Introduction

In today’s rapidly evolving blockchain technology landscape, Bitcoin is not only widely accepted as a digital asset but its underlying technology is also continuously evolving and innovating. As the Bitcoin ecosystem expands, various Layer2 solutions are emerging like mushrooms after rain, aiming to enhance the scalability, efficiency, and security of the Bitcoin network. This article will delve into multiple innovative Bitcoin Layer2 projects. Through detailed analysis of their technical principles, team backgrounds, funding situations, and development roadmaps, we will understand how they drive innovation and development within the Bitcoin ecosystem.

Babylon: Cross-Chain Staking and Bitcoin Economic Security

Babylon uses cryptographic methods to leverage native Bitcoin (BTC) staking, providing Proof of Stake (PoS) security for other blockchains. This mechanism not only generates on-chain returns for BTC but has also garnered significant market attention.

Technologically, Babylon’s staking process relies entirely on cryptography without the need for third-party bridges or custodians. BTC stakers achieve this by sending transactions with two UTXO outputs: the first UTXO is time-locked and can be unlocked by the staker’s private key after expiry, while the second UTXO is transferred to a temporary Bitcoin address. This address conforms to the “Extractable One-Time Signature (EOTS)” cryptographic standard. Stakers run nodes on PoS chains and sign with their EOTS private key upon validating a unique valid block. Honest operation, signing only one valid block at a time, earns validators’ rewards. Attempting malicious dual-signing exposes the EOTS private key, allowing anyone to seize staked BTC, thereby enforcing honesty.

Babylon also offers BTC timestamp services, uploading checkpoint data from any blockchain to BTC’s op_return for enhanced security. Babylon’s cross-chain staking reserves staked BTC in Bitcoin network scripts, allowing stakers to specify validators and earn rewards on corresponding PoS chains. By securing other PoS chains with staked BTC, Babylon enables BTC to earn returns without leaving the main network, pioneering a new path for BTC staking and potentially revolutionizing the BTC ecosystem.

According to DefiLlama, the BTC yield market exceeds $10 billion, with active yields reaching $4 billion and rates varying from 0.01% to 1.25%. Traditional methods often involve third-party CeFi entities, bridging, or wrapping BTC. PoS blockchain staking rewards typically range from 5% to 20%. Babylon’s staking offers up to 50 times more returns than traditional BTC holding, showcasing significant growth potential.

However, convincing passive BTC holders to participate in staking presents challenges, given that 25% of BTC remains inactive for over 5 years, and 67% has been held for more than 1 year. Babylon is currently conducting testnet staking and plans to launch mainnet testing between May and June. Liquidity staking for BTC voucher-like assets has yet to be announced.

Founded in 2022 by Stanford professors David Tse and Dr. Fisher Yu, the latter known for his pioneering fair proportion scheduling algorithms in wireless communications. Babylon raised $18 million in December 2023, led by Polychain Capital and Hack VC, with participation from Framework Ventures, Polygon Ventures, OKX Ventures, and IOSG Ventures. In February 2024, Binance Labs announced its investment in Babylon. In May 2024, Babylon completed a $70 million funding round led by Paradigm.

Chakra: A ZK-Driven Bitcoin Re-Staking Protocol

Chakra is a ZK-driven Bitcoin re-staking protocol aimed at establishing a secure Bitcoin PoS system. By leveraging ZK-STARKs and a middleware chain, the Chakra network sets a native modular paradigm for expanding the BTC ecosystem. On April 30th, Chakra announced the completion of a new strategic financing round with investments from StarkWare, Bixin Ventures, Cogitent Ventures, among others, although specific amounts and valuation details have not been disclosed.

Chakra aims to address liquidity and interoperability challenges, unlocking significant value within the Bitcoin ecosystem. With Chakra, other BTC Layer2 solutions can focus on execution layers without excessive dependence on Bitcoin’s settlement infrastructure.

The Chakra network unlocks liquidity and economic security through a shared settlement layer, empowering participants within the BTC ecosystem. Projects and DApps on BTC Layer2 will benefit from robust liquidity network effects in this secure, vibrant ecosystem.

Using Chakra, Bitcoin holders can stake assets without transferring them out of their wallets, employing UTXOs with time locks. Chakra utilizes STARKs for its proof system. Compared to SNARKs, STARKs offer a zero-knowledge-proof solution without the need for trusted setups. Chakra implements zk-light clients with STARKs technology, allowing verification of staking information without connecting to the Bitcoin network, ensuring efficient and secure zero-knowledge proofs. By introducing CairoVM, Chakra further enhances scalability and transparency within its system.

nubit_org: A Protocol for Extending Bitcoin Data Availability

Nubit is a protocol designed for extending data availability (DA) scenarios for BTC. It operates a PoS consensus to organize a DA chain similar to Celestia, periodically uploading Nubit’s DA data to the BTC main chain. Nubit lacks smart contract capabilities and requires Rollup based on its DA for construction. Users upload data to Nubit, which undergoes PoS consensus to enter a “soft confirmation” state. Subsequently, Nubit uploads the data root to the BTC main chain for final confirmation. Users must upload data tags on the BTC main chain for querying original data in Nubit’s full node Merkle tree.

Currently, there are around 100 BTC L2 solutions in the market. Even if all chose to upload DA to BTC blocks, the main network can support only about 20 L2 solutions, maximizing BTC block capacity. Therefore, integrating with BTC for security guarantees presents significant narrative gaps. Nubit’s DA repackaging approach offers an intriguing solution.

Nubit has conducted its first round of Pre-Alpha Testnet, allowing users to earn points by linking BTC accounts or running light nodes. The first testnet phase has concluded, with plans for a second phase underway. Angel investors in Nubit’s pre-seed funding include Bounce Finance and Brc20 founder Domo, with a total of $3 million raised. dao5, OKX Ventures, and Primitive Ventures also participated in the funding round.

