What are BTC Layer 2 Networks?
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1. What are BTC Layer 2 Networks?
A second-layer network (Layer 2) is built on top of a first-layer network, usually created to address certain issues present in the first-layer network. The one established on Ethereum is commonly referred to as Ethereum Layer 2, while the one built on the Bitcoin network is known as Bitcoin Layer-2 networks.
The Bitcoin Layer-2 network is primarily designed to address issues within the Bitcoin network, such as high transaction fees, insufficient throughput, and scalability impediments. By using a second-layer network to handle transaction issues, the results are transmitted back to the Bitcoin network once processed, thus alleviating the pressure on the Bitcoin network.
2. Why Bitcoin Needs a Layer 2 Network
2.1 Rapid Growth in Transaction Volume
In 2023, the BRC20 token protocol gained popularity, leading to a continuous increase in demand for block space. Consequently, transaction fees on the Bitcoin network skyrocketed. Issues such as slow transaction speeds, lengthy confirmation times, high transaction fees, and limitations in network scalability have hindered the current development of the Bitcoin ecosystem. To address these challenges, a second-layer network is required to support the current state of Bitcoin development.
2.2 Hindering Block Expansion
Due to the early limitation of Bitcoin's block capacity to 1 MB, the issue of block expansion has long been a contentious topic. The lack of consensus on expansion solutions led to subsequent hard forks, resulting in the creation of BCH (Bitcoin Cash) and BSV (Bitcoin Satoshi Vision).
The complexity of expanding the Bitcoin network is high. After the completion of Segregated Witness (SegWit), the current main direction is to build new second-layer networks on top of the Bitcoin network. This approach not only avoids affecting the Bitcoin system but also addresses congestion issues on the blockchain.
2.3 Demand for the Prosperous Development of the Ecosystem
In comparison to the flourishing Ethereum ecosystem, the development of the Bitcoin network's ecosystem still has a long way to go. As of now, Bitcoin can only accomplish asset issuance, with the transaction count of BRC20 token transfers exceeding 10 million, a substantial figure. However, the Bitcoin network is still unable to construct on-chain applications like decentralized exchanges (DEX) as Ethereum does and lacks the capability for independent asset settlement. The development of Bitcoin's second-layer network contributes to the overall prosperity and growth of the ecosystem.
3. What Are Some Layer 2 Solutions for Bitcoin?
3.1 On-Chain Layer 2 Solutions
On-chain Layer 2 construction can be broadly divided into two types: one that is compatible with the Ethereum Virtual Machine (EVM) model, and the other that resembles the Bitcoin Unspent Transaction Output (UTXO) model. Solutions based on this on-chain Layer 2 model retain most of the fundamental characteristics of blockchain, resulting in a significant reduction in transaction fees. However, performance improvement is limited, and the system tends to be somewhat centralized, posing certain security issues. These pros and cons have been clearly verified in Ethereum's second-layer networks.
Currently, on the Bitcoin network, teams like Stacks, Rootstock (RSK), Liquid, and others adopt this approach to construct on-chain Layer 2 networks.
3.2 Distributed Layer 2 Solutions
Distributed second-layer construction can be categorized into two types: one that is solely responsible for value transfer, and the other that combines value transfer with Turing-complete capabilities. Representing the former is the Lightning Network, while the latter is exemplified by the RGB protocol. The main challenge of this type of solution lies in the complexity of technical implementation. However, its advantages include a more decentralized system, enhanced privacy, better resistance to censorship, and unlimited scalability. Once this technology is successfully developed, it has the potential to greatly advance the construction and development of upper-layer applications.
3.3 Other Layer 2 Solutions
In addition to the two types of solutions mentioned above, there are currently many other solutions available in the market. For example, B²Network has developed a Bitcoin second-layer network compatible with the EVM based on ZK-Rollup; Bison is constructing a native ZK-Rollup on the Bitcoin network to implement DeFi solutions for the Bitcoin network; Merlin Chain's second-layer solution integrates ZK-Rollup networks, decentralized simulation machines, on-chain anti-fraud modules, and more.
Currently, Bitcoin's Layer 2 is still in its early stages, and it will take time to determine which solution becomes mainstream and is accepted by the market. It is not hard to imagine that when Bitcoin's second-layer solutions are perfected, it will also be a period of prosperity for the Bitcoin ecosystem.
4. How to Purchase Tokens Related to Bitcoin's Layer 2
MEXC has listed Layer 2 Bitcoin network-related tokens such as STX, MAP, TET, ALEX, etc. You can purchase these spot tokens on the MEXC platform.
For example, with STX, you can open the MEXC App on your mobile device, enter STX in the top search bar, select STX spot trading, click on [Buy] on the K-Line page, choose your order type, quantity, and other information, then click [Buy STX] to complete the purchase.
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