Bitcoin Layer2 Explosion is Imminent, Drawing Lessons from Ethereum's Scalability

Bitcoin, as digital gold, welcomed a new asset type in 2023 - "inscriptions". The emergence of inscriptions has brought a new spring to the Bitcoin ecosystem, attracting a large amount of funds, users, and developers. However, the limitations of Bitcoin as Layer 1 are gradually becoming apparent, with the lack of support for smart contracts, performance bottlenecks, and high miner fees posing obstacles to further development.

These issues have prompted people to turn their attention to Bitcoin scaling solutions, with Bitcoin Layer 2 becoming a new hot track. Among them, Merlin Chain, as a star project, quickly achieved a huge TVL after its launch, reaching 3.5 billion USD at one point. However, the price of the MERL token subsequently plummeted, and the TVL also dropped to around 1.3 billion USD, raising doubts about the prospects of Bitcoin Layer 2.

In fact, the development of the blockchain industry has been progressing amidst skepticism and recognition. As a pioneer, Ethereum's Layer2 development experience is worth learning from.

The road to Ethereum's scalability has gone through three phases: learning and exploration, breaking through bottlenecks, and flourishing in diversity.

1. The learning and exploration phase draws on solutions such as Bitcoin's state channels, Lightning Network, and sidechains, but all have varying degrees of limitations.

2. The breakthrough bottleneck phase proposed Plasma and Rollup technologies, especially Optimistic Rollup which solved key issues, allowing projects like Optimism and Arbitrum to gain widespread recognition.

3. The phase of a hundred flowers blooming has seen a large number of Layer 2 projects and one-click chain creation tools, forming a thriving ecosystem.

The development of Bitcoin Layer 2 has not been smooth sailing either. Early solutions like the Lightning Network and Liquid Network had varying degrees of limitations. Recent new solutions such as RGB and BitVM have garnered attention, but have yet to see widespread adoption.

The main dilemma currently facing Bitcoin Layer 2 is the lack of truly decentralized and publicly recognized solutions, which makes it difficult to attract large amounts of capital. To overcome this dilemma, it is necessary to find a balance between decentralization, security, and native properties.

The emerging BEVM and Mezo projects show some possibilities for breakthroughs:

• BEVM based on Taproot Consensus has implemented a trustless BTC network solution, enhancing security and the degree of decentralization.

• Mezo uses tBTC as a foundation to attempt to connect the Bitcoin and Ethereum DeFi ecosystems.

Although Bitcoin Layer 2 is still in a difficult climbing period, as long as we move in the right direction, it is expected to usher in a real explosion in the future. We need more projects that are decentralized, native, and secure to promote the development of this trillion-dollar track. Regarding the future of the Bitcoin ecosystem, we should maintain expectations, patience, and perseverance.