Lorenzo: A Liquidity Staking Protocol for BTC

Lorenzo, built on Babylon, is a liquidity staking protocol that offers rapid deployment services for L2-as-a-service. It aims to reduce the risk of penalties for stakers and unlock liquidity for staked BTC assets. Stakers deposit BTC into Lorenzo’s multi-signature addresses and receive an equivalent amount of stBTC as proof of liquidity on its chain, while also earning staking rewards.

Lorenzo Chain, underpinned by Babylon’s shared security for Bitcoin, serves as an EVM-compatible Bitcoin Layer2 (L2) network. It aims to modularly facilitate the deployment of various BTC L2 solutions, positioning itself as an interoperable chain directly supporting these L2 networks. Currently, Lorenzo has announced partnerships with Babylon, BounceBit, among others, planning to launch a testnet based on the Cosmos architecture. It is currently collaborating on liquidity restaking tests in Babylon’s fourth-phase testnet.

According to Rootdata, Lorenzo has received investments from Binance, MH Ventures, NGC Ventures, although specific details have not been disclosed. Lorenzo has recently launched a pre-staking event with Babylon and co-hosted the Bitlayer Mining Gala, where users can stake BTC to earn stBTC through the pre-staking Babylon event page. All BTC received by Lorenzo will be staked on Babylon immediately upon its launch, subject to Babylon’s staking limits. The actual staking progress may depend on Babylon’s potential staking capacity constraints.

bitsmiley_labs: A Comprehensive DeFi Protocol for the Bitcoin Ecosystem

BitSmiley is a comprehensive DeFi protocol within the Bitcoin ecosystem, encompassing overcollateralized stablecoin issuance, decentralized lending, and derivatives. The protocol’s stablecoin, bitUSD, operates similarly to MakerDAO, using overcollateralization. Its decentralized lending mechanism resembles Compound’s approach. bitUSD can operate on both Bitcoin’s L1 and L2 networks, issued based on the bitRC-20 standard, supporting features like upgrades, minting, and burning. This structure facilitates representation as a stablecoin on the BTC mainnet. Additionally, BitSmiley has developed the AMM bitCow specifically for stablecoins and is currently undergoing testing deployment across multiple BTC L2 solutions.

BitSmiley has received investments from institutions including OKX Ventures, ABCDE Capital, Forsight Ventures, Waterdrip Capital, Kucoin Ventures, CMS Holdings, and ArkStream Capital. In its early stages, BitSmiley issued the Ordinals NFT M-bitDisc-Black, which has garnered positive market feedback. This NFT also serves as a ticket for participating in the project’s testnets.

build_on_bob: BTC EVM Sidechain Architecture

BOB is a BTC EVM sidechain architecture implemented using the OP Superchain SDK. It utilizes wrapped BTC assets like wBTC and tBTC from Ethereum as gas fees and plans to introduce BTC’s security through a new Proof of Work (POW) merged mining protocol. The BOB testnet has been operational for several months, establishing a growing ecosystem, and officially launched its mainnet on May 1st. In its initial phase, over 40 projects have deployed on the chain, contributing to a Total Value Locked (TVL) exceeding 300 million. The platform is currently conducting its second phase of deposit activities where accumulated Spice points correspond to $BOB tokens.

Participating in BOB’s pre-staking requires operations on the Ethereum mainnet. For BTC holders, participation involves bridging assets such as $tBTC and $wBTC cross-chain, offering a reward multiplier of 1.5x. BOB also accepts deposits in various other assets such as DAI, eDLLR, rETH, USDC, USDT, wstETH, and STONE, with a staking reward multiplier of 1.3x. Additionally, BOB supports staking with ALEX, ETH, and eSOV, with a reward multiplier of 1x.

BOB has significant resources and has collaborated with Marathon Digital Holdings ($MARA), one of the largest publicly traded Bitcoin mining companies in the United States, to launch BTC Layer 2 solutions. It has also announced a $10 million investment from Coinbase, underscoring its substantial potential.

Botanix Labs: EVM Equivalent of L2 on Bitcoin

Botanix Labs has constructed an Ethereum Virtual Machine Equivalent Layer 2 (EVM L2) on Bitcoin, operated through Proof of Stake (PoS). Users can stake BTC in multi-signature addresses to participate in L2 staking or bridge BTC to engage in the ecosystem. A distinctive feature is that these BTC assets are protected by a decentralized multi-signature network called Spiderchain.

By staking BTC to become validator nodes in both PoS and the Spiderchain multi-signature network, Botanix utilizes Bitcoin block hash values as a source to randomly select nodes for PoS block production. The block headers are ultimately engraved into Bitcoin blocks upon final confirmation. All L2 assets on Bitcoin are safeguarded by the Spiderchain multi-signature network, where nodes randomly form multi-signature groups to control BTC in multi-signature addresses, thereby increasing the cost of malicious actions since staked BTC can be penalized.

On May 7, 2024, Botanix Labs announced securing $11.5 million in funding from investors including Polychain Capital, Placeholder Capital, Valor Equity Partners, and angel investors such as Andrew Kang, Fiskantes, Dan Held, The Crypto Dog, and Domo (founder of BRC20).

Botanix’s testnet has been operational for six months, allowing users to participate in testing and earn a range of NFT credentials. Starting from 2022, Botanix Labs has demonstrated substantial technical prowess in constructing an L2 solution on Bitcoin, making its testnet an attractive participation opportunity.

bounce_bit: Infrastructure for BTC Yield Farming and Restaking

BounceBit is an infrastructure on BTC that facilitates yield farming and restaking, integrating both CeFi and DeFi operations while using BTC collateral to secure blockchain integrity. BounceBit itself operates as a BTC EVM Layer 2 (L2), where PoS staking on L2 can involve staking native token BB or BTC assets. BTC assets deposited are custodied through centralized custody services supported by Mainnet Digital and Ceffu. On BounceBit, deposited BTC assets are converted into bounceBTC, which can be staked to earn validator rewards within the network.

