Source:Trustless Labs

Introduction

In the rapidly changing world of blockchain technology, Bitcoin is not only widely accepted as a digital asset, but its underlying technology is also constantly evolving and innovating. As the Bitcoin ecosystem gradually expands, various Layer2 solutions are emerging like mushrooms after the rain, aiming to improve the scalability, efficiency, and security of the Bitcoin network. This article will delve into multiple innovative Bitcoin Layer2 projects. Through a detailed analysis of the technical principles, team backgrounds, financing situations, and development roadmaps of these projects, we will understand how they are driving the innovation and development of the Bitcoin ecosystem.

Babylon: Cross-chain Staking and Bitcoin Economic Security

Babylon uses cryptographic methods to utilize Bitcoin (BTC) native staking to provide security guarantees for proof-of-stake (PoS) on other blockchains. This mechanism not only brings on-chain income to BTC but also has attracted widespread market attention.

In terms of technical implementation, Babylon's staking process relies entirely on cryptography, without the need for third-party bridges or custodians. BTC stakers can implement staking by sending transactions with two UTXO outputs. The first UTXO writes a time-locked script, and after expiration, the staker can unlock BTC with a private key. The second UTXO is transferred to a temporary Bitcoin address, and the public-private key pair of this address complies with the cryptographic standard "extractable one-time signature (EOTS)." When the staker runs a node of the PoS chain and verifies a uniquely valid block, they sign it with the EOTS private key.

If the staker operates honestly and signs only one valid block at a time, they will receive rewards as validators of the PoS chain. If they attempt to act maliciously and sign two blocks at the same time, their EOTS private key will be reverse-engineered, allowing anyone to transfer the staked BTC using that private key, leading to confiscation and prompting the staker to remain honest. Babylon also provides BTC timestamp services, uploading checkpoint data of any blockchain to BTC's op_return, enhancing security.

Babylon's staking is cross-chain, with the staked BTC remaining in scripts on the Bitcoin network. Stakers can specify validators and earn rewards on the corresponding PoS chain. By staking BTC to provide economic security for other PoS chains, BTC can earn income without leaving the main network, opening up a new way to stake BTC and greatly changing the BTC ecosystem.

According to DefiLlama's data, the current BTC lending market size exceeds $10 billion, with active income of $4 billion and yields ranging from 0.01% to 1.25%. This generally requires entrusting third-party CeFi institutions, or bridging or wrapping BTC. Staking rewards on PoS blockchains usually range from 5% to 20%. Through Babylon's staking business, BTC does not need to be entrusted to third-party institutions and can earn 50 times the traditional BTC income, with tremendous growth potential.

However, most BTC holders are passive holders, with 25% of BTC unused for over 5 years and 67% held for over 1 year. Therefore, convincing BTC holders to participate in staking is somewhat challenging. Babylon is conducting testnet staking and plans to launch the mainnet test in May or June, with no announcement yet regarding the introduction of staking BTC voucher-like assets.

Babylon was founded by Stanford University professor David Tse and Dr. Fisher Yu in 2022. Professor Yu is a member of the US National Academy of Engineering and is renowned for his legendary proportional fair scheduling algorithm in the field of wireless communication. On December 7, 2023, Babylon completed a $18 million financing round, led by Polychain Capital and Hack VC, with participation from Framework Ventures, Polygon Ventures, OKX Ventures, IOSG Ventures, and others. On February 24, 2024, Binance Labs announced its investment in Babylon.

Chakra: ZK-Powered Bitcoin Re-staking Protocol

Chakra is a ZK-powered Bitcoin re-staking protocol designed to establish a secure Bitcoin PoS system. By utilizing ZK-STARKs and a middleware chain, the Chakra network has established a native modular paradigm for expanding the BTC ecosystem. On April 30, Chakra announced the completion of a new strategic financing round, with investments from StarkWare, Bixin Ventures, Cogitent Ventures, and others. Specific amounts and valuation information have not been disclosed.

Chakra aims to address liquidity and interoperability challenges, unlocking the immense value of Bitcoin. With Chakra, other BTC Layer2 solutions can focus on execution layers without overly focusing on the settlement of Bitcoin infrastructure.

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

Chakra allows Bitcoin holders to stake assets without transferring them out of their wallets by generating UTXOs with time locks. Chakra uses STARK to implement the proof system. Compared to SNARK, STARK provides a zero-knowledge proof solution that does not require a trusted setup. Chakra uses STARKs technology to implement zk light clients, allowing verification of staking information without connecting to the Bitcoin network, ensuring the efficiency and security of zero-knowledge proofs. By introducing CairoVM, Chakra further enhances the system's scalability and transparency.

nubit_org: Protocol for Expanding Bitcoin Data Availability

Nubit is a protocol for expanding data availability (DA) scenarios for BTC, organizing a DA chain similar to Celestia through PoS consensus and regularly uploading Nubit's DA data to the BTC main chain. Nubit lacks smart contract capabilities and requires Rollup to build on its DA. Users upload data to Nubit, which is confirmed by PoS consensus to enter a "soft confirmation" state, after which Nubit uploads the data root to the BTC main chain for final confirmation. Users need to upload data tags to the BTC main chain for querying original data in the Merkle tree of Nubit full nodes.

