the underlying Bitcoin code, and RootStock also has good compatibility with Ethereum in terms of Ethereum Virtual Machine(EVM), allowing Dapps on Ethereum to be able to run on RootStock. So when it was first announced, RootStock filled the market with expectations. However, with the downside of the market and the project’s development being less than expected, it slowly made less and less noise and became an ignored presence. According to the data on the official website, the total lockup value is currently around $83 million, of which MoneyOnChain, a lending protocol, accounts for nearly half, Sovryn（$SOV), a DeFi platform, $20 million, and other projects are almost negligible.
It is worth mentioning that there is an RSK Infrastructure Framework (RIFOS, $RIF) infrastructure network on RootStock, which is simply understood as a layer 2 network of RSK that can provide some cloud services in addition to smart contracts on Bitcoin. faster, cheaper, and easier for everyone to use.
Lightening Network: Built for Mass Payment
The Lightning Network was born in 2018 and is considered one of the most important innovations since the birth of Bitcoin, mainly solving the Bitcoin offline real-time transaction processing problem and indeed enabling high speed, high TPS and low cost transactions for Bitcoin.
The main idea of the Lightning Network is very simple-put a large number of transactions off the Bitcoin blockchain and only put the key information on chain for confirmation, improving the off-chain transaction channel mainly by introducing the idea of smart contracts based on two core concepts: RSMC (Recoverable Sequence Maturity Contract) and HTLC (Hashed Timelock Contract). The former solves the problem of confirmation of off-chain transactions, and the latter solves the problem of payment channels.
Using the Lightning Network, millions of people can send a portion of their bitcoins at the same time at near-instant speed. The Lightning Network has grown very rapidly since its inception, and the total number of $BTC locked in the Lightning Network has now reached over 5,000, with over 16,000 nodes and over 76,000 channels. The introduction of Bitcoin as legal tender in El Salvador and the introduction of the Lightning Network integrated tipping service by Twitter are signs of the widespread use of the Lightning Network, and it is likely that we will see more users using Lightning Network payments for everyday use in the future.
Liquid Network: Built for Fast Transaction with Privacy
Officially launched by Blockstream in September 2018, the Liquid Network is a Bitcoin sidechain based on the open-source Elements protocol that extends Bitcoin’s capabilities by enabling high-speed, private Bitcoin transactions and smart contracts with additional opcodes. $LBTC, which is the native token on the Liquid network, is backed 1:1 by bitcoins on the main chain.
Liquid allows for fast transfers with a balance of privacy, and not only that, but also the ability to issue crypto assets on Liquid. In November 2021, El Salvador plans to issue $1 billion in bonds on Liquid Network, which will be partially backed by BTC. However, the issuance of the bond has been delayed several times for a number of reasons.
Stacks: the First SEC-Qualified Token Offering in U.S. History
Stacks is a Bitcoin Layer-2 that supports decentralized applications and smart contracts, created in 2013. In 2019, it became the first company to receive SEC approval for a token offering ($STX). Stacks has a separate ledger to store data outside of bitcoin L1, and developers can build any application on it. Anything that can be built on Ethereum, Solana, can be built on Stacks.
The project’s ecosystem currently contains 88 different kinds of applications such as data, DEFI, DAW, wallet, etc. It has become the leading infrastructure project in the BTC L2 segment, and the market value of the token STX in circulation has exceeded $900 million. But the total value locked(TVL) on Stacks is not much, currently totaling around $450 million, with Alex($ALEX), which is the first one-stop complete DeFi service platform on Bitcoin, contributing nearly 85.25%. Other protocols on Stack include DeFi projects Stackswap($STSW), Arkadiko($DIKO), DAO related project Bitfary($FARI) and others with a market cap of less than $500,000.
Conclusion
It’s obvious that Layer-2 scaling on Ethereum has attracted all the attention and funds recently, especially with Optimism’s $OP airdrop and the upcoming potential airdrop from Arbitrum and zkSync. But let’s not forget that Ethereum is still lagging behind Bitcoin in terms of market cap at the moment. And other public chains or cross-chain bridges are still subject to hacking attacks from time to time, leading to lost funds and theft.
After all, Bitcoin is the largest crypto asset in terms of market capitalization, and the stability and security of its network is unquestionable. After more than a decade of development, Bitcoin has been running wild on the road of value storage, and its market value has increased thousands of times in the last decade. As the most stable and secure blockchain network, isn’t there a greater value of development beyond value storage?
*Risk Warning
This article represents only the views of the writer and does not constitute any investment suggestions.
Bitunix reserves all rights to this article. Reposting or sharing of the article will be permitted provided Bitunix is referenced.
