Bitcoin Layer2 may explode as halving is imminent

On March 19, Bitcoin's second-layer network Merlin Chain announced the launch of M-Token and the release of M-BTC. Recently, Babylon and B² Network have reached a cooperation, and the concepts of Layer2 and staking on Bitcoin have aroused heated discussions. In addition, multiple Layer2 projects on the Bitcoin chain are also continuing to make efforts. So, what impact will Babylon and B² Network have on the Bitcoin ecosystem? What other Bitcoin Layer2 projects in the Bitcoin ecosystem are worth paying attention to?

Bitcoin Layer2 has been active recently, and the cooperation between Babylon and B² has attracted market attention

The Babylon team proposed the concept of BTC staking, allowing BTC holders to stake their idle BTC to enhance the security of the PoS chain. The B² Network team suggested building Bitcoin's execution layer through modular design, allowing BTC holders to deposit BTC into Bitcoin's execution layer (commonly known as Layer-2s) for various DApp operations, thereby increasing BTC's liquidity. B² Network and Babylon announced a close collaboration to build infrastructure and services, using Rollup as an execution layer protected by the Bitcoin network.

Crypto researcher Haotian said: One is a BTC modular expansion solution provider, which launched the B² Hub modular DA layer, and the other is a BTC second-layer POS security pledge service provider, which brings native asset pledge interest into the BTC network. The BTC pledge system introduced by Babylon can guarantee the security of the external POS system. It should be said that every key step in the B² Hub involves the verification and governance of a decentralized Validators network. When B² Hub and Babylon cooperated, the security of its decentralized verification network was enhanced. Eigenlayer's re-staking provides EigenDA node services by giving Ethereum nodes a gain Buff, which is equivalent to enhancing node verification capabilities through economic incentives. By analogy, Babylon's role is actually very similar to the Function provided by Eigenlayer. In short, if the impact of the cooperation between B² Network and Babylon on the BTC layer2 ecosystem is compared to the utility of Celestia DA and Eigenlayer Restaking on Ethereum layer2.

What are the mainstream public chains for Layer 2 on Bitcoin?

With the rise of staking and re-staking on Ethereum, the staking track on the Bitcoin network has also become a focus of market attention. In addition, many projects in the Layer2 ecosystem and modular ecosystem on Bitcoin have also received market attention.

BounceBit

BounceBit's staking is handed over to a CeFi custodian, and bounceBTC is minted on the BounceBit chain. At this time, users can entrust bounceBTC to the Staking operation node, and the operation node will give users stBTC, the liquid version of bounceBTC staking. Users can also obtain more profit possibilities in on-chain DeFi through stBTC. This means that bounceBTC users will receive three types of income: 1. CeFi income; 2. Staking income; 3. DeFi income. BounceBit previously completed a $6 million seed round of financing, led by Blockchain Capital and Breyer Capital.

Babylon

Babylon's staking is self-custodial, and the custody contract is expressed by UTXO transactions. Babylon attempts to build three security sharing protocols: Bitcoin Staking Protocol, Bitcoin Timestamping Protocol, and Bitcoin Data Availability Protocol. Bitcoin Timestamping Protocol: The Bitcoin Timestamping Protocol is used to synchronize the PoS chain and the BTC chain to prevent users from withdrawing from staking on the BTC chain, but the PoS chain shows that they have not withdrawn and can continue to vote and participate in governance. Babylon completed an $18 million Series A financing in December last year, led by Polychain Capital and Hack VC, and Binance Labs subsequently made additional investments in it.

Merlin

Merlin Protocol has built a universal adaptation protocol dedicated to Bitcoin network crypto assets. The Merlin team uses comprehensive technical solutions such as smart contracts, data oracles, crypto-economic incentive mechanisms and encryption algorithms to seamlessly adapt Bitcoin ecosystem crypto assets to the EVM ecosystem and Bitcoin L2 ecosystem through Merlin Protocol, directly solving the liquidity and scalability problems of Bitcoin network crypto assets, and opening up a new path for Bitcoin ecosystem developers.

On March 19, Bitcoin's second-layer network Merlin Chain announced the launch of M-Token and the release of M-BTC. Merlin's first Runes asset $RUFI is about to start fair launch, the ace blockchain game Dragonverse Neo released a white paper and announced the launch of its native token $MDBL, MerlinSwap announced the IDO of its governance token $MP, and ecological applications such as Influpia, MerlinSwap, and Unicross were launched one after another.

CKB

CKB was originally a long-established Bitcoin ecological public chain. In July 2018, CKB completed a financing of 28 million US dollars, with participation from many well-known investment institutions such as Polychain Capital, Sequoia China, Wanxiang Block, and Blockchain Capital. Recently, it announced that it would adjust the main network positioning to Bitcoin Layer 2 and launched a layer asset protocol RGB++.

The RGB++ solution proposed by Cipher, a co-founder of Nervos, attempts to entrust the asset status, contract release and transaction verification of RGB to the CKB public chain. CKB acts as a third-party data hosting and computing platform, and users no longer need to run the RGB client themselves. Since CKB itself is an extended UTXO model (Cell), the off-chain information of RGB assets can be written into the Cell, and a 1-to-1 mapping relationship can be established between the Cell and Bitcoin UTXO, realizing a CKB-based RGB asset data hosting and verification solution to solve the usability problem as an enhanced supplement to the original RGB solution. With the development momentum of Bitcoin Layer 2, coupled with its own UTXO + PoW orthodox "BUFF", CKB quickly became a hot topic for community discussion.

Stack

Stacks is a smart contract layer on Bitcoin. Its formal construction began in 2017, and the initial version was launched in 2021. The initiators are a group of computer scientists from Princeton. The TVL on Stack has exceeded $140m; the upcoming Nakomoto upgrade in Q2 will generate faster blocks and further improve security, which is expected to significantly improve the DeFi experience and attract more liquidity.

Among them, ALEX in Stacks is the leading protocol, contributing 60% of TVL. ALEX has developed a set of DeFi-related components, including AMM, Orderbook, Oracle, Bridge, etc., and also has Launchpad business. Stacks' monthly transaction volume is in the hundreds of thousands. In the past two months, benefiting from the vigorous development of STX 20, the transaction volume has shown a clear upward trend, breaking through the 1M mark in January, close to 10% of the overall Bitcoin transactions. In addition, the number of mature developers (with 2 years of work experience in crypto) has continued to increase steadily, with an annual growth rate of +51%.

Summarize

With the Bitcoin halving, Bitcoin Layer2 is expected to usher in a new round of substantial increases. In addition, the developers of Bitcoin Layer2 have borrowed the technical concepts of Ethereum Layer2 and modularity, and combined the characteristics of Bitcoin to carry out technical innovation, thereby promoting the rapid development of the Bitcoin ecosystem. In the future, the development of the Bitcoin ecosystem may become the main narrative of this round of bull market.