Currently, there are 100 BTC L2s in the market. If all choose to upload DA to BTC blocks, even if the BTC blocks are filled, the mainnet can support at most around 20 L2s. Therefore, there is a significant narrative gap in how to connect with BTC and use its security guarantees, making Nubit's DA repackaging approach an interesting solution.

Nubit has completed the first round of Pre-Alpha Testnet, where users can earn points by linking BTC accounts or running light nodes. The first round of the testnet has ended, and plans are in place for the second testnet. Nubit's angel round investors include Bounce Finance and Brc20 founder Domo, completing a $3 million Pre-Seed round of financing, with participation from dao5, OKX Ventures, Primitive Ventures, and others.

lorenzo: BTC Liquidity Staking Protocol

Based on Babylon, Lorenzo is a liquidity staking protocol that provides a fast deployment service for L2-as-a-service, aiming to reduce the risk of stakers' penalties and release the liquidity of staked BTC assets. Stakers deposit BTC into Lorenzo's multi-signature address and receive an equivalent amount of stBTC as liquidity proof on its chain, as well as staking rewards.

The Lorenzo chain itself shares security protection with Babylon's Bitcoin and is an EVM-compatible Bitcoin L2, which will help deploy more BTC L2s in a modular way in the future. The Lorenzo chain serves as an interoperable chain for these L2 chains. Currently, Lorenzo has announced collaborations with Babylon, BounceBit, and others, planning to launch a testnet based on the Cosmos architecture. It is currently collaborating on the fourth phase of the testnet with Babylon to conduct liquidity re-staking tests.

According to Rootdata, Lorenzo has received investments from Binance, MH Ventures, and NGC Ventures, with specific details undisclosed. Currently, Lorenzo has announced the launch of a pre-staking Babylon event and the joint hosting of the Bitlayer Mining Gala, where users can stake BTC to receive stBTC on the pre-staking Babylon event page. All BTC received by Lorenzo will be staked by Lorenzo on Babylon as soon as it goes live. However, due to Babylon's staking limit, the actual staking progress may be subject to Babylon's possible staking limit determination.

bitsmiley_labs: Comprehensive DeFi Protocol for the Bitcoin Ecosystem

BitSmiley is a comprehensive DeFi protocol for the Bitcoin ecosystem, including over-collateralized stablecoin issuance, decentralized lending, and derivatives. bitUSD, based on BitSmiley, is an over-collateralized stablecoin similar to MakerDAO, with decentralized lending similar to Compound. bitUSD can be implemented on both BTC's L1 and L2, issued based on the bitRC-20 standard, supporting functions such as upgrades, minting, and burning, making it easy to represent stablecoins on the BTC mainnet. BitSmiley has also developed the AMM bitCow for stablecoins, currently being deployed and tested on multiple BTC L2s.

BitSmiley has received investments from OKX Ventures, ABCDE Capital, Forsight Ventures, Waterdrip Capital, Kucoin Ventures, CMS Holdings, and ArkStream Capital. In the early stages of the project, BitSmiley issued the Ordinals NFT M-bitDisc-Black, which received good market feedback and is used as a ticket to participate in the testnet.

build_on_bob: BTC EVM Sidechain Architecture

BOB is a BTC EVM sidechain architecture implemented using the OP Superchain SDK, using wrapped BTC such as wBTC and tBTC on Ethereum as gas fees, and will introduce BTC security through a new POW merge mining protocol in the future. The BOB testnet has been running for several months and has a certain ecosystem. On May 1, the mainnet was officially launched. In the first phase, over 40 projects have been deployed on the chain, with over $300 million TVL. The second phase of the deposit activity is currently underway. The accumulated Spice points from the deposit correspond to the $BOB token.

Participation in the pre-staking of BOB requires operations on the Ethereum mainnet, and if using BTC, it needs to be cross-chained to $tBTC or $wBTC. The reward multiplier is 1.5x. It also accepts DAI, eDLLR, rETH, USDC, USDT, wstETH, and STONE for deposit, with a reward multiplier of 1.3x, and accepts ALEX, ETH, and eSOV for staking, with a reward multiplier of 1x. BOB has strong resources and has partnered with the largest publicly traded mining company in the US, $MARA, to launch a BTC L2, and announced a $10 million investment from Coinbase, showing great potential.

Botanix Labs: EVM Equivalent L2 on Bitcoin

Botanix Labs has built an EVM equivalent L2 on Bitcoin, operated by PoS. Users can stake BTC in multi-signature addresses to participate in staking on L2 or bridge BTC to participate in the ecosystem. Its feature is that these BTC assets are protected by the decentralized multi-signature network Spiderchain.