BounceBit offers users triple income streams: earnings from mainnet BTC asset custody, yields from on-chain staking projects, and rewards from restaking activities. Supported by Binance, BounceBit allocates 8% of its token supply to BNB stakers participating in the Binance Megadrop initiative.

citrea_xyz: Enhancing Bitcoin Block Space with ZK Rollup

Citrea is a ZK Rollup protocol built on Bitcoin (BTC) aimed at enhancing block space functionality. Developed by the Chainway team, Citrea focuses on early implementations of BitVM verification. The Citrea network processes transactions in zkVM (Zero-Knowledge Virtual Machine) and generates zk proofs. These proofs are then embedded into Bitcoin blocks, facilitating optimistic verification through BitVM on the BTC mainnet. This approach ensures that Citrea’s settlement and data availability are handled by the Bitcoin mainnet.

Citrea utilizes the trust-minimized bridge Clementine to facilitate asset bridging between its L2 solution and the Bitcoin mainnet. When users withdraw BTC from L2, they transfer assets to the withdrawal contract on L2 along with their BTC address. The bridge operator then transfers their own BTC assets to the user. Every six months, Clementine undergoes a checkpoint where the operator must use the original transaction data along with SPV withdrawal proofs and Citrea’s zk proofs to extract the owed BTC. In case of misconduct, challengers can initiate a challenge to reveal the original transaction data, preventing the operator from withdrawing BTC from the bridge and ensuring the safety of bridge assets.

Currently, Citrea has completed a $2.7 million seed funding round led by Galaxy, with participation from investors such as Delphi Ventures, Eric Wall, Anurag Arjun, BatuX, Igor Barinov, and James Parillo.

Mintlayer: Bitcoin Sidechain Based on PoS

Mintlayer is a Bitcoin sidechain based on Proof of Stake (PoS), utilizing Verifiable Random Functions (VRF) to ensure stable block production rates. Similar to BTC, Mintlayer adopts the UTXO structure, thereby enjoying various advantages of the BTC network directly. Token issuance on Mintlayer does not require smart contracts; instead, it uses UTXO with added metadata, akin to BTC’s colored coins. Additionally, Mintlayer supports atomic swaps using hashed timelock contracts, enabling exchange with BTC mainnet assets, a feature not achievable by BTC L2 solutions based on EVM and account structures.

Mintlayer incubates the native DeFi product Atomiq DeFi, leveraging atomic swap capabilities to facilitate direct interaction with BTC on Atomiq DeFi. The Mintlayer token $ATMQ is scheduled for release by the end of the second quarter.

NervosNetwork: Smart Contract Platform for PoW and UTXO Models

Nervos is a smart contract platform based on Proof of Work (PoW) and the UTXO model. In 2024, it proposed a comprehensive solution to enhance the BTC ecosystem and introduced the RGB++ protocol for issuing and expanding Bitcoin Layer 1 assets. Leveraging years of accumulation with the UTXO model, Nervos’ RGB++ utilizes BTC’s native capabilities directly, ensuring high security and strong integration with the BTC mainnet.

RGB++ assets issued on the BTC mainnet are bound to Bitcoin UTXOs. Users have the option to “peg” RGB++ assets to the Nervos network. This process involves creating specific UTXOs on the mainnet, triggering corresponding shadow transactions on the Nervos network, where RGB++ asset information is written into Nervos UTXOs. The unlocking condition requires specific BTC UTXOs. Users can benefit from smart contract capabilities, lower fees, and higher performance on Nervos, and assets can be pegged back to the BTC mainnet via the same binding mechanism.

Based on the aforementioned homomorphic binding approach, Nervos also introduced the UTXO Stack application chain architecture, akin to Ethereum’s OP Stack, and is developing its own Lightning Network. Nervos boasts the most comprehensive BTC ecosystem expansion solution currently available.

Mezo: BTC L2 based on tBTC

Mezo is a BTC Layer 2 network built on tBTC using the Cosmos EVM architecture. It facilitates asset transfers from BTC to Mezo L2 through tBTC’s multi-signature cross-chain bridge. Mezo introduces the Böhmian economics of HODL Proof, similar to BTC staking with ve33. Users can lock BTC on Mezo to participate in consensus, with longer lock-up periods earning higher staking validation weights and rewards.

Mezo’s PoS mechanism includes both BTC and native token MEZO staking, rewarding participants with veMEZO. Rewards are distributed across different incentive pools, with BTC stakers receiving 1/3 of the total incentives and MEZO stakers receiving 2/3. Mezo has completed a $21 million Series A funding round led by Pantera Capital, with participation from Multicoin, Hack VC, Draper Associates, among others. Early deposit activities have been initiated, supporting native BTC, wBTC, and tBTC, with plans to launch the mainnet in the latter half of 2024.

BVMnetwork: Rollup-aaS Platform That Supports Unlimited Expansion

BVMnetwork is a modular Bitcoin Layer 2 protocol built on Bitcoin. It features the bulk issuance of BTC ecosystem-related L2s, each optimized for a specific purpose.

BVMnetwork is positioned as Rollup-aaS (Rollup as a Service). Technically, BVMnetwork adopts a model similar to EVM, using Bitcoin as the data layer to achieve transaction-level consensus. By utilizing TxWriter and TxReader, BVMnetwork can embed BVM transactions into Bitcoin transactions, ensuring all BVM nodes maintain a consistent state across the network. TxWriter is responsible for embedding BVM transactions into Bitcoin transactions, similar to Ordinals technology. TxReader filters BVM transactions in each new Bitcoin block.

