Layer 2 projects are increasingly central to overcoming scaling and efficiency challenges at the base protocol level for top-tier Layer 1 blockchains such as Ethereum and Bitcoin. 

Layer-2 protocols bring new ideas, which can solve increased transaction speeds, lower fees, and how to handle redefined networks.

These solutions, built on the Bitcoin blockchain, aim to address some inherent limitations while unlocking new possibilities for innovation and growth.

What is Bitcoin Layer-2?

Bitcoin Layer-2 refers to various protocols and technologies built on top of the Bitcoin blockchain to help improve its scalability, privacy, and functionality. 

These Layer-2 solutions aim to offload some transaction processing from the main Bitcoin blockchain to separate layers, allowing faster and cheaper transactions.

Also See: Top 5 Bitcoin Ordinal Marketplace Reviewed

What is the difference between Bitcoin and Ethereum Layer-2 Solutions?

While both Bitcoin and Ethereum have Layer-2 solutions, there are some key differences:

• Bitcoin's Layer-2 scales payments, while Ethereum's Layer-2 supports smart contracts and dApps.
• Ethereum Layer-2 solutions like Polygon, Optimism, and Arbitrum use Ethereum's EVM for compatibility, unlike Bitcoin Layer-2 projects, which must create their own environments.
• Bitcoin's scripting is more limited than Ethereum's smart contract functionality, which impacts the complexity possible with Layer-2 solutions.

Why is there a Need for Bitcoin Layer-2 Protocols?

Bitcoin layer-2 protocols are needed to address several limitations and challenges in the Bitcoin network's base layer. Here are some key reasons: 

• The base layer of Bitcoin can only handle a limited number of transactions at a time. Layer-2 solutions address this issue by allowing transactions to occur off the main blockchain, which can then be settled in groups, easing the strain on the primary blockchain.
• Bitcoin's scripting language is limited for security, but Layer-2 protocols can add smart contracts and complex transactions without compromising base layer security.
• With the increasing demand for Bitcoin transactions comes higher transaction fees. Layer-2 protocols enable users to conduct transactions off the main blockchain, often with reduced fees or at no cost at all, thus making microtransactions more viable.
• Bitcoin's transactions lag behind other cryptocurrencies, but Layer-2 solutions offer almost instant confirmation, greatly improving user experience for payments and DeFi apps.
• Bitcoin transactions are recorded on a public blockchain, allowing fund tracing, while Layer-2 solutions can enhance privacy by conducting transactions off-chain.
• Layer-2 solutions enable interoperability between blockchain networks, allowing seamless asset transfers across platforms without centralized exchanges.

Top 7 Layer-2 Projects to Follow in 2024

Here are the top layer-2 projects in 2024: 

#1: Stacks (STX)

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Stacks is a decentralized computing network and blockchain ecosystem for building decentralized apps and smart contracts that connect to Bitcoin. It extends Bitcoin's security, capital, and permissions models, allowing apps, assets, identities, and DAOs to be built directly on Bitcoin.

Stacks and other Layer-2 coins like ELA and SAVM outperformed BTC post-halving. With the Nakamoto upgrade underway, Stacks is becoming faster and more secure, offering fast transactions and leveraging Bitcoin's security with 100% finality.

Current Market Stats:

• With over $64,237.77 in market value and $2.64 per token, Stacks provides a robust platform for developers and users alike.
• The total supply of STX tokens is 1.82 billion. 
• 80.00% of the total supply is unlocked. This means many STX tokens are available for trading or transfer.

Top dApps built on STX:

• Arkadiko Finance: A decentralized liquidity protocol on Stacks where users can borrow USD stablecoins by collateralizing their STX tokens. The borrowed funds are repaid over time using interest generated by locked STX tokens. 
• Boomstack: A Stacks-based DeFi platform offering lending, borrowing, and trading services for digital assets, contributing to the decentralized finance ecosystem. 
• Friedger: A decentralized social network on Stacks focused on user data privacy and control, potentially integrating with DeFi protocols within the Stacks ecosystem. 

Also See: What is Bitcoin Margin Trading and How Does it Work?

#2: Rootstock Infrastructure Framework (RIF)

The Rootstock Infrastructure Framework is a decentralized system that works on the Stacks blockchain. It provides various decentralized finance (DeFi) services and solutions. Using RIF, people can use their STX tokens as collateral to borrow stablecoins, join liquidity pools, and swap tokens.

Moreover, RIF makes it possible to make synthetic assets that are tied to real-world assets. This opens up more chances for investing in DeFi. The system's strong ecosystem supports different decentralized apps (dApps) and lets users control the platform using its own governance token. RIF's goal is to improve what the Stacks blockchain can do and help people use decentralized financial services in a safe and clear way.

Current Market Stats:

• With 1 billion RIF tokens circulating, RIF offers open-source, decentralized tools and technologies for building accessible DeFi products. 
• Its market cap is $212.79 million. 

Top dApps built on RIF:

• RIF Storage: Provides secure and censorship-resistant storage on the RIF platform for various applications and users. 
• RIF Payments: Infrastructure layer for peer-to-peer and micropayments, facilitating fast and low-cost transactions on the RSK network. 
• RIF Marketplace: Decentralized marketplace where users can buy, sell, and trade digital goods and services using RIF tokens. 
• RIF Gateways: Interoperability protocols and gateways enabling seamless communication between different blockchain networks, enhancing usability and functionality in the RIF ecosystem.