By staking BTC to become a validator node and participating in PoS and the multi-signature network Spiderchain, Botanix uses the hash value of Bitcoin blocks as the source, randomly selects nodes to participate in PoS block production, and engraves the block header into the BTC block when finally confirmed. All assets on L2 on BTC are protected by the multi-signature network Spiderchain, with nodes randomly forming multi-signature groups to control BTC in multi-signature addresses, making the cost of malicious behavior high, as the staked BTC can be confiscated.

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

Botanix's testnet has been running for half a year, and users can participate in testing and receive a series of NFT credentials. Botanix Labs has been building L2 on BTC since 2022 and has a certain technical strength, making the testnet a good opportunity for participation.

bounce_bit: Infrastructure for BTC Yield Farming and Restaking

BounceBit is an infrastructure for BTC yield farming and restaking, integrating CeFi and DeFi businesses, using BTC staking to guarantee blockchain security. BounceBit itself is also a BTC EVM L2, where PoS staking on L2 can stake the native token BB or BTC assets. The absorbed BTC assets are held in centralized custody services supported by Mainnet Digital and Ceffu, and the deposited BTC assets on BounceBit become bounceBTC, which can be staked to earn validation rewards in other validator networks. BounceBit brings triple rewards to users: mainnet BTC asset custody rewards, on-chain staking project rewards, and restaking rewards.

BounceBit is supported by Binance and will provide 8% of the token to Binance Megadrop BNB stakers.

citrea_xyz: ZK Rollup Enhancing Bitcoin Block Space

Citrea is a ZK Rollup based on Bitcoin (BTC) that enhances block space functionality, developed by the Chainway team, focusing on the early implementation of BitVM verification. The Citrea network processes transactions in zkVM and generates zk proofs, which are then inscribed into BTC blocks. Through BitVM, optimistic verification is achieved on the BTC mainnet, ensuring that Citrea's settlement and data availability are handled by the Bitcoin mainnet.

Citrea implements asset bridging between L2 and the BTC mainnet through the trust-minimized bridge, Clementine. When users need to withdraw BTC from L2, assets are transferred to the withdrawal contract on L2 with a BTC address attached. The bridge operator first transfers their own BTC assets to the user. Every six months, Clementine bridge undergoes an interruption check, where the operator needs to extract the deserved BTC based on the original transaction data, SPV withdrawal proof, and Citrea's zk proof. If the operator behaves maliciously, challengers can initiate a challenge, reveal the original transaction data, and prevent the operator from extracting BTC from the bridge, ensuring the safety of bridge assets.

Currently, Citrea has completed a $2.7 million seed round of financing, led by Galaxy, with participating investors including Delphi Ventures, Eric Wall, Anurag Arjun, BatuX, Igor Barinov, and James Parillo.

mintlayer: PoS-Based Bitcoin Sidechain

Mintlayer is a proof-of-stake (PoS)-based Bitcoin sidechain that uses verifiable random functions (VRF) to ensure stable block production. Like BTC, Mintlayer adopts the UTXO structure, allowing it to directly benefit from various advantages of the BTC network. Token issuance on Mintlayer does not require smart contracts; instead, it is achieved through UTXO annotations, similar to colored coins on BTC. It also supports atomic swaps using UTXO, enabling asset exchanges with the BTC mainnet through hash time-locked contracts, which is not achievable by BTC L2 with EVM and account structures.

Mintlayer has incubated the on-chain DeFi product Atomiq DeFi, leveraging the features of atomic swaps to allow direct interaction with mainnet BTC in Atomiq DeFi. The token $ATMQ will be issued at the end of the second quarter.

NervosNetwork: Smart Contract Platform with PoW and UTXO Model

Nervos is a smart contract platform based on proof of work (PoW) and the UTXO model. In 2024, it proposed a comprehensive solution to expand the BTC ecosystem and issued the RGB++ Bitcoin layer asset issuance and expansion protocol. Leveraging years of accumulation in the UTXO model, RGB++ and UTXO isomorphism binding directly utilizes the native capabilities of BTC, with high security closely related to the BTC mainnet.

RGB++ issues assets on the BTC mainnet, bound to Bitcoin UTXOs. Users can choose to "jump" RGB++ assets to the Nervos network. The BTC transaction for jumping will output specific UTXOs on the mainnet, triggering related shadow transactions on the Nervos network, with RGB++ asset information being written into Nervos UTXOs. The unlocking condition is specific BTC UTXOs. Users can enjoy smart contract capabilities, lower fees, and higher performance on Nervos, and can also jump assets back to the BTC mainnet through isomorphism binding.

Based on this isomorphism binding approach, Nervos also released the UTXO Stack application chain architecture, similar to Ethereum's OP Stack, and is developing its own Lightning Network. Nervos has the most comprehensive solution for expanding the BTC ecosystem.

