Author: Climber, Golden Finance
Recently, several Bitcoin Layer 2 projects have announced the launch of their mainnets, including AINN Layer2, BEVM, Taproot Chain, SatoshiVM, and Merlin Chain. Previously, Jademont, founder of Waterdrip Capital, said that at least 10 Bitcoin Layer 2 networks will be launched this year.
Nearly half of these projects have been launched on the mainnet in Q1 of this year, so it is no wonder that some people believe that this year is the "first year of Bitcoin Layer 2". Since the outbreak of the inscription sector last year, the Bitcoin ecosystem has become more valued by capital. If the underlying chain project responsible for carrying data and applications can seize the first-mover advantage, it is very likely to occupy more market share when the trend comes.
As Bitcoin L2 chains emerge, we might as well observe and understand the basic information and progress of each project, while also understanding the deep reasons behind the rise of the Bitcoin ecosystem, so that we can better understand the logic behind the entry of capital.
1. Bitcoin Layer 2 on the Mainnet
In February this year, Bitcoin Magazine listed the standards for Bitcoin L2, which mainly include the following three points:
1. Use Bitcoin as the native asset. 2. Use Bitcoin as a settlement mechanism to enforce transactions: L2 users must be able to return control of their assets on the first layer. 3. Demonstrate functional dependence on Bitcoin: If the Bitcoin network fails but the related system can still remain operational, then the system is not L2 of Bitcoin.
Currently, the L2 projects that have been launched on the mainnet are officially labeled as Bitcoin L2. This article lists them in the order of their launch time as follows:
1、ANN Layer2：
On April 1, AINN Layer2 mainnet was officially launched. At the same time, AINN Layer2 Dataset staking activity was launched and will support the Rune Protocol.
As of the time of writing, AINN Layer2’s TVL is $620 million, and the total number of stakers exceeds 135,700.
AINN Layer2 (ANVM) is a Bitcoin Layer2 solution focused on Web3+AI applications, focusing on AI-driven modular structures. AINN Layer2 is also a shared computing power platform that uses mining incentives to run AI training. It aims to continue to build the infrastructure for Web3 AI and is committed to supporting the development of applications that combine Web3 and AI.
In March of this year, AINN Layer2 received millions of dollars in financing, with Waterdrip Capital and Satoshi Lab participating in the investment.
Recently, AINN Layer2 signed a memorandum of cooperation with the Ministry of Digital Development of the Kyrgyz Republic at the Hong Kong Web3 Spring Summit.
2、BEVM：
On March 28, BEVM announced the launch of the mainnet and launched the Genesis Box Free Mint program. Afterwards, BEVM and Binance Web3 Wallet launched a joint airdrop event.
BEVM is the first BTC Layer2 built on Taproot Consensus and compatible with EVM, using BTC as Gas. It allows all DApps that can run in the Ethereum ecosystem to run on Bitcoin L2. Its core goal is to expand Bitcoin's smart contract scenarios, help BTC break through the constraints of Bitcoin's blockchain being non-Turing complete and not supporting smart contracts, and allow BTC to build decentralized applications on BEVM, a Layer2, with BTC as the native Gas.
The BEVM team has been exploring Bitcoin Layer 2 since 2017. In 2018, the BEVM team's BTC Layer 2 ChainX achieved 100,000+ BTC cross-chain. The BEVM pilot network was launched in July 2023. As of now, it has 100,000+ on-chain users, processed more than 6 million transactions, and has 30+ ecological projects deployed on its pilot network.
At the end of March this year, BEVM announced the completion of its seed round and part of its Series A financing of tens of millions of dollars. Investors included nearly 20 institutions including RockTree Capital, Waterdrip Capital, Arkstream Capita, etc., and the post-investment valuation reached US$200 million.
In January, BEVM released a testnet full node plan.
3、Taproot Chain：
On March 28, the TaprootChain mainnet was officially launched, and the inscription cross-chain function was opened. In addition, three BRC-20 tokens will be listed, namely ORDI, SATS, and BTCS. At the same time, the platform will start a points activity.
Taproot Chain is the first Bitcoin Layer2 network incubated by Taproot Labs that supports the issuance and trading of Taproot assets. It is built based on Op Stack technology and builds a Layer2 ecological platform for the combination of BTC native assets and smart contract Dapp applications.
Taproot Chain is also a Bitcoin Layer2 designed specifically for the application layer of the crypto industry. It combines the Bitcoin Taproot Assets Protocol, EVM smart contracts, and crypto asset cross-chain technology to create a financial ecosystem that can unleash the vitality of native Bitcoin assets worth nearly one trillion US dollars.
On the same day, Taproot Chain announced that it had received a new round of millions of dollars in financing led by Negentropy Capital.
On March 2, Taproot Labs launched the Taproot Chain testnet.
4.SatoshiVM:
On March 15, the SatoshiVM mainnet was launched, and the project subsequently launched the SAVM token staking function.
