Protos: How many L2s does Bitcoin have? Why are there so many L2s?

Unbeknownst to most of the Bitcoin community, there are 400 “layer 2s” running on the blockchain. This rough estimate comes from Lava founder Shehzan.

During an Aug. 25 episode of the Gwart Show on YouTube, Shehzan joined Gwart and commentator Shinobi to question the benefits of hundreds of Rollups and alternative blockchains using the bitcoin ledger.

Some estimates put the number at a much lower 80 or 85, while others put it at over 1,000. Estimates vary widely because anyone can “rollup” data and broadcast a tiny hash to any miner, technically creating a “Bitcoin Layer 2.”

In fact, many are simple clones of Ethereum Rollup, handling almost all activity on centralized servers outside the Bitcoin network and broadcasting periodic hashes of that state into Bitcoin blocks.

Plus, they’re easy to create. In fact, one developer created a Rollup for $20. Anyone can pay miners to include data in a block; if that data is a hash of an alternative blockchain, the system can advertise itself as “Bitcoin Layer 2.”

Anyone can clone their own Bitcoin Layer 2

So what does it mean to say there are hundreds of Bitcoin Layer 2s? The answer to this question begins to illustrate the problem with this particular area of ​​crypto: few people agree on a definition.

Initially, layer 2 strictly referred to the trustless integration and execution of off-blockchain activities via the base blockchain. However, over the years, the term has evolved and now vaguely refers to cryptographic platforms that broadcast data to the base blockchain.

Sometimes the interaction is two-way, and there are many ways to use Bitcoin transactions to enforce rights on alternative blockchains.

Examples include Layer 2s without proprietary tokens, such as Lightning, Liquid, Ark, or BitVM. More popular Bitcoin Layer 2s introduce proprietary tokens, such as Rootstock, Stacks, Libre, or Merlin. According to the Stacks founder, the total value of Bitcoin Layer 2 was $5 billion as of February and will grow 20 times.

Some developers are very excited.

Trying to independently verify the exact amount of Bitcoin Layer 2 without translating marketing language word for word would be very difficult. Projects that are essentially alternative blockchains with their own tokens clearly want to avoid drawing attention to the economic realities of their efforts.

Instead, project leaders write evasive project descriptions that focus on Bitcoin language and obscure their use of alternative blockchains and tokens.