In recent weeks and months, Bitcoin as an asset has fallen from its position in the 70s. Market participants have been looking for the market leader to break into ATHs, which it has yet to do in Q2, 2024. Competition in the Bitcoin L2 space is heating up, with Starknet announcing that they would deploy a BTC L2 of their own, dubbed Catnet. This initiative involves creating a custom signet with OP_CAT turned on; this is the Operational code that would have allowed Bitcoin to host smart contracts from the start if it hadn’t been removed early on in BTC’s development. Now Babylon, a project that provides BTC staking and staking services is getting more attention. The protocol is now in its testnet phase, while also recently raising some $70M from the likes of Paradigm, among others.

Nonetheless, Bitlayer distinguishes itself with its unique method of implementing the BitVM and attracting both liquidity and users alike. Regardless of BTC’s price action, the Bitcoin ecosystem’s growth continues to proliferate, with Bitlayer spearheading this effort. Bitlayer has seen quite a lot of growth since we first covered the emerging protocol, which was just a few weeks ago. The team just appeared at the GM Vietnam Blockchain Week, and will also be at EthCC, coming up next month, taking a very proactive stance when it comes to promoting the work they do, and the BitVM thesis in general. Bitlayer’s median gas fee is currently quoted at $0.4, and protocol TVL has nearly tripled since then, sitting at ~$354M. This puts the protocol in 2nd place when ranking the Bitcoin chains by TVL. Bitlayer is second only to Merlin chain, which takes the No. 1 spot. This chain’s TVL notably more than doubled in just 1 day last month. The Bitlayer ecosystem has grown to over 100 dApps.

Bitlayer has been live for just a matter of weeks and has already displayed some impressive growth. The chain has passed the 1M transaction mark, with activity peaking along with BTC price. In our last edition, we briefed users on the protocols Ready Player One airdrop, a $50M campaign for developers and protocol teams, with $20M dedicated to the leaderboard competition alone. Since then, Bitlayer has implemented a new $23M Mining Gala event, which recently concluded earlier this week. In today’s edition, we’ll break down some of the key partner projects that were a part of this initiative, which make up a large portion of Bitlayer’s total TVL, userbase, and activity.

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Avalon Finance

Avalon describes itself as the first ‘CeDeFi’ lending market. The protocol contributes over $120M IN TVL on Bitlayer, and its native AVAF token as well as esAVAF can be staked to receive protocol revenue and esAVAF rewards.

The modular protocol’s main offering on Bitlayer is it’s overcollateralized lending market which enables users to make deposits into isolated pools, to be used as collateral for borrowing funds. Majors and smaller tokens can both be deposited, though at this time only BTC can be borrowed against. Currently, there is nearly $86M in WBTC borrowed, with ~$180M in total deposits. Depositing earns a 2x points multiplier while borrowing earns 6x. For this reason, the maximum borrow cap of 1300 WBTC is nearly full, with a utilization ratio of ~43% of the available funds. Borrowers can make use of a max LTV of 60%, with an 85% liquidation ratio and a 10% liquidation penalty. Users can track their points accrual on the project’s integrated leaderboard.

Pell Network

Pell Network holds ~$95M in TVL on Bitlayer. Pell Network provides a suite of services for the emerging BTC L2 market, including network security features, blockchain operation infrastructure, and yield enhancement. Pell Network is also involved with BTC restaking, aiming to diversify Bitcoin L2 yields and enhance security for these chains in the process.

On Bitlayer, users can ‘Restake’ various assets, to earn 15% more Pell points. In addition to WBTC, various BTC LSDs can be deposited into the protocol, with stBTC accounting for the majority of Bitlayer TVL. Users can earn bonus points for using the protocol for the first time and remaining loyal with extended deposit lengths, in addition to some basic social engagement tasks.

On the backend, Pell Network basically aggregates both native Bitcoin native staking yield as well as yield from LSDs, creating a network where stakers can choose to validate new modules built in the ecosystem.

BitCow

BitCow is the No.3 ranked protocol by TVL on Bitlayer, sitting at ~$35M. BitCow functions as an AMM, with both stable swap and concentrated liquidity services. The protocol specifically aims to service the expanding Bitcoin L2 ecosystems. With its v1, BitCow provides stable swap services for stablecoins and LSD assets, while maintaining minimal gas use and maximizing capital efficiency. Equilibrium prices are also adjusted over time to account for LSD assets which slowly grow in value.

BitCow’s V2 focuses on concentrated liquidity for volatile pair swaps. Features include automated pricing, 0 IL, and transparent P&L info. Automated pricing is made possible by using an external oracle, allowing for concentrated liquidity without the need for managing price intervals. All liquidity for a given asset is automatically concentrated around the oracle-determined price. This compromise allows for greater yields for LPs while eliminating the need for LP management protocols, and the complexity tradeoffs associated with concentrated liquidity.

In its V2, BitCow also employs a dual-token LP solution, consisting of one pair representing the volatile asset in the pair, and the other the stablecoin in the pair. This is used to allow volatile token LP holders the right to their assets as it become more or less valuable. Alternatively, the stablecoin LP holder will remain market neutral and instead accrue trading revenue from the pair, while the volatile LP token holder. Additionally, the Trumeme feature of the protocol allows users to spin up their own memecoin on testnet and provide initial liquidity.

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