Mezo: BTC L2 Based on tBTC

Mezo is a BTC layer 2 network built on tBTC using the Cosmos EVM architecture, enabling asset transfers from BTC to Mezo L2 through tBTC's multi-signature cross-chain bridge. Mezo introduces the HODL Proof of Banzhaf economics, similar to ve33 in BTC staking. Users can participate in consensus by locking BTC on Mezo, with longer lock-up periods resulting in exponentially increased staking validation weight and rewards.

Mezo's PoS includes both the BTC portion and the native token MEZO portion, both of which can earn veMEZO as rewards, incentivizing different reward pools, with 1/3 of the total rewards going to BTC stakers and 2/3 going to MEZO stakers. Mezo has completed a $21 million Series A financing round, led by Pantera Capital, with participation from Multicoin, Hack VC, Draper Associates, and others. Mezo has initiated early deposit activities, allowing deposits and withdrawals of native BTC, wBTC, and tBTC, with the mainnet expected to launch in the second half of 2024.

BVMnetwork: Rollup-aaS Platform Supporting Unlimited Scalability

BVMnetwork is a modular Bitcoin L2 protocol. It specializes in batch issuance of L2 related to the BTC ecosystem, with each L2 optimized for specific purposes.

BVMnetwork is positioned as Rollup as a Service (Rollup-aaS). Technically, BVMnetwork adopts a model similar to EVM, using Bitcoin as the data layer to achieve transaction-level consensus. Through the use of TxWriter and TxReader, BVMnetwork embeds BVM transactions into Bitcoin transactions and ensures that all BVM nodes maintain a consistent state on the network. TxWriter is responsible for embedding BVM transactions into Bitcoin transactions, similar to the technology used in Ordinals. TxReader filters BVM transactions in each new Bitcoin block. BVMnetwork is based on Op-Rollups' multi-layer architecture, including data availability (DA), smart contract platform, Sequencer, Rollup nodes, execution engine, settlement, and bridging. BVMnetwork provides a fully hosted solution, allowing users to deploy a BVM Chain with just a few clicks and choose the most suitable configuration for their application.

Currently, the market value of $BVM is $143 million, with a total supply of 100 million and a circulating supply of 23 million. The token TGE took place on March 24, 2024, and is currently in the staking phase. Users can stake BVM tokens to mine SHARD (BVM's governance token), with an annualized yield rate (APR) of 50% as provided on the official website. Users can also participate in mining other newly launched BTC L2 tokens.

BVM Team has issued multiple BTC L2 networks, including alpha chain, which is the first BTC L2 network, naka for BTC DeFi business, EternalAI for fully on-chain AI on BTC L2, swamps for supporting SRC-20 DeFi on BTC L2, RuneChain focusing on Rune transactions on BTC L2, Bittendo supporting gamefi on BTC L2, bloom for BTC staking and restaking on BTC L2, and several new L2 chains in planning, including introducing POW and RWA.

The BVM team iterates quickly and launches projects at a fast pace. The above projects often use airdrops to existing holders and potential new users, and launch by involving old assets in IDOs. The BVMnetwork team consists of some active Bitcoin OG members on Twitter. The team previously participated in the development of BTC L2 Trustless Computer in 2023, which received a lukewarm response at the time. They later turned the tide with the development of Friend.tech on Bitcoin, and finally achieved success with BVM.

BitLayerLabs: BTC L2 Project Based on BitVM

BitLayerLabs is the first BTC layer 2 network based on BitVM, supporting multiple virtual machines and EVM compatibility, using Op-Rollup technology. It announced the completion of a $5 million seed round of financing on March 27, 2024, led by Framework Ventures and ABCDE Capital. Other participating institutions include StarkWare, OKX Ventures, Alliance DAO, and UTXO Management. It received strategic financing from OKX on May 19, with the amount undisclosed.

BitLayerLabs is positioned as Op-Rollup, and its asset bridging plan uses DLC and BitVM, allowing users to withdraw assets on BTC even if there are issues on the mainnet (escape channel). Through BitVM, BitLayerLabs can build a Turing-complete computing layer on the Bitcoin stack, using basic building blocks (such as hash locks, time locks, and large merkle trees) to create a system capable of handling complex computations and contracts. BitLayerLabs supports multiple virtual machines, including EVM, CairoVM, SolVM, and MoveVM.

Currently, it uses a PoS + multi-signature bridge on the mainnet. BitLayer plans to implement a minimal BitVM implementation to replace the current bridging solution in Q2 2025.

Bitlayer has released mainnet V1 and announced a developer incentive program and early supporter NFT activity. It is currently conducting mining activities in collaboration with Lorenzo, Bitsmiley, Avalon, Bitcow, Pell, Enzo, and Bitparty, which will continue 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 DLC/BitVM technology protocol to ensure user asset access. Mainnet V3 is planned for June 2025, using BitVM for L1 verification challenges, achieving BTC security equivalence, implementing BitVM-based OP challenges, and a BitVM escape asset scheme DLC-Attestors.

Alpen Labs: Modular ZK-Rollup Project

Alpen Labs is dedicated to developing ZK-Rollup technology. Although limited information has been disclosed, its team and financing background are quite strong. The project is positioned as a modular ZK-Rollup, with native ZK validators and optimistic ZK bridges.

