5 New Bitcoin Layer 2 Protocols You Should Know About

The Bitcoin network has a scalability problem that prevents its mainstream adoption despite it being the most popular digital currency. Bitcoin layer 2 protocols are emerging to help scale Bitcoin and bring more utility to the network. 

Read on to learn about Bitcoin Layer 2 protocols you should be aware of.

What Are Bitcoin Layer 2 Protocols?

Bitcoin layer 2 protocols are secondary networks built on the Bitcoin blockchain to enhance scalability by processing transactions of the main network.

Transactions are processed off-chain, reducing the burden on Bitcoin’s blockchain and increasing transaction efficiency.  The layer 2 chain broadcasts the transaction back to the base layer, where it undergoes block finality and is confirmed on-chain. 

This raises the question of why Bitcoin needs layers to scale.

Since its inception, Bitcoin’s strong emphasis on decentralization and security has worked against it in becoming a dominant mainstream digital currency. Bitcoin’s inherent properties mean network security is achieved, but the trade-off is limited capacity for high transactions and high network fees. 

Generally speaking, the Bitcoin network processes up to 7 transactions per second. The low throughput is brought about by the blockchain’s limited block size of 4 MB and an average block time of 10 minutes. These limitations have been crucial to Bitcoin’s sovereignty by preventing the collusion of a majority of nodes. 

However, the current state has led to congestion during peak network activity and high transaction fees. The Bitcoin scalability issue is also compounded by the fact the network doesn’t support smart contracts due to its simple scripting language. This hinders developers from building decentralized applications on the Bitcoin blockchain.

Bitcoin layer 2 helps to address these concerns.

L2 protocols appeal to Bitcoin supporters who want to see the network retain its original properties and benefit from new upgrades on secondary networks.

Benefits of layer 2 protocols include:

• Increased transaction throughput and lower transaction fees
• Expanded capability to build diverse applications on layer 2 protocols that support smart contracts 
• Inherit the security infrastructure from Bitcoin core for layer 2 protocols

New Layer 2 Protocols for Bitcoin 

The following are some of the most promising layer 2 protocols that are working to optimize the Bitcoin blockchain for faster throughput and low-cost transactions. 

BitcoinOS

BitcoinOS is a superchain of interoperable Bitcoin rollups with near trustless Bitcoin rails.

The open-source project aims to solve the scalability problem by introducing interoperable rollups. Rollups process transactions of-chain and then bundle them together, compressing the transaction load they require, and broadcast them to Bitcoin core as a single transaction. 

BitcoinOS rollups are smart contract capable and will be EVM compatible. Moreover, since transactions occur off-chain, BitcoinOS has a higher throughput compared to base-layer transactions. Lastly, BitcoinOS offers near-trustless Bitcoin rails to move money from L1 to L2 without the need for trusted bridges. 

Build on Bitcoin (BOB) 

Build on Bitcoin (BOB) is a Bitcoin layer 2 chain combining rollup functionality, EVM compatibility, and blockchain bridges.

BOB’s one-of-a-kind rollup stack is based on the Optimism layer and, through ZK upgrades, can be rolled up to Ethereum for the onboarding of assets, users, and liquidity. This brings Bitcoin class security to BOB and enhances interoperability.

BOB leverages EVM to facilitate the creation and deployment of smart contracts on the secondary layer. By using a BTC light client, BOB allows EVM smart contracts to access Bitcoin block and transactional data and process BTC transactions. BOB supports a wide range of decentralized bridges and contributes to the utility of the mainnet. 

Botanix

Botanix is an innovative Bitcoin layer 2 chain that enables developers to build EVM applications on top of the Bitcoin network.

Botanix is powered by Spiderchain, which comprises a series of successive multisig wallets that create a network to secure BTC on the Botanix protocol. Users can bridge their BTC on Botanix for bridged assets without worrying about security. 

Because of EVM compatibility, Botanix users can access decentralized applications, NFTs, etc. The Botanix protocol is secured by Orchestrator nodes which provide liquidity in the L2 chain and from L2 to L1. 

Merlin Chain

Merlin Chain is a Bitcoin layer 2 chain that supports native L1 assets, protocols, and users, enableing users to interact with new Bitcoin tokens standards like BRC20, BRC420, Atomicals, Pipe, and more on layer 2.

The Merlin Chain protocol is EVM compatible, using ZK-rollups to improve BTC transaction efficiency and enhance scalability. Sequencer nodes broadcast data to the Bitcoin network through decentralized oracles to connect the two protocols. 

Mintlayer

Mintlayer is a layer 2 protocol designed to act as a sidechain to Bitcoin.

Mintlayer’s hybrid chain is compatible with the Lightning Network and enables users to make fast transactions off-chain and use the Mintlayer protocol for final settlement. Users can enjoy the higher throughput of the Lightning Network and the security of Mintlayer’s blockchain architecture.

Mintlayer uses the atomic swap system to transfer assets directly to Bitcoin and vice-versa, without the need for intermediaries or wrapping of any tokens. The proof-of-stake protocol intends to integrate Bitcoin into its consensus system in the future. 

In addition to the layer 2 scaling solutions listed above, you should also keep an eye on the likes of Taproot Assets, Stacks, Rootstock, and Bison Labs, as they are providing new use cases and functionalities on top of Bitcoin.

The Bottom Line

Bitcoin layer 2 protocols will play a pivotal role in solving the scalability challenge and bringing transaction efficiency to the network. Layer 2 will also benefit developers looking to leverage Bitcoin’s blockchain security for decentralized applications.