#3: Merlin Chain (MERL)

Merlin Chain is a layer 2 blockchain project focused on revolutionizing the gaming and esports sectors through decentralized solutions. With non-fungible token (NFT) support, decentralized finance (DeFi) integration, and community-driven governance, Merlin Chain operates as a layer 2 protocol. 

Current Market Stats:

• MERL's fully diluted valuation stands at $1,571,303,532. 
• An all-time high of $1.45 was recorded 7 days ago.
• The current price is $0.7400+. 

dApp built on MERL:

• Merlin dApp: Merlin is a decentralized application (dApp) built on the Binance Smart Chain, serving as a yield aggregation platform. With auto-compounding features, Merlin aims to optimize yield farming opportunities within the BSC ecosystem, providing users with a seamless and efficient DeFi experience.

Also See: What are Bitcoin Stamps and SRC-20 Tokens?

#4: BVM (BVM)

BVM is like an upgrade for Bitcoin, designed to make Bitcoin transactions faster and more efficient. It works on a layer above the main Bitcoin network, which helps solve some of its problems. With BVM, transactions can happen quicker and cost less, all while keeping Bitcoin secure and decentralized.

BVM uses off-chain solutions to enable micropayments, reduce network congestion, and enhance transaction throughput, aiming to maximize Bitcoin's global potential.

With Ordinals technology and the BRC-20 standard, BVM opens new avenues for affluent Bitcoin holders to engage in native DeFi applications, harnessing Bitcoin's potential in decentralized finance.

Current Market Stats:

• BVM (BVM) currently trades at $3.0+ with a 24-hour price change of +8.0%. 
• Its fully diluted valuation stands at $349,639,297. The token's trading volume in the last 24 hours is $3,783,188. 

#5: Dovi (DOVI)

Dovi is a community-driven Bitcoin Layer 2 protocol that offers an EVM-compatible smart contract platform. 

Dovi boosts Bitcoin's capabilities by handling transactions efficiently and introducing features such as Schnorr Signatures for improved security. It also supports multiple assets, including BRC20 and ARC20 tokens, broadening Bitcoin's utility.

Its roadmap is straightforward: in the short term, Dovi aims to launch the platform and build a strong community. In the long term, the goals shift towards enhancing and refining the protocol, growing the ecosystem, and fostering innovation within the industry.

Current Market Stats:

• The price of DOVI is currently $0.2374, with a slight increase of 0.5% over the last 24 hours. 
• The trading volume of DOVI over the past 24 hours is $1,400,458, indicating a recent rise in market activity. 
• The all-time high for DOVI was $1.87, recorded on Dec 16, 2023, while the all-time low was $0.1999, recorded on Apr 19, 2024.

#6: MAP Protocol (MAPO)

MAP Protocol (MAPO) is a Bitcoin layer-2 network that enables peer-to-peer cross-chain interoperability. 

Notably, its recent transition from ERC20 tokens to mainnet tokens underscores its commitment to enhancing its ecosystem and functionality. This move reflects MAPO's dedication to providing a robust infrastructure for seamless interaction between various blockchain networks, positioning it as a promising player in the evolving cryptocurrency ecosystem. 

MAPO can be traded on cryptocurrency exchanges, including LBank, Bitget, BiKing, Gate.io, and HTX.

Current Market Stats:

• MAP Protocol (MAPO) is currently trading at $0.0239 with a market cap of $104,862,724, ranking it #431 on CoinMarketCap. 
• Over the last 24 hours, MAPO has seen a trading volume of $1,158,842. It has a circulating supply of 4,387,467,170 MAPO tokens out of a total supply of 9,697,223,991 MAPO tokens. 

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Also See: Bitcoin Oracle: A Roadmap for the Future of Bitcoin DeFi

#7: Liquid Network

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The Liquid Network is like an add-on for the Bitcoin system. It helps make transactions faster and more private. Also, it allows people to make new kinds of digital money, like stablecoins and security tokens.

The Liquid Network is looked after by a global group of members. These include exchanges, banks, and Bitcoin-focused companies. They team up to make sure it works well and gets better over time.

Assets on the Liquid Network are backed 1:1 by Bitcoin on the mainchain, ensuring transparency and security. Users can leverage the network's speed and privacy features for transactions and issue new assets such as stablecoins and security tokens. 

dApps built on Liquid Network:

• Lend at Hodl Hodl: A peer-to-peer, non-custodial lending platform where loans are issued in Tether (USDt) on the Liquid Network, ensuring users' financial privacy. 
• SideSwap: A desktop and mobile application designed for peer-to-peer trading and self-custody assets such as security tokens and stablecoins issued on the Liquid Network.

Conclusion

The field of Bitcoin layer-2 project is consistently evolving, introducing advancements that boost the network's scalability, confidentiality, and capabilities.

If widely embraced, these Layer 2 projects could further unlock new applications and propel the development of the Bitcoin ecosystem in the years ahead.

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