WHAT IS BITCOIN LAYER-2?
Bitcoin Layer-2 is considered an additional layer of solutions built on the Bitcoin blockchain platform to enhance transaction processing capabilities, increase speed and reduce costs compared to performing directly on Bitcoin while still ensuring integrity. Bitcoin’s inherent security and decentralization.
Bitcoin Layer-2 focuses on both important aspects: the ability to create smart contracts and scalability. This helps open up more diverse applications on the Bitcoin platform, creating a Bitcoin blockchain similar to Layer -1 blockchains.
Building Layer-2 not only supports the Bitcoin blockchain to increase transaction speed and reduce transaction fees, but also helps the Bitcoin network become more applicable in the market and not become “obsolete.”
IMPORTANCE OF BITCOIN LAYER-2
Bitcoin Layer 2 plays an important role in solving several important problems facing the Bitcoin network, including:
1. Enhance scalability
Bitcoin is currently facing a scalability problem as the number of users and transactions increases. Layer 2 helps reduce pressure on Bitcoin’s main blockchain by moving some transactions off the main blockchain, keeping the network able to handle more transactions without significantly changing the blockchain’s structure.
2. Reduce transaction costs
Transactions on the Bitcoin blockchain can incur high transaction fees and long confirmation times. Layer 2 provides the means to carry out transactions quickly and at lower costs using techniques such as the Lightning Network.
3. Increase transaction confirmation speed
Layer 2 helps speed up transaction confirmations by making offline transactions between parties without waiting for confirmation on the main blockchain. This reduces the waiting time between when a transaction is sent and when it is confirmed.
4. Interoperability with other systems
Layer 2 provides interoperability with different systems, allowing the integration of new services and applications on the Bitcoin platform without having to change its main protocol.
In summary, Bitcoin Layer 2 plays an important role in enhancing the performance and scalability of the Bitcoin network, while also providing a basis for the development and integration of new applications.
TOP 5 PROJECTS ON BITCOIN LAYER-2
According to data updated on CoinMarketCap on May 6, 2024, below are the top 5 tokens on Bitcoin Layer 2 based on 24h Volume:
1. Stacks (STX): $55,652,804
Stacks Token is a cryptocurrency built on the foundation of Bitcoin through the Stacks protocol. This project focuses on developing decentralized applications (dApps) on the Bitcoin platform using part of Layer 2.
Here are some important points about Stacks Token and how it interacts with Bitcoin Layer 2:
- Stacks Protocol: The Stacks Protocol is a software layer on the Bitcoin platform that helps build decentralized applications. Instead of creating a separate blockchain, Stacks uses the Bitcoin blockchain as a base to build and deploy smart contracts.
- Smart Contracts on Bitcoin: Stacks enable the development of smart contracts directly on the Bitcoin blockchain, opening the door to building more complex applications and protocols on the Bitcoin platform.
- Scalability: Using Bitcoin Layer 2, Stacks can reduce pressure on Bitcoin’s main blockchain by moving a portion of decentralized operations off the main blockchain. This increases scalability and reduces transaction costs for users.
- Integration with Bitcoin: Stacks Token makes Bitcoin a richer platform by providing a base for building complex smart contracts and applications on the platform.
- Interoperability: Stacks Token and the Stacks protocol provide interoperability with other applications and services on Bitcoin and other blockchain networks, opening up a rich and diverse environment for developing and using Decentralized applications.
In short, Stacks Token plays an important role in expanding and developing the decentralized blockchain on the basis of Bitcoin, opening up many new opportunities for building and deploying decentralized applications.
2. Merlin Chain (MERL): $33,489,066
- Increase speed and reduce costs: Using Bitcoin Layer 2 can help Merlin Chain increase transaction confirmation speed and reduce costs compared to using Bitcoin’s main blockchain. This could make using and trading Merlin Chain more efficient.
- Integration with the Bitcoin blockchain: Merlin Chain can integrate easily with the existing Bitcoin ecosystem, allowing users to use and manage their tokens through Bitcoin wallets or other services in the Bitcoin blockchain.
- Security and reliability: The security and reliability of Merlin Chain can be enhanced by the security of the Bitcoin network and the security solutions applied on Bitcoin Layer 2.
- Expanding Usability: Using Bitcoin Layer 2 could open up many new opportunities for Merlin Chain to integrate and use its tokens in various applications and services, from payments to Decentralization apps is more complex.
3. BVM: $3,380,839
- Increase speed and reduce costs: Using Bitcoin Layer 2 can help BVM tokens increase transaction speed and reduce costs compared to using Bitcoin’s main blockchain. This makes using and trading BVM tokens more efficient.
- Integration with the Bitcoin blockchain: BVM token can integrate easily with the existing Bitcoin ecosystem, allowing users to use and manage their tokens through Bitcoin wallets or other services in the Bitcoin blockchain.
- Security and reliability: The safety and reliability of the BVM token can be enhanced by the security of the Bitcoin network and the security solutions applied on Bitcoin Layer 2.
- Expanding Usability: Using Bitcoin Layer 2 can open up many new opportunities for BVM to integrate and use its token in various applications and services, from payments to Decentralization applications is more complex.
- Layer 2 services and applications: BVM tokens can leverage Layer 2 services and applications such as Lightning Network or sidechains to provide better features and trading experiences for users.
4. SatoshiVM (SAVM): $839,480
- Performance: SatoshiVM can provide higher performance for applications and transactions on the Bitcoin network by using Layer 2 solutions such as Lightning Network. This helps speed up transaction processing and reduce waiting time for users.
- Low Cost: Using Bitcoin Layer 2 reduces transaction costs compared to using Bitcoin’s main blockchain, as transactions do not need to be confirmed on the main blockchain each time.
- Easy Integration: SatoshiVM can integrate easily with the existing Bitcoin ecosystem, allowing users to use and manage their tokens through Bitcoin wallets or other services in the Bitcoin ecosystem.
- Safety and reliability: The safety and reliability of SatoshiVM can be enhanced by the security of the Bitcoin network and the security solutions applied on Bitcoin Layer 2.
Interoperability: SatoshiVM can interact with other services and applications on Bitcoin and other blockchain networks, opening up a rich and diverse environment for developing and using decentralized applications.
5. Elastos (ELA): $401,884
- Elastos is not a direct solution on top of Bitcoin Layer 2. Instead, Elastos is an independent blockchain with its own infrastructure and protocol, independent of the Bitcoin blockchain. However, Elastos can interoperate with Bitcoin and Bitcoin Layer 2 solutions such as Lightning Network or sidechains.
- While not part of Bitcoin Layer 2 directly, Elastos can leverage Bitcoin’s Layer 2 solutions to provide a faster, low-cost, and more secure trading environment for its users. This could boost the growth and usage of Elastos in building decentralized applications and services on its platform. This ecosystem has some important characteristics as follows:
- Peer-to-Peer: Elastos provides a peer-to-peer development environment, eliminating dependency on a central server and increasing application security and reliability.
- dApps development environment: Elastos enables the development of decentralized applications (dApps) on its platform, providing a safe and secure base for these applications.
- Intellectual property protection: Elastos uses blockchain technology to protect the intellectual property of digital works, helping content creators control and retain their ownership rights.
- Enhanced security: Elastos uses a technique called “Runtime” to isolate applications and data, helping protect users from security threats.
CONCLUSION
- The potential of the above tokens goes beyond Bitcoin’s scalability, but also facilitates wider popularity in the Bitcoin ecosystem.
- With the development of Bitcoin, Layer 2 will play an increasingly important role in shaping the future of BTC.