Alpen Labs' ZK verification technology continues the BitVM approach but has designed a ZK SNARK validator SNARKnado specifically for Bitcoin. Compared to BitVM's validator design, it can reduce the rounds of interactive verification, thereby increasing feasibility. Some of the code has been open-sourced.

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

Anduro: Sidechain System Supported by NASDAQ-Listed Mining Company Mara

Anduro is a multi-sidechain platform incubated by the NASDAQ-listed mining company Marathon Digital Holdings, aiming to provide sidechain solutions.

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

All Anduro sidechains are merged-mined with Bitcoin, and its native asset Anduro BTC is pegged 1:1 with BTC. Anduro sidechains maximize compliance with Bitcoin's native properties, including block generation using proof of work (PoW).

anetaBTC: Wrapped BTC Based on Cardano and Ergo

anetaBTC is a Wrapped BTC project based on Cardano and Ergo, aiming to achieve BTC liquidity on these two chains' DeFi ecosystems. By using smart contracts to mint and redeem AnetaBTC, BTC holders can participate in various activities in the Cardano and Ergo DeFi ecosystems, such as lending, trading, and liquidity mining, without giving up their BTC holdings.

anetaBTC's tokens include $cBTC, $NETA, and $cNETA, with $cBTC being the Wrapped BTC token minted on the Cardano and Ergo networks by anchoring BTC. $cBTC is still being continuously minted, and the TGE for $cNETA has been completed. $cBTC is the project's Wrapped BTC, with 17.6 minted. $NETA and $cNETA are the project's tokens, with a total supply of 2 billion, issued on Ergo and Cardano, respectively. The market value of cNETA is currently $2.53 million, and all are publicly distributed.

Currently, the anetaBTC project has launched the V1 version of the mainnet, with the V2 testnet expected to be released in the second quarter of 2024, the V2 mainnet planned for the third quarter of 2024, and the V3 version scheduled for release in 2025.

The project was founded by Austin Regron, who has years of development experience and is focused on bringing BTC into the Cardano and Ergo ecosystems. Co-founder Willie McClinton was a doctoral student at MIT and was involved in the project's development but has since left.

BiopDAO: Op Rollup Project Supporting BRC-20 Protocol

BiopDAO is a project based on Op Rollup, focusing on supporting the BRC-20 protocol and providing the Biop Virtual Machine (BVM) to support smart contracts. The project aims to create an efficient, secure, and scalable Layer 2 solution. The main token of BiopDAO is $Biop, with a total supply of 21,000,000. Currently, the market value of $Biop is approximately $500,000, with a FDV of $2.5 million. BiopDAO plans to launch three versions of L2 blockchains: V1, V2, and V3. The V1 version is planned for release in the first quarter of 2024, the V2 version in the second quarter of 2024, and the V3 version in the fourth quarter of 2024. Although BiopDAO's code is open source, the project is progressing slowly and has a low completion rate.

Bitsat_Official: ZK-Rollup Project Integrating AI into BTC L2

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

The core of Bitsat is HyperLayer, a high-performance, scalable platform for deploying and running distributed AI applications on the Bitcoin network. Technical features include ZK-Connector for efficient data and asset transfer, VM Engine compatible with the Ethereum Virtual Machine (EVM), and an asynchronous high-performance consensus mechanism for high performance and scalability.

The project has not yet disclosed related Tokenomics information. The roadmap for Bitsat includes testing the network in Q2 2024 and launching the mainnet V1 in Q4 2024.

Bool_Official: Decentralized, Secure Bitcoin Verification Layer

Bool is a modular data availability (DA) layer using ZK, MPC, and TEE (Trusted Execution Environment) technologies.

The project aims to provide a decentralized and secure Bitcoin verification layer driven by MPC-based distributed key management. Technical features include using Dynamic Hidden Committees (DHC) and Ring Verifiable Random Function (Ring VRF) protocols to protect member identities, and executing all key management processes in a Trusted Execution Environment (TEE). In terms of Tokenomics, the total supply of $BOOL is 1 billion, with an initial allocation of 500 million.

The roadmap includes completing code audits in June 2024, launching the mainnet in July, and opening BTC staking in August and beyond. The project is open source, with a high level of completion, and is awaiting audit.

CashuBTC: Privacy-Focused BTC Project

Cashu is a free and open-source Chaumian ecash system designed for Bitcoin and deeply integrated with the Lightning Network to ensure privacy. It is well recognized by the BTC core community. Cashu aims to provide an open electronic cash protocol called Cashu NUT, using blind signatures to protect user privacy, and transactions are peer-to-peer.

Technical features include Lightning node operators acting as custodians for users on the Lightning Network while issuing electronic cash to users. Cashu is an open-source protocol, with support and applications from multiple systems.

