According to Blockworks, the Bitcoin blockchain ecosystem has seen a surge in speculative points farming, with Merlin leading the trend. Merlin, which was relatively unknown a month ago, has experienced a 2,000% growth in the past 30 days. It now has over $1 billion in total value locked (TVL), making it the largest Bitcoin sidechain, according to data from DeFiLlama. This puts Merlin ahead of established layer-1s like Avalanche and Polygon.
More than half of Merlin’s $1 billion is held in Solv Finance, a protocol that allows users to deposit wrapped bitcoin and receive 'Solv Points' in return. Solv and Merlin are currently running a promotion encouraging users to farm for points and tokens. In the crypto world, points are valueless participation tallies that often determine allocations in future token airdrops. Following recent airdrops that converted points to large sums of tokens related to Solana and EigenLayer, points farming has found its place in the Bitcoin ecosystem.
Merlin also airdropped its native MERL token to users last week. However, the token has seen a nearly 40% slump since being listed on CoinGecko. Merlin presents itself as a Bitcoin layer-2 solution, integrating zero-knowledge proofs with Bitcoin’s blockchain through Taproot. This integration enhances transaction privacy and efficiency significantly. Unlike Ethereum zk rollups where proofs are verified on-chain, Merlin’s proofs are verified off-chain by a decentralized network of oracle nodes before being batched and submitted to Bitcoin’s blockchain through Taproot. This off-chain handling of data and proofs ensures scalability and security without overloading the Bitcoin mainnet with excessive data.
Merlin's growth indicates a broader trend of renewed interest in speculative uses for bitcoin beyond its price. Runes, an evolution of the Ordinal inscription concept, went live at the halving and have caused a spike in the network’s transaction fees. Venture capital, which had long been on the sidelines when it comes to Bitcoin, has started to flow into the ecosystem. There’s also a race alongside Merlin to draw liquidity to Bitcoin layer-2 solutions. A different Bitcoin layer-2, Stacks, just pulled off its Nakamoto upgrade in an attempt to make its product faster and more reliable.
