The slow birth of Bitcoin's Layered Ecosystem

BTC L2s have surged from $200M to $1.5B in TVL over 2 years. But for a trillion-dollar chain, it still trails ETH’s $83B and SOL’s $5B. Bitcoin started simple, but its potential is now coming to light.

To read a the full history of what lead to the BTC L2 explosion & a more in depth explanation of the 6 top Protocols check out our Latest Article.

Let’s dive in.

Humble beginnings

2008: Satoshi's whitepaper is published outlining a radical P2P system of trustless money transfer

2009: The 1st Genesis block is mined. Early Bitcoin was simple, you could Mine, Validate & Transact

2010: BTC makes news as two pizzas are sold for 10k BTC

Light Tinkering

2011: Small changes are made with version 0.3 & 0.4 fixing bugs and security. The first exchange markets begin to emerge trading goods for BTC online. GPU mining is discovered to be faster than CPU.

2012: 1st major Feature added P2SH: Which allowed Multi-Sig

The first Meta-Layer

2013: Bitcoin Improvement Proposal System is activated allowing for deeper changes to the network The 1st "L2" is ICO'd, Mastercoin aimed to add smart functionality. Later rebranded to OMNI, it was the 1st place USDT was issued.

2014: Ethereum is launched

Planting Roots

2015: BTC has 200k active addresses, performance struggled with limited design changes

2016: Lightning Network proposed, a Meta-Layer that bundled transactions off chain to increase efficiency. Rootstock is proposed to bring real smart contract functionality.

Bull Run

2017: BTC fees rose 98x in 2 years as prices peaked. Focus was on speeding up BTC, leading to forks like BCH and BSV, which only increased block size.

2018: SegWit launched, enhancing transaction flexibility and opening the path for Layer 2 solutions.

Lightning strike a little late

2018: Lightning Network launches after BTC drops 40%, easing congestion effectively despite the timing. Crypto winter hits, slowing activity. Meanwhile, as ETH adds smart features, BTC devs propose Taproot to enable more complex transaction types.

Big DeFi Bang

2020: ETH sees a burst of new projects, CRV, BAL, SUSHI, YFI help redefine DeFi as a compostable interconnected finance system.

2021: NFT Volume explodes. With rising ETH TX Fees, the acceptance/visibility of L2s is accelerated with ARB & OP emerging as solutions

BTC L2s get Serious

Late 2021: With ETH DeFi maturing, focus shifts to BTC L2s, Rootstock sees more upgrades and has TVL increase 4x in 6mo. BTC was not just digital Gold.

2022: Stacks L2 goes live starting the L2 competition, it employs a novel Consensus mechanism, PoX.

Modern times

Between 2023 & 2024 BTC saw the launch of about 60 different L2 solutions, aiming to both add smart functionality to BTC & increase throughput, growing TVL to 1.5bn. We've chosen the largest 6 projects in TVL to look at and see what unique features they have.

Rootstock

RSK works via Merge Mining, meaning each block is mined parallel to BTC, limiting speed. While it has EVM Turing complete contracts, its age means it lacks modern features like Rollups which hamper scalability. RSK's age grants maturity yet stifles complexity.

Stacks

STX the 2nd oldest, introduced a new Consensus Mechanism, Proof of Transaction, where miners spend BTC to secure the network & earn STX, while stakers do the reverse STX employs a non-EVM system with its own Clarity language, focused on predictability & transparency.

Core (COREDAO)

CORE the largest L2, utilizes a mix of PoW & PoS which aims to solve the blockchain trilemma, balance: Scalability, Security & Decentralization. It's EVM deep compatibility, high scalability, security & generous CORE incentive structure have won over users & TVL.

Merlin

MERL takes a simple approach using ZK rollups, with hashes inscribed to BTC. It's focus is on expanding the utility of BTC-native assets, & thus allows direct bridging of BRC-20 tokens & Ordinals. Time will tell if this straightforward simple approach will win.

Bitlayer

Bitlayer, the 2nd largest in TVL, uses a Layered Virtual Machine, combining Optimistic & ZK Rollups for the best of both technologies. Built to be deeply EVM native, it requires minimal changes to port existing Solidity code, helping secure both TVL & builders.

BSquared

B² takes a fresh approach to tech with Acct Abstraction. This turns user accounts into smart contracts, enabling Tx batching, automation, & unique recovery methods. This is user-centric approach opens the doors for simpler, keyless logins & easier web3 onboarding.

Wrap-Up

Together these 6 protocols are 85% of the 1.5bn in BTC L2 TVL. Each takes a different approach to adding more functionality & mirroring BTCs security. For many years BTC's development has been slow, but now through L2s it is poised to catch up and unlock its immense value.

Stay tuned for a detailed breakdown of the TVL.