BVMnetwork is based on a multi-layer architecture of Op-Rollups, including data availability (DA), smart contract platform, Sequencer, Rollup nodes, execution engine, settlement, and bridging. BVMnetwork offers a fully managed solution, allowing users to deploy a BVM Chain with just a few clicks and choose the configuration best suited for their application.

Currently, the market capitalization of $BVM is $143 million, with a total supply of 100 million and a circulating supply of 23 million. The token generation event (TGE) was held on March 24, 2024, and it is currently in the staking phase. Users can stake BVM tokens to mine SHARD (BVM’s governance token) with an annual percentage rate (APR) of 50% as stated on the official website. They can also participate in mining other newly launched BTC L2 tokens.

The BVM team has already launched multiple BTC Layer 2 networks. The alpha chain is the first BTC L2 network. Naka is an L2 for BTC DeFi operations. EternalAI is a fully on-chain AI BTC L2. Swamps is a BTC L2 supporting SRC-20 DeFi. RuneChain is a BTC L2 focused on Rune transactions. Bittendo is a BTC L2 supporting gamefi, and Bloom is a BTC L2 for BTC staking and re-staking. The team is also planning new L2s that will introduce POW and RWA.

The BVM team is known for rapid iteration and quickly capitalizing on trends. These projects often launch through airdrops to existing holders and potential new users, with IDOs using older assets. The BVMnetwork team consists of Bitcoin OG members active on Twitter. They previously worked on the BTC L2 Trustless Computer in 2023, which had a lukewarm reception, and later developed Bitcoin’s Friend.tech. However, they achieved success with BVM.

BitLayerLabs: BTC L2 Project Based on BitVM

BitLayerLabs is the first Bitcoin Layer 2 network (L2) based on BitVM, supporting multiple virtual machines and EVM compatibility, utilizing Op-Rollup technology. On March 27, 2024, it announced the completion of a $5 million seed round of financing, co-led by Framework Ventures and ABCDE Capital. Other participating institutions included StarkWare, OKX Ventures, Alliance DAO, and UTXO Management. On May 19, it secured strategic financing from OKX, though the amount was not disclosed.

Positioned as an Op-Rollup, BitLayerLabs plans to use DLC and BitVM for asset bridging, allowing users to retrieve assets on BTC even if issues arise on the mainnet (escape hatch). With BitVM, BitLayerLabs can build a Turing-complete computation layer on the Bitcoin stack, utilizing fundamental building blocks such as hash locks, time locks, and large Merkle trees to create systems capable of handling complex computations and contracts. BitLayerLabs supports multiple virtual machines, including EVM, CairoVM, SolVM, and MoveVM.

Currently, the mainnet employs a PoS + multi-signature bridge approach. BitLayer plans to implement a minimized BitVM solution by Q2 2025 to replace the current bridging scheme.

BitLayer has launched mainnet V1 and announced a developer incentive program and early supporter NFT activities. It is currently running a mining event in collaboration with Lorenzo, Bitsmiley, Avalon, Bitcow, Pell, Enzo, and Bitparty, which will last for two weeks until June 10.

According to the roadmap, BitLayer will achieve mainnet V2 in September 2024, transitioning to an equivalent Rollup model and introducing the Sequencer+DA mode based on the DLC/BitVM technical protocol to ensure user asset accessibility. By June 2025, mainnet V3 will be realized, utilizing BitVM for L1 verification challenges, achieving BTC security equivalence, and implementing BitVM-based OP challenges and the DLC-Attestors scheme for asset escape.

Alpen Labs: Modular ZK-Rollup Project

Alpen Labs is dedicated to developing ZK-Rollup technology. Despite limited disclosed information, its team and funding background are impressive. The project is positioned as a modular ZK-Rollup with a native ZK verifier and an optimistic ZK bridge.

Alpen Labs’ ZK verification technology continues the approach of BitVM but has designed a ZK SNARK verifier specifically for Bitcoin called SNARKnado. This design reduces the number of rounds required for interactive verification compared to BitVM’s verifier, thus enhancing feasibility. Some of the code has already been open-sourced.

On April 10, 2024, Alpen Labs announced the completion of a $10.6 million seed round, which was actually completed in 2023. Investors include Castle Island Ventures, Robot Ventures, and Axiom Capital. The CEO and founder, Simanta Gautam, founded Alpen Labs in 2022, focusing on BTC and zkSNARKs. Gautam graduated from MIT and has held research intern positions at MIT, NASA, and Amazon, and founded Synapse. Alpen Labs has not published its code on GitHub, and the roadmap has yet to be released.

Anduro: Sidechain System Supported By Nasdaq-listed Mining Company Mara

Anduro is a multi-sidechain platform incubated by Nasdaq-listed mining company Marathon Digital Holdings, aimed at providing sidechain solutions.

Anduro has designed two sidechains: COORDINATE, which is BTC-compatible and operates on a UTXO model supporting innovations like Ordinals protocol; and ALYS, which is ETH-compatible and targets real-world asset (RWA) entities.

All Anduro sidechains engage in merged mining with Bitcoin, and its native asset, Anduro BTC, is pegged 1:1 with BTC. Anduro sidechains maximize adherence to Bitcoin’s native properties, including block generation through Proof of Work (PoW).

anetaBTC: Wrapped BTC Based On Cardano and Ergo

anetaBTC is a Wrapped BTC project based on Cardano and Ergo, aimed at facilitating BTC liquidity in the DeFi ecosystems of these two chains. Through smart contract minting and redemption of AnetaBTC, BTC holders can participate in various activities such as lending, trading, and liquidity mining in Cardano and Ergo’s DeFi ecosystems without relinquishing their BTC holdings.