BnzkLabs: BTC L2 Project Based on ZK-Rollup

BnzkLabs plans to support the Ordinal BRC20 protocol (zkToken), followed by support for BRC721 (zkNFT) and other protocols. The project's progress is currently insufficient, and no code is visible. In terms of Tokenomics, the total supply of $BNZK tokens is 21 million, with 10% reserved for the team, 20% for ecosystem rewards, 40% for public and private sales, and 30% for mining rewards. The roadmap includes testing the network in April 2024 and launching the mainnet in September 2024. The project's completion is currently average, and no code is visible.

DrivechainLayerTwoLabs: Bitcoin Sidechain Technology

LayerTwo Labs was created by the BTC Drivechain team. Drivechain is a merged-mined BTC sidechain technology designed as a soft fork upgrade for Bitcoin, proposing a new way for sidechains to interact.

Paul Sztorc, the proposer of Drivechain, is the founder and CEO of LayerTwoLabs. He is a former researcher and statistician at Yale University and a senior practitioner in Bitcoin, detailing the concept of Drivechain in BIP300 and BIP301.

Drivechain is a BTC sidechain technology that achieves widespread sidechain expansion of Bitcoin without changing the core security and decentralization of Bitcoin, through a hash rate custody mechanism and a miner scoring system. Its basic mechanism involves creating a new Bitcoin address, where any funds sent to this address are locked, and these funds can only be spent with the agreement of all miners. Miners reach consensus through a "scoring" system, and once a transaction's score is high enough, the transaction is published, and the funds move from the sidechain to the main chain.

Drivechain allows the Bitcoin network to experiment with new use cases through sidechains, such as issuing assets, fully private transactions, state blockchain contracts, without sacrificing the core security and decentralization of Bitcoin. The project's roadmap has begun implementation, and the testnet has a Launcher for Linux, Mac, and Windows. The project is open source, with a high level of completion and frequent updates.

It raised $3 million in December 2022, with specific details undisclosed.

EASTBlue_io: L2 Solution Focused on Large-Scale Applications

EASTBlue is an L2 solution focused on large-scale applications, backed by NEAR, using Rollup technology and supporting multiple virtual machines.

The project is based on Rollup and aims to introduce a new programmable layer for Bitcoin through the EAST Account Insurance Library (AVM) using NEAR's chain signatures and account aggregation to solve congestion and scalability issues brought 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 started on March 22, 2024, with priority given to PARAS token holders. The token supply is 1 billion, and $EAST is dynamically issued based on ecosystem behavior and performance, with a 5-year lock-up period. The majority of tokens (52%) are allocated for community development and ecosystem entry. Staking functionality will be launched, but a complete roadmap has not been found, and the project code is not visible.

The tokenomics allocation rules are as follows:

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

fedimint is an open-source protocol for community custody and trading of Bitcoin, emphasizing privacy protection and reducing reliance on large centralized exchanges. Co-founders include Justin Moon, co-founder of austinbitdevs.com, and Obi Nwosu, former CEO of the UK Bitcoin exchange Coinfloor. The project has completed a $4.2 million seed round and a $17 million Series A round, with a total funding of $21.21 million. Fedimint has recently released version 0.3.0, making significant progress in automated testing for version compatibility.

GeliosOfficial: BTC L2 Supporting Runes Standard and EVM-Friendly

Gelios is a BTC L2 that supports the Runes standard and is EVM-friendly, aiming to facilitate communication between applications and seamless cross-chain interaction. As a dApp layer for Bitcoin, Gelios allows users to transfer BTC and WBTC to Gelios, unlocking the potential of BTC DeFi. The project has partnerships with Ave.ai, OKX, Bitget, Gate, Unisat, and others. Currently, the anime 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 listed on Alphanet and can be traded with ETH on Uniswap. The roadmap includes a three-phase airdrop: testnet (completed), Alphanet (ongoing), and mainnet (not started).

HacashCom: Bitcoin Solution with Multi-Layer Scalability and State Channels

Hacash.com is a project dedicated to solving Bitcoin scalability issues by implementing one-way transfer of Bitcoin at Layer 1 and deploying state channels for payment operations at Layer 2, further proposing the concept of Layer 3 for ecosystem scalability.

Hacash Layer 1 network, operational since 2019, uses a Proof of Work (PoW) consensus mechanism, issuing and settling coins through HACD, BTC, and HAC PoW currencies to address the lack of monetary properties in Bitcoin. Layer 2 is primarily used for large-scale payments, building payment settlement channel chains, and serving as the infrastructure for Layer 3. Layer 3 supports multi-chain interaction and ecosystem development for asset issuance, smart contract execution, and on-chain data interaction and cross-chain capabilities. The founding team includes Ken You, Trevor Stoll, and Leo Yang. The project raised $60,000 for listing on the Mexc exchange. It is currently in the testnet phase.

