Bitcoin Layer2 Development Prospects: Drawing Insights from Ethereum's Experience

With the birth of the Ordinal protocol, the Bitcoin ecosystem has welcomed a brand new asset type known as "inscriptions." The inscription craze has not only spawned various asset issuance protocols but also attracted a large amount of capital, users, and developers. However, the limitations of Bitcoin as Layer 1 are gradually becoming apparent, including issues such as the lack of support for smart contracts, performance bottlenecks, and high miner fees. These factors have prompted people to turn their attention to Bitcoin's scalability solutions, particularly Layer 2 solutions.

Against this backdrop, Merlin Chain has rapidly emerged as a Bitcoin Layer 2 project, with its staking activity Merlin's Seal attracting over $3.5 billion in TVL at one point. However, after the listing of the Merlin token MERL, the price plummeted, and the TVL also significantly decreased, raising doubts about the prospects of Bitcoin Layer 2.

The development path of Bitcoin Layer2 has not been smooth sailing. Looking back at the expansion history of Ethereum, we can find that it has gone through continuous exploration and evolution from state channels, Lightning Network to sidechains, and then to Plasma and Rollup technologies. The emergence of Rollup technology ultimately drove the explosive growth of Ethereum Layer2, giving rise to successful projects like Optimism and Arbitrum.

Currently, the main challenges facing the Bitcoin ecosystem are the lack of sufficient decentralization, data availability, and security in Layer 2 solutions. Existing solutions such as the Lightning Network, Liquid Network, RSK, RGB, and Stacks all have their own limitations. However, emerging solutions like BEVM and Mezo are attempting to break through these limitations, bringing new possibilities for the development of Bitcoin Layer 2.

BEVM is a decentralized Bitcoin network solution based on Taproot Consensus, which enhances security and decentralization through technologies such as Schnorr signatures, MAST, and Bitcoin light node network consensus. Mezo, on the other hand, utilizes tBTC as a foundation to explore an innovative Layer 2 implementation.

Despite the numerous challenges facing the current development of Bitcoin Layer 2, this trillion-dollar sector has already shown great potential. In the future, we look forward to seeing more decentralized, natively strong, and secure Layer 2 projects emerge, driving the Bitcoin ecosystem towards prosperity. As long as we continue to explore and innovate in the right direction, Bitcoin Layer 2 will ultimately experience a true explosion, rather than just fleeting hype.