The tokens associated with anetaBTC include $cBTC, $NETA, and $cNETA. $cBTC is a Wrapped BTC token minted on the Cardano and Ergo networks by anchoring BTC. Currently, $cBTC minting is ongoing, while the TGE (Token Generation Event) for $cNETA has been completed. $cBTC represents the Wrapped BTC of the project, with 17.6 units currently minted. $NETA and $cNETA are project tokens with a total supply of 2 billion, issued on Ergo and Cardano respectively. cNETA has a market value of 2.53 million, with 70% publicly allocated and fully circulated.

The anetaBTC project has launched its mainnet V1 version and plans to introduce the V2 testnet in the second quarter of 2024, followed by the V2 mainnet in the third quarter of 2024. The V3 version is scheduled for release in 2025.

Founded by Austin Regron, who has extensive development experience and focuses on integrating BTC into the Cardano and Ergo ecosystems. Co-founder Willie McClinton, a PhD student at MIT, was involved in the project’s development but has since departed.

BiopDAO: Op Rollup Project Supporting BRC-20 Protocol

BiopDAO is a project based on Op Rollup, focusing on supporting protocols like BRC-20 and offering the Biop Virtual Machine (BVM) to facilitate smart contracts. The project aims to create an efficient, secure, and scalable Layer 2 solution. The primary token of BiopDAO is $Biop, with a total supply of 21,000,000 tokens. Currently, $Biop has a market cap of approximately $500,000, with a fully diluted valuation (FDV) of $2.5 million.

BiopDAO plans to launch three versions of its L2 blockchain: V1 in Q1 2024, V2 in Q2 2024, and V3 in Q4 2024. Despite the project’s code being open-source, progress has been slow and the completion level is not high at the moment.

Bitsat_Official: Integrating AI into BTC L2’s ZK-Rollup Project

Bitsat is a full-chain interoperability protocol compatible with EVM and Cosmos, aiming to integrate AI into Bitcoin Layer 2 (L2) networks.

At its core, Bitsat features HyperLayer, a high-performance and scalable platform designed for deploying and running distributed AI applications on the Bitcoin network. Key technological aspects include ZK-Connector for efficient data and asset transfer, VM Engine compatible with Ethereum Virtual Machine (EVM), and an asynchronous high-performance consensus mechanism, offering high throughput and scalability.

As of now, Bitsat has not disclosed specific Tokenomics information. The roadmap includes launching the testnet in Q2 2024 and the mainnet V1 in Q4 2024.

Bool_Official: Decentralized, Secure Bitcoin Verification Layer

Bool is a modular data availability (DA) layer utilizing ZK (Zero-Knowledge), MPC (Multi-Party Computation), and TEE (Trusted Execution Environment) technologies.

The project aims to provide a decentralized and secure Bitcoin validation layer driven by MPC-based distributed key management. Key technical features include the use of Dynamic Hidden Committees (DHC) and Ring Verifiable Random Function (Ring VRF) protocols to protect member identities, as well as executing all key management processes within a Trusted Execution Environment (TEE).

In terms of Tokenomics, the total supply of $BOOL is 1 billion, with an initial allocation of 500 million tokens.

The roadmap includes completing code audits in June 2024, launching the mainnet in July, and opening BTC staking from August onwards. The project’s code is open-source with a high completion level, currently awaiting audit.

CashuBTC : A BTC Project Emphasizing Privacy Protection

Cashu is a free open-source Chaumian eCash system designed specifically for Bitcoin, deeply integrated with the Lightning Network to ensure privacy. It is well-regarded within the BTC core community. Cashu aims to provide an open electronic cash protocol known as Cashu NUT, using blind signatures to protect user privacy, with transactions conducted peer-to-peer.

Key technical features include Lightning node operators acting as custodians for users on the Lightning Network, facilitating the issuance of electronic cash to users. Cashu is an open-source protocol supported and utilized by multiple systems.

BnzkLabs: A BTC L2 Project Based on ZK-Rollup

BnzkLabs plans to support the Ordinals BRC20 protocol (zkToken), followed by support for BRC721 (zkNFT) and other protocols. Progress is currently insufficient, and no code has been seen yet. In terms of Tokenomics, the $BNZK token has a total supply of 21 million, with team reserves at 10%, ecosystem rewards at 20%, public and private sales at 40%, and mining rewards at 30%. The roadmap includes launching the testnet in April 2024 and the mainnet in September 2024. Currently, the project’s completion status is moderate, with no code visible.

Drivechain LayerTwoLabs: Bitcoin Sidechain Technology

LayerTwo Labs was founded to create Bitcoin sidechains based on the BTC Drivechain proposal. Drivechain is a BTC sidechain technology that functions as a soft fork upgrade for Bitcoin, introducing a new way of interacting with sidechains.

Paul Sztorc, the originator of Drivechain, serves as the founder and CEO of LayerTwo Labs. He is a former researcher and statistician at Yale University, and a seasoned Bitcoin professional who extensively detailed the concepts of Drivechain in BIP300 and BIP301.

Drivechain operates as a BTC sidechain technology that achieves widespread scalability for Bitcoin sidechains without compromising the core security and decentralized nature of Bitcoin. It utilizes a hash rate escrow mechanism and a miner scoring system. Funds sent to a specific address are locked, and can only be spent if all miners agree. Miners reach consensus through a scoring system, and once a transaction reaches a sufficient score, it is published, transferring funds from the sidechain to the main chain.

Drivechain allows the Bitcoin network to experiment with new use cases through sidechains, such as asset issuance, fully private transactions, and state blockchain contracts while maintaining Bitcoin’s core security and decentralization features intact. The project’s roadmap is actively being implemented, with a testnet already launched and a Launcher available for Linux, Mac, and Windows. The code is open-source, with good completion status and frequent updates.

In December 2022, LayerTwo Labs secured $3 million in funding, although specific details were not disclosed.