Bitcoin can be transferred unidirectionally to Hacash, maintaining its ownership and native value properties, with a total supply of 21 million HAC, circulating in Hacash in the smallest Satoshi unit. HAC is created through BTC transfers, with the issuance of HAC gradually decreasing, and after 1.05 million BTC transfers, each 1 BTC transfer only generates 1 HAC. The total supply of HACD is approximately 16.77 million, generated through mining and HAC bidding, with mining difficulty gradually increasing and a maximum daily output of 58. It is estimated that all HACD will require 800 years to produce, but it may never produce all HACD.

interlayHQ: Bitcoin-Backed Assets for Cross-Chain Interoperability

Interlay's flagship product is "interBTC," a fully collateralized one-to-one Bitcoin-backed asset that achieves interoperability between multiple blockchain ecosystems while maintaining Bitcoin's censorship-resistant nature. Technically, Interlay v2 introduces native DeFi functionality, allowing users to easily access Bitcoin-centric DeFi use cases such as swap, Borrow & Lend, Multi-Chain BTC, and Stake BTC by creating markets tailored to Bitcoin holders and establishing deep liquidity in these protocols. Users can easily access Bitcoin-centric DeFi use cases by locking BTC to mint iBTC, using iBTC as collateral for DeFi transactions to generate income, and then redeeming BTC. Interlay has undergone audits by well-known audit firms 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, raising a total of $9.5 million, with the most recent funding on December 21, 2021, raising $6.5 million from investment institutions 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, providing functions such as search, wallet, trading market, and inscriptions. Libre does not require tokens, is built-in with Typescript and other top languages, and allows BTC to join in seconds without KYC. Libre processes over 4000 transactions per second, with zero transaction fees and on-chain AMM. The mainnet of Libre was launched on July 4, 2022, with an airdrop of 10 million LIBRE, of which only 277,000 were eventually claimed. Libre also launched a test version of BRC 20 Dex and a mobile app for convenient inscription trading.

LightecXYZ: ZKP-Based Bitcoin Layer2 Solution

LightecXYZ aims to build Bitcoin's Layer2 using zero-knowledge proof (ZKP) technology, with main projects including opZKP and zkBTC. opZKP transfers complex calculations off-chain, generates a concise proof, and introduces new opcodes in the Bitcoin script language to verify the off-chain executed calculations on-chain. This solution overcomes Bitcoin's Turing incomplete limitations, making it possible to deploy various applications on Bitcoin. The opZKP technology is complex and has a long development cycle. zkBTC, built on opZKP, enables a ZKP-based cross-chain bridge between Bitcoin and Ethereum, allowing users to deposit Bitcoin to mint ERC-20 token $zkBTC. The entire process generates ZKP proof off-chain, verifies the proof on the Ethereum smart contract, mints the corresponding amount of $zkBTC tokens after confirmation, and requires the destruction of the corresponding $zkBTC tokens and generates proof off-chain for Bitcoin redemption. The Lightec team does not hold the private key of the specified address throughout the process, ensuring security and decentralization.

The Lightec team is actively developing the zkBTC project, expected to launch on the testnet in a few months. They are also building a token economic model to support further development of the opZKP proposal and promote the construction of the Bitcoin Layer2 ecosystem.

Liquid_BTC: Fast, Secure, and Confidential Bitcoin Layer2 Solution

The Liquid Network is a Bitcoin Layer2 solution that provides fast, secure, and confidential settlement and issuance of digital assets, including stablecoins, security tokens, and other financial instruments. The Liquid Network compresses block generation time to within 2 minutes using a special federated Byzantine agreement (FBA). It protects transaction amounts and address information through Confidential Transactions technology and zero-knowledge proofs. The Liquid Network allows users to trade LBTC (Liquid Bitcoin) as a tradable digital asset for fast and private transactions, with over 3700 LBTC currently in circulation.

The Liquid Network is governed by a distributed alliance of over 65 Bitcoin-centric companies, including Bitbank, BTCBOX, Aquannow, Bitcoin Reserve, Cobo, and OpenNode. Bitfinex Securities launched the first tokenized debt for the New Hilton Hotel, to be issued on the Liquid Network.

The Liquid Network is developed by Blockstream, founded in 2014, with products including Liquid and Blockstream Green. 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, it raised $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, it raised $210 million in Series B funding, with a valuation of $3.2 billion, with participation from Baillie Gifford and iFinex.

The ecosystem includes the AQUA Wallet, DeFi products Bisq, Peach Bitcoin, Boltz, NFT project tokenocean, as well as SideSwap and Debifi.

LumiBitL2: Enhanced Scalability, Privacy, and Decentralization for BTC Layer2 Solution

LumiBit is a BTC Layer2 solution that utilizes 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 for improved verification efficiency. It integrates the Halo2 zero-knowledge proof mechanism, enhancing security without requiring trusted setups. It introduces abstract accounts from the Omin wallet, allowing users to transact on the LumiBit chain using local Bitcoin keys. The LumiBit testnet is now live.

mercurylayer: Bitcoin Layer2 Focused on Privacy and Efficiency

Mercury Layer is a Bitcoin Layer2 focused on enhancing privacy and efficiency through state chains for off-chain transfer and settlement of Bitcoin UTXOs. Mercury Layer utilizes state chains and blind threshold signature technology to facilitate instant and feeless transactions without compromising fund custody and security.