SatoshiVM is a decentralized Bitcoin ZK Rollup Layer 2 solution that is compatible with the Ethereum Virtual Machine (EVM) ecosystem and uses native BTC as gas fees. SatoshiVM connects the EVM ecosystem with Bitcoin, enabling the Bitcoin ecosystem to issue assets and develop applications.
The actions before going online are:
In February, SatoshiVM was connected to the OKX Web3 wallet.
On January 26, SatoshiVM launched a non-interactive zero-knowledge proof toolkit, SVMZK, but the integration of SVMZK with Bitcoin Taproot is still under development.
On January 18, SatoshiVM completed its IDO on the decentralized auction platform Bounce Brand at a price of 0.05 USDT, but it rose nearly 300 times after listing, reaching a maximum of nearly 15 USDT. The current price is 7.7 USD.
At the same time, SatoshiVM announced the basic information and distribution details of its token SAVM. The total supply of SAVM tokens is 21 million, and the distribution ratios include: 36.5% for the ecosystem, 30% for liquidity, 15% for contributors, 15% for Bootstrapping, 2% for Bounce Finance IDO, 1% for APE Terminal IDO, 0.4% for MUBI mining pool, and 0.1% for BSSB mining pool.
5、Merlin Chain：
On February 8, the Merlin Chain mainnet was launched and the staking activity Merlin's Seal was launched.
CHcokjR9LO31KPE1jfr9rUuESMiYf0CDW6iBfQ30.png
As a star project, the project was very active, and even caused congestion in the Merlin network and excessively high gas fees. As of the time of writing, Merlin Seal TVL has exceeded US$3.63 billion.
Merlin Chain is a Bitcoin Layer2 solution developed by the team behind Bitmap Tech (formerly Recursiverse), and integrates the ZK-Rollup network, decentralized oracle network, and on-chain BTC fraud prevention module. Its core goal is to activate native assets, protocols, and products on Bitcoin Layer1 through the Layer2 network, thereby enriching the Bitcoin ecosystem.
In February this year, Merlin Chain announced the completion of financing, with 24 institutions including OKX Ventures, ABCDE, Foresight Ventures, Arkstream Capital and others participating in the investment, but the specific amount was not disclosed.
Before and after the launch of its mainnet, Merlin Chain also made several major moves:
In March, Merlin Chain announced the launch of the pledge mapping asset M-Token. At the same time, Merlin Chain's first rune asset RUFI was fairly launched on UniCross.
In February, TRON announced a strategic partnership with Merlin Chain, and OKX Web3 wallet also announced its access to the Merlin Chain network.
In addition, Merlin Chain announced that it would use 1% of the total token supply (i.e. 21 million MERL, with a total supply of 2.1 billion tokens) for Launchpad through People’s Launchpad, with an initial price of 0.00004762 USDT. People’s Launchpad is a token launch (issuance) platform established by People’s Alliance.
On January 19, Merlin Chain was announced to be launched, and a week later, the Merlin Chain testnet was launched.
Other Bitcoin L2 developments:
In April, Bitcoin L2 network Mezo developer Thesis completed a $1 million Series A round led by 2Pantera Capital. Bitcoin L2 development company Alpen Labs completed a $10.6 million round of financing led by Ribbit Capital.
In March, TunaChain, the first modular L2 on Bitcoin, announced that it would launch the Tuna Ocean governance token TUNA through the LBP platform; Mirror L2 announced the completion of its first round of financing and opened the testnet.
In January, Mintlayer mainnet was launched. B²Network launched the Beta testnet “Haven”.
2. Behind the Bitcoin L2 Cluster: Technology + Capital Dual Drive
2024 is called the "first year of Bitcoin Layer 2". In the first quarter of this year, several Bitcoin Layer 2s have been established, and at least five mainnets of projects in this field have been launched recently, which shows that this narrative has gradually become a trend. Behind all this, there are many factors. Capital is always profit-seeking, but at the same time, technological progress also plays a supporting role.
1. Technical and financial aspects
There are currently a variety of Bitcoin L2 solutions on the market. From the perspective of technical implementation, they can be roughly divided into five categories: Bitcoin side chain, UTXO+client verification, Taproot Consensus, multi-signature+EVM, and Rollp.
But all of the above are derived from the development of the Bitcoin network itself. BTC has undergone three revolutionary technological iterations since its birth:
2009: BTC was born, and for the first time, the blockchain structure was used to open up decentralized currency applications.
2017: BTC Segregated Witness upgrade supports up to 4MB of storage, solving BTC’s on-chain storage problem. This also provides a basis for the now popular Ordinals protocol (issuing assets).
2021: BTC Taproot is upgraded to support the BTC threshold signature algorithm, which also provides underlying support for the fully decentralized Bitcoin Layer2 technology.
According to the report "Bitcoin Ecological Layer: Pulling Back the Curtain of the Trustless Financial Era", as of the fourth quarter of 2023, Bitcoin layer development has made significant progress, and L2 solutions have made significant progress. The ecosystem has expanded to include sidechains, drivechains, merged mining chains, and PoS chains. This period also marked the emergence of various protocols, token standards, cross-chain bridges, rollups and other innovative solutions.