EASTBlue_io: Layer 2 Solution Focused on Large-Scale Applications

EASTBlue is a Layer 2 solution focused on large-scale applications, backed by NEAR and utilizing Rollup technology with multi-VM support. The project is based on Rollup and aims to introduce a new programmable layer for Bitcoin using the EAST Account Vault Model (AVM) leveraging NEAR’s chain signatures and account aggregation. This approach addresses congestion and scalability issues caused by Ordinals, enhancing BTC’s smart contract capabilities. EASTBlue achieves a new cross-chain transaction paradigm by transferring account ownership to smart contracts.

The $EAST airdrop began on March 22, 2024, prioritizing PARAS token holders. The token has a total supply of 1 billion, with issuance dynamics tied to ecosystem behavior and performance, and a 5-year lockup period. A majority of the tokens (52%) are allocated for community development and ecosystem bootstrapping. Staking functionality will be introduced, although a complete roadmap and project code are not yet available.

Tokenomics distribution rules are as follows:

fedimint: Community-Managed Open-Source Protocol for Trading and Custody of Bitcoin

Fedimint is an open-source protocol community-managed for trading and custody of Bitcoin, emphasizing privacy protection and reducing reliance on large centralized exchanges. Co-founders include Justin Moon and Obi Nwosu, who are co-founders of austinbitdevs.com and former CEO of the UK Bitcoin exchange Coinfloor, respectively. The project has completed a $4.2 million seed round and a $17 million Series A round, totaling $21.21 million in funding. Fedimint recently released version v0.3.0, making significant strides in automated testing for version compatibility.

GeliosOfficial: A BTC L2 Solution Supporting the Runes Standard and EVM Compatibility

Gelios is a Bitcoin L2 solution that supports the Runes standard and is EVM-friendly, aimed at facilitating communication between applications and seamless cross-chain interactions. Serving as a dApp layer for Bitcoin, Gelios allows users to transfer BTC and WBTC onto its platform, unlocking the potential of BTC DeFi. The project has partnered with Ave.ai, OKX, Bitget, Gate, Unisat, among others. Currently, the second-dimensional card placement game Crimson Heart has been deployed on the Gelios network.

The initial supply of $gOS is 210,000,000, with an initial market value of $40 million and initial liquidity of 100 ETH. $gOS is currently trading on the Alphanet and can be exchanged for ETH on Uniswap. The roadmap includes a three-phase airdrop: Testnet (completed), Alphanet (ongoing), and Mainnet (upcoming).

HacashCom: Multi-layer Scaling and State Channels Bitcoin Solution

Hacash.com is a project dedicated to addressing Bitcoin’s scalability issues. It achieves one-way transfer of Bitcoin at Layer 1 and implements payment operations through state channels at Layer 2. Furthermore, it proposes a Layer 3 concept to expand the ecosystem.

The Hacash Layer 1 network has been operational since 2019, utilizing a proof-of-work (PoW) consensus mechanism. It issues, distributes, and settles coins using three PoW currencies: HACD, BTC, and HAC, aiming to resolve Bitcoin’s lack of monetary attributes. Layer 2 is primarily designed for large-scale payments, constructing a chain of payment settlement channels and serving as the infrastructure for Layer 3.

Layer 3 supports a multi-chain interaction ecosystem, enabling asset issuance, smart contract execution, on-chain data exchange, and cross-chain functionalities. The founding team includes Ken You, Trevor Stoll, and Leo Yang. The project raised $60,000 for listing on the Mexc exchange and is currently in the testing phase.

Bitcoin can be transferred unidirectionally to Hacash, retaining its ownership and intrinsic value attributes. The total supply is capped at 21 million coins, circulating in minimal Satoshi units within Hacash. Transfers of BTC result in the creation of HAC, with issuance gradually decreasing. Following 1.05 million BTC transfers, only 1 HAC is generated per 1 BTC transfer. HACD has a total supply of approximately 16.77 million, generated through mining and HAC auctions, with mining difficulty increasing over time. The maximum daily production is 58, and it is estimated that all HACD may require 800 years to produce, potentially never fully exhausting the total supply.

interlayHQ: Cross-Chain Interoperable Assets Supported by Bitcoin

Interlay’s flagship product is “interBTC,” a fully collateralized, one-to-one Bitcoin-backed asset designed to achieve interoperability across multiple blockchain ecosystems while maintaining Bitcoin’s censorship-resistant properties. Technically, Interlay v2 introduces native DeFi capabilities by creating markets tailored to Bitcoin holders and establishing deep liquidity in these protocols. Users can easily access Bitcoin-centric DeFi use cases such as swap, Borrow & Lend, Multi-Chain BTC, and Stake BTC. They can lock BTC to mint iBTC on a 1:1 basis, use iBTC as collateral for DeFi transactions to earn income, and then redeem BTC. Interlay has undergone audits by prominent firms such as informal systems, quarkslab, nccgroup, and security research labs. The founding team includes Alexei Zamyatin and Dominik Harz, both PhDs from Imperial College London. To date, Interlay has completed two funding rounds totaling $9.5 million, with the latest round on December 21, 2021, raising $6.5 million from investors including IOSG Ventures, DFG, and HYPERSPHERE.

libreblockchain: Faster, Cheaper Bitcoin L2

Libre is a Bitcoin Layer-2 solution that makes Bitcoin and Ordinals faster, cheaper, and more programmable. Libre.org is a new all-in-one platform for Bitcoin ordinals, offering search, wallet, marketplace, and inscription functionalities. Libre operates without needing a token, integrates Typescript and other top languages, and allows BTC integration in seconds without KYC. Processing over 4000 transactions per second with zero transaction fees, Libre features an on-chain AMM. The mainnet launched on July 4, 2022, with a distribution of 10 million LIBRE tokens, of which only 277,000 were claimed. Libre also introduced a test version of its BRC 20 Dex and a mobile app for convenient inscription trading by users.