Mirror_L2: Decentralized Proof-of-Stake Bitcoin Layer2 Solution

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Mirror Staking Protocol, originally known as Mirror L2, is a decentralized proof-of-stake (PoS) BTC Layer2 solution that is compatible with EVM and smart contracts, using BTC as GAS. Mirror Staking Protocol adopts the Overlapping Group Multisignature (MSG) algorithm, collectively managed by hundreds or thousands of nodes, balancing BTC staking rate, security, and decentralization. It generates mBTC anchored 1:1 with BTC and compatible with EVM, and is already used in the restaking mechanism.

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

Seed funding 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 TVL and an ecosystem through the "Stake Once, Earn Twice" activity in collaboration with other BTC L2 projects. It was announced in March that the first round of funding was completed and the testnet was open. Each redemption will earn 10 points, while minting will 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 near-instant transactions and contract deployment, secured by the Bitcoin network. The Syscoin blockchain is a dual-layer blockchain based on PoW consensus, with the core being the Syscoin blockchain and NEVM providing smart contract functionality.

Syscoin was founded in April 2014 and announced a $20 million ecosystem development fund in June 2022. Syscoin is listed on Binance, with a current FDV of $170 million.

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

u_protocol: Fully Decentralized Synthetic BTC

U Protocol is a native fully decentralized synthetic BTC compatible with EVM, with main products including uBTC and U Bitcoin Thunder Network. uBTC is a decentralized Bitcoin for Layer 2, supported by Lido's Wrapped Staked Ether and BTC.b. u_protocol uses BTC as the pricing unit, and the redemption mechanism enhances user experience by charging a one-time redemption fee to prevent frequent redemptions. The system sets a price cap of 1.10 BTC, allowing borrowers to maximize borrowing and sell uBTC for immediate profit when the uBTC:BTC exchange rate exceeds this level.

ZKBaseOfficial: Infrastructure Protocol Based on ZK Technology

ZKBase is based on zero-knowledge proof (ZK) technology, providing scaling solutions for mainstream blockchains such as Ethereum and Bitcoin, offering a range of services including decentralized exchanges, cross-chain bridges, layer-2 payments, NFT markets, and layer-2 domains. ZKBase will release 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, while providing a more secure way equivalent to the security of the BTC network. Chief Strategy Officer Antonio Saaranen previously served as the CSO of the Qtum Foundation. Marketing and Public Relations Director Hailan Jia previously served as the Senior PR Manager at Huobi Global. In 2020, ZKBase raised a $1.7 million angel round, with a valuation of $25 million, with investments from Bixin Ventures, SNZ Holding, FBG Capital, and others.

Conclusion

The number of Bitcoin Layer2 projects is rapidly growing, with close to 100 projects currently in existence, which can generally be categorized into four main types.

The first type consists of EVM sidechains, which is the largest category of projects. Most of these projects deploy EVM chains using a modular rollup approach, utilizing PoS consensus. The entry barrier for startups is relatively low, but effective launch requires strong capital operation capabilities. Some projects in this category are attempting to introduce more advanced modular solutions such as ZK.

The second type of projects continues the design concept of BitVM, innovating on the verification method, which to some extent introduces BTC security. However, these projects choose to initially launch a mainnet with EVM + PoS to develop the ecosystem, essentially no different from the first type of EVM sidechains. They often receive high funding and have a certain narrative expectation, making them a race track for concentrated VC investment.

The third type of projects focuses on BTC deposit staking, using BTC as the staking asset in PoS, introducing concepts similar to BTC re-staking. They aim to attract more BTC savings. The leading project Babylon innovates at the cryptographic level in the BTC staking method, while other projects innovate at the business level, such as introducing BTC staking into CeFi to create more yield. We believe that BTC re-staking will be the mainstream of the future ecosystem, and it will solve the BTC narrative dilemma in the BTC EVM sidechain before achieving BitVM.

The fourth type of projects explores more on BTC native solutions, such as further developing the UTXO model and attempting to create new sidechain assets based on UTXO, such as Nervos. The exploration of BTC native also includes the continued exploration of joint mining sidechains. A few projects are attempting to push for BTC upgrades to introduce more script operators to expand the BTC ecosystem, which is currently the most degenerate path.

The BTC ecosystem is in a rapid development stage, with various innovative projects emerging to address the challenges of scalability, security, and efficiency in the Bitcoin network. From Babylon's cross-chain staking to Nubit's expanded data availability, from Lorenzo's liquidity staking protocol to BitSmiley's comprehensive DeFi protocol, these projects are collectively driving the diversification of the Bitcoin ecosystem through different technological paths and business models. By continuously monitoring and participating in these cutting-edge projects, the community and developers will be better able to grasp the future development trends of blockchain technology and collectively build a more efficient, secure, and diverse blockchain ecosystem.

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