All of the above have laid a technical foundation for the emergence of Bitcoin L2.
However, the biggest incentive for all parties to enter the Bitcoin ecosystem was the rise of the inscription market last year. The outbreak of inscriptions directly ignited the Bitcoin ecosystem and also allowed capital to see the huge investment potential contained therein.
Bitget Research Institute pointed out that with the market expectation consensus on the approval of BTC spot ETF, the arrival of BTC halving event, and the expectation of Fed rate cut, a large amount of funds continued to flow into the Bitcoin ecosystem, creating a sustained wealth effect.
Although the wealth effect started with BRC20 of the Ordinals protocol, it will not be limited to this niche area, but will be fully expanded to other innovative protocols and sectors. The continuous wealth effect will further attract the continuous inflow of funds, making the Bitcoin ecosystem expected to become the new engine of the next bull market.
The report also pointed out that in addition to innovative asset issuance protocols such as Ordinals and Atomicals, another current focus of the Bitcoin ecosystem is expansion solutions. Expansion solutions including Lightning, Rootstock, Stacks, RBG, etc. are booming and will help Bitcoin improve its performance and build a more prosperous ecosystem.
In February of this year, Pantera Capital estimated that the total value of DeFi applications in the Bitcoin ecosystem could reach up to US$450 billion, and this is only one sector in the Bitcoin ecosystem.
2. Institutional entry
Bitcoin Layer 2 projects continue to emerge and can be launched on the mainnet in a short period of time, which is inseparable from the support of major institutions.
On April 5, ABCDE co-founder BMAN predicted that as Bitcoin transforms from an interest-free asset to an interest-bearing asset, the trillion-dollar Bitcoin will enter the on-chain Defi world, and the total market value of TVL and L2 of the Bitcoin ecosystem will exceed 100 billion US dollars.
In February this year, OKX Ventures and ABCDE jointly held the second quarter Bitcoin Ecosystem Demo Day, covering BTC second-layer network, second-layer service solutions, Bitcoin staking, Launchpad, DA and other Bitcoin infrastructure construction projects.
OKX Ventures is focusing on the BTC ecosystem and has invested in projects such as B^2 Network, Bitmap Tech, Babylon, bitSmiley, alexGo, and Portal Defi. In addition, OKX Ventures will continue to invest $10 million to support entrepreneurs in the BTC ecosystem, and will also provide services and resources.
In January, the media disclosed a number of positive news about Bitcoin L2, including:
The digital asset research team of asset management giant Franklin Templeton published an article stating that the Ordinals and second-layer solutions of the Bitcoin ecosystem should not be ignored. These are crucial to solving Bitcoin’s economic security issues and improving BTC’s practicality as a store of value (SoV).
Ego Death Capital announced a new round of financing, “Fund II,” which aims to raise $100 million to promote the growth of the Bitcoin ecosystem. Previously, Fund I raised a total of $25.2 million.
ABCDE co-founder Du Jun said on his social platform that he is ready to deeply participate in the construction of the Bitcoin ecosystem, and the preferred track is Layer2. At the same time, Du Jun said, "On the day the project goes online, 50 million U or equivalent Bitcoin addresses will be announced for the development of this project."
Venture capital firm SATX Labs announced the launch of the first Bitcoin ecosystem investment fund. The fund will focus on Bitcoin's second-layer protocol and ecosystem construction, ensure the security of the main network and promote the sustainable development of the Bitcoin ecosystem.
Smart Bitcoin Labs announced on the X platform that it has established UTXO Fund and UTXO FundⅡ, with a fund size of US$5 million, focusing on investments in Bitcoin inscriptions, Layer2, DeFi and other fields.
Last November, Web3 venture capital firm AC Capital announced the launch of a $20 million fund, whose strategic investment focus is on BTC ecosystem asset investment.
However, the earliest large-scale Bitcoin ecosystem fund was Bitcoin Magazine Ventures, managed by David Bailey and Tyler Evans, in early June last year. According to internal information, this venture capital fund dedicated to investing in the Bitcoin ecosystem raised $30 million and has been oversubscribed by $90 million.
Summarize
At the beginning of this year, major institutions increased their bets on the Bitcoin ecosystem and its L2 projects, and the Bitcoin L2 network was launched one after another at the end of Q1, and staking activities also attracted funds and popularity. Compared with the Ethereum L2 network, most of the Bitcoin L2 project parties are in the East and the online progress is faster.
Bitcoin will be halved in April, and there will be a wave of enthusiasm for the Bitcoin ecosystem. The early launch will undoubtedly benefit the influence of the Bitcoin L2 project that has already been launched. When the time is right, the coin will be launched and listed, which will significantly shorten the profit exit cycle for early capital.
However, it is worth noting that many of the above Bitcoin L2 projects have not announced the specific amount of financing, and the time from the project launch on the test network to the main network is relatively short. Network security, project ecology, developers, user experience and other aspects still need to be tested by time.