LightecXYZ: Bitcoin Layer2 solution based on ZKP

LightecXYZ aims to build Bitcoin’s Layer2 using zero-knowledge proof (ZKP) technology, with its main projects including opZKP and zkBTC. opZKP shifts complex computations off-chain, generating a succinct proof that is then verified on-chain using new opcodes introduced into the Bitcoin script language. This approach addresses Bitcoin’s Turing incompleteness, enabling the deployment of various applications on Bitcoin. The development of opZKP is technically complex and has a long development cycle.

zkBTC, built on top of opZKP, facilitates a ZKP-based cross-chain bridge between Bitcoin and Ethereum. This solution allows users to deposit Bitcoin into a specified address to mint ERC-20 tokens called $zkBTC, pegged one-to-one with Bitcoin. The entire process involves generating a ZKP proof off-chain, verifying it on the Ethereum smart contract to mint the corresponding $zkBTC tokens upon confirmation of the transaction. When redeeming, users must destroy the equivalent $zkBTC tokens, generate an off-chain proof for verification, and upon confirmation, redeem Bitcoin.

Throughout these processes, the Lightec team does not possess the private keys of the specified addresses, ensuring security and decentralization. Currently, the Lightec team is actively developing the zkBTC project, expected to launch on the testnet in the coming months. They are also in the early stages of building a token economic model to support further development of the opZKP proposal, driving the construction of the Bitcoin Layer2 ecosystem.

Liquid_BTC: A Fast, Secure, and Robust Layer2 Solution for Bitcoin

Liquid Network is a Layer2 solution for Bitcoin that provides fast, secure, and confidential settlement and digital asset issuance, including stablecoins, security tokens, and other financial instruments. It utilizes a unique Federated Byzantine Agreement (FBA) consensus protocol to compress block generation times to within 2 minutes. Transactions are protected using Confidential Transactions technology and Zero-Knowledge Proofs to safeguard transaction amounts and address information. Liquid Network allows users to transact quickly and privately using LBTC (Liquid Bitcoin) as a tradable digital asset, with over 3,700 LBTC currently in circulation.

Governed by a decentralized federation of more than 65 Bitcoin-centric companies, including Bitbank, BTCBOX, Aquannow, Bitcoin Reserve, Cobo, OpenNode, among others, Liquid Network facilitates network governance. Bitfinex Securities launched El Salvador’s inaugural tokenized debt, providing funding for the New Hilton Hotel, with the tokens issued on Liquid Network.

Liquid Network is developed by Blockstream, a company founded in 2014. Blockstream’s portfolio includes Liquid and Blockstream Green among other products. The company raised $21 million in seed funding in 2014, with investments from Ethereal Ventures, Khosla Ventures, Reid Hoffman, Blockchain Capital, Ribbit Capital, Mosaic Ventures, Future Perfect Ventures, AME Cloud Ventures, Max Levchin, Nicolas Berggruen, Danny Hillis, Eric Schmidt’s Innovation Endeavors, and Ray Ozzie. In 2016, Blockstream secured $55 million in Series A funding from Horizons Ventures, AXA Strategic Ventures (AVP), Blockchain Capital, AME Cloud Ventures, Future Perfect Ventures, Khosla Ventures, Mosaic Ventures, Seven Seas Venture Partners, and Batara Eto. In 2021, Blockstream raised $210 million in Series B funding at a valuation of $3.2 billion, with participation from Baillie Gifford and iFinex.

Blockstream’s ecosystem includes projects like the AQUA Wallet, DeFi products such as Bisq, Peach Bitcoin, and Boltz, NFT platform tokenocean, as well as SideSwap and Debifi.

LumiBitL2: Enhanced Scalability, Privacy, and Decentralized BTC Layer2 Solution

LumiBit is a BTC Layer2 solution leveraging ZK-EVM to provide enhanced scalability, privacy, and decentralization. It features a universal circuit design for seamless Ethereum smart contract migration and efficient transaction verification. LumiBit adopts Type2 ZK-EVM, highly compatible with EVM and optimized data structures to improve verification efficiency. It integrates the Halo2 zero-knowledge proof mechanism, eliminating the need for trusted setups, thereby enhancing security. With abstract accounts from the Omin wallet, users can transact on the LumiBit chain using their local Bitcoin keys. LumiBit’s testnet is already live.

mercurylayer:Bitcoin Layer 2 Focusing on Privacy and Efficiency

Mercury Layer is a Bitcoin L2 solution focused on enhancing privacy and efficiency through state chains, enabling off-chain transfers and settlements of Bitcoin UTXOs. Utilizing state chains and blind multisignature technology, Mercury Layer facilitates instant and fee-free transactions without compromising fund custody and security.

Mirror_L2: Bitcoin Layer2 Solution for Decentralized Proof of Stake

Mirror Staking Protocol, originally named Mirror L2, is a decentralized Proof of Stake (PoS) BTC Layer2 solution compatible with EVM and smart contracts, using BTC as GAS. Mirror Staking Protocol utilizes the Multi-Signature Group (MSG) algorithm for overlapping groups managed by hundreds of nodes, balancing BTC staking rates, security, and decentralization. It generates mBTC anchored 1:1 with BTC and compatible with EVM, integrated within its restaking mechanism.

Mirror has designed a node governance scheme. Nodes are elected by the community through four rounds of elections, starting from 100 nodes and gradually increasing to 300, 600, and 1000 nodes. Nodes must stake at least 1 BTC to the Mirror channel and serve as decentralized network custodians for 12 months. The election champion receives an upside option reward of 1 million MIRR (Mirror’s governance token), with an exercise price of $0.12.

A seed round financing was conducted on March 4, 2014, with investors including Conflux, UTXO Management, and IMO Ventures, with the amount undisclosed. In the future, Mirror Staking Protocol plans to establish Total Value Locked (TVL) and an ecosystem through activities like “Stake Once, Earn Twice” alongside other BTC L2 projects. The first round of financing was announced in March, and the testnet was opened. Each redemption earns 10 points, while minting does not earn points.

RolluxL2: Bitcoin Layer2 Solution Compatible With Ethereum Smart Contracts

Rollux, developed by Layer1 blockchain Syscoin (SYS), is an Optimistic Rollup equivalent to EVM, with plans to transition to a ZK-based Rollup in the future. Rollux supports nearly instant transactions and contract deployment, secured by the Bitcoin network. Syscoin blockchain operates on a dual-layer architecture with PoW consensus, where the core is the Syscoin blockchain, and NEVM provides smart contract functionality.

Syscoin was founded in April 2014 by Layer1 blockchain Syscoin (SYS). In June 2022, Syscoin announced securing a $20 million ecosystem development fund. Syscoin is listed on Binance with a current Fully Diluted Valuation (FDV) of $170 million USD.

SovrynBTC: Decentralized Trading and Lending Platform Based on Bitcoin

Sovryn is developed on Rootstock (RSK) and is a decentralized trading and lending platform based on Bitcoin, offering a full suite of DeFi services including stablecoins, AMM, lending pools, and margin trading.

Sovryn’s founder, Edan Yago, graduated from Tel Aviv University and is the founder of CementDAO and Sovryn. John Light, the product lead, previously served as governance lead at Aragon One. The project underwent four rounds of financing: a seed round in 2020 raising $2.1 million with investments from Greenfield, Collider Ventures, and Monday Capital; additional rounds in January and March 2021 raising $12.5 million in total; a $9 million round in April 2021 with investments from Anthony Pompliano, Cadenza Ventures, Gate Ventures, AscendEX, Blockware, and Consolidated Trading; and a $5.4 million round in October 2022 with participation from General Catalyst, Collider Ventures, Bering Waters, Bollinger Investment Group, and Balaji Srinivasan.

u_protocol: Full-Chain Decentralized Synthesis of BTC

U Protocol is a native cross-chain decentralized synthetic BTC, compatible with EVM. Its main products are uBTC and U Bitcoin Thunder Network. uBTC is a decentralized Bitcoin for Layer 2, backed by Lido’s Wrapped Staked Ether and BTC.b. U Protocol uses BTC-denominated pricing, with a redemption mechanism that enhances user experience by charging a one-time redemption fee to prevent frequent redemptions. The system has a price cap of 1.10 BTC. When the uBTC:BTC exchange rate exceeds this level, borrowers can maximize borrowing and sell uBTC for instant profit.

ZKBaseOfficial: Infrastructure Protocol Based on ZK Technology

ZKBase is based on zero-knowledge proof (ZK) technology, providing scalability solutions for mainstream blockchains such as Ethereum and Bitcoin. It offers a range of services, including decentralized exchanges, cross-chain bridges, Layer 2 payments, NFT marketplaces, and Layer 2 domain names. ZKBase will launch AMM ZKSwap, supporting BRC20 assets to enhance market liquidity and capital efficiency. Compared to other protocols, ZKBase technology focuses on privacy and fast transaction processing, offering a secure method comparable to the security of the BTC network. Chief Strategy Officer Antonio Saaranen previously served as CSO of the Qtum Foundation. Marketing and Public Relations Director Hailan Jia was formerly a Senior PR Manager at Huobi Global. In its 2020 angel round, ZKBase raised $1.7 million, with a valuation of $25 million. Investors included Bixin Ventures, SNZ Holding, and FBG Capital.

Conclusion

The number of Bitcoin Layer 2 projects is rapidly increasing, with nearly 100 currently in existence. These can generally be divided into four main categories.

The first category is EVM sidechains, which is the most numerous. Most of these deploy EVM chains using a modular rollup approach and PoS consensus. They have a low startup threshold but require strong capital operations to launch effectively. Some projects are attempting to introduce more modular solutions like ZK.

The second category follows the design philosophy of BitVM, innovating in verification methods to some extent, introducing BTC security. However, these projects typically launch an EVM + PoS mainnet to develop their ecosystem, making them essentially similar to the first category of EVM sidechains. This category often attracts significant funding and is a key investment area for VCs.

The third category focuses on BTC deposit staking, using BTC as a staked asset in PoS, introducing concepts like BTC restaking similar to eigenlayer, and attempting to attract more BTC savings. Leading project Babylon is innovating cryptographically in BTC staking, while other projects innovate on a business level, such as introducing BTC staking in CeFi for higher yields. We believe BTC restaking will become mainstream in the future ecosystem, addressing the BTC narrative challenge of the aforementioned BTC EVM sidechains by providing staking security before BitVM is realized.

The fourth category involves more exploration on the BTC native side, such as further developing the UTXO model and creating new sidechain asset binding schemes based on UTXO, like Nervos. BTC native exploration also includes continued exploration of merge-mined sidechains. A few projects are attempting to push BTC upgrades to introduce more script operators, expanding the BTC ecosystem, which is currently the most degen route.

The BTC ecosystem is rapidly evolving, with various innovative projects emerging to address challenges in scalability, security, and efficiency. From Babylon’s cross-chain staking to Nubit’s enhanced data availability, Lorenzo’s liquid staking protocol to BitSmiley’s integrated DeFi protocol, these projects are driving the diversification of the Bitcoin ecosystem through different technological paths and business models. By continuously following and participating in these cutting-edge projects, the community and developers can better grasp the future development trends of blockchain technology, collectively building a more efficient, secure, and diverse blockchain ecosystem.

Statement:

1. This article is reprinted from [chaincatcher], the original title is “Inventory of 35+ Bitcoin Layer2 Projects: Exploring Innovative Projects and Technology Frontiers”, the copyright belongs to the original author [Trustless Labs], if you have any objection to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Other language versions of the article are translated by the Gate Learn team, not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.