Bitcoin Layer 2s:- The race to scale Bitcoin and bring it into the DeFi ecosystem is heating up. Emerging Bitcoin Layer 2s like Bitlayer are making significant efforts to introduce Ethereum-like capabilities to the Bitcoin network.
Despite being the largest cryptocurrency by market cap, Bitcoin has struggled to scale in proportion to its vast volume and potential. Nearly 99% of all Bitcoin remains idle in users’ wallets. Unlocking that value and making Bitcoin useful for real-world applications won’t be a simple task.
Meanwhile, Ethereum has been actively developing Layer 2 scaling solutions for several years, giving it a considerable head start. This early momentum has fostered a vibrant ecosystem—rich with innovations, hard-earned lessons, and cautionary tales that Bitcoin Layer 2s can learn from.
That’s the focus of this PowerTalk with Bitlayer Co-Founder Kevin He, who shares key takeaways for builders aiming to scale Bitcoin effectively.
When architecting Bitcoin Layer 2 solutions, critical lessons can be drawn from Ethereum’s Layer 2 evolution.
Notably, prior to founding Bitlayer, Kevin served as the Vice President of Technology at New Huo Tech, Senior Technical Director at Huobi, and Chief Scientist at YOUChain.
Bitcoin Layer 2 Must Focus on Onchain verification
From Stacks and Rootstock to newer entrants like Bitlayer and Botanix, Bitcoin Layer 2 networks are growing rapidly. These Bitcoin Layer2 are making efforts to bring programmability and throughput to the world’s oldest and most trusted blockchain – Bitcoin.
But in their ambition to extend Bitcoin’s utility, these protocols face a critical question: What can they learn from Ethereum’s Layer 2 evolution? The answer may determine whether Bitcoin’s second layer becomes a meaningful ecosystem — or a fragmented maze of half-baked solutions. Bitlayer Cofounder Kevin explains the lessons:
First, rollups remain a pragmatic and widely accepted scaling approach, as they strike a balance between scalability and security by inheriting Bitcoin’s trust assumptions.
However, Bitcoin Layer 2s must prioritize onchain verification/validation capabilities as their foundation. This ensures proofs or fraud disputes can be settled directly on Bitcoin’s base chain without relying on off-chain actors or third-party systems—preserving decentralization and trust-minimized.
Notably, the current environment with the coming up of Spot BTC ETs and its expanding integration with the traditional institutional players have bought more confidence into Bitcoin.
Over the past year, Bitcoin’s price has increased by approximately 18%, briefly surpassing the $100,000 mark in December 2024. As of today, it is trading around $81,575, recovering as Trump Tariffs take pause.
Second, while data availability (DA) is vital for rollup functionality, Bitcoin’s ecosystem should adopt adaptable solutions rather than one-size-fits-all standards.
Bitcoin’s community-driven nature naturally encourages experimentation here. By treating DA as a flexible component rather than a rigid protocol requirement, Bitcoin Layer 2s can cater to diverse needs while aligning with the chain’s minimalist ethos.
In short, Bitcoin Layer 2s should anchor on trust-minimized onchain verification first, then embrace modularity for DA. This avoids over-engineering pitfalls while upholding Bitcoin’s core strengths: decentralized, secure, and censorship-resistant settlement.
Recently, Rootstock, one of the oldest projects aiming to accelerate Bitcoin DeFi, also announced its plan to release Software Development Kit (SDK) for allowing more developers to build own Bitcoin Layer2.
Bitcoin didn’t need to change. It needed a layer to grow on.
— Rootstock (@rootstock_io) April 9, 2025
User Experience Is Everything
Ethereum L2s — Arbitrum, Optimism, Base, and others — learned early that users won’t adopt new tech just because it’s faster or cheaper. Users need frictionless UX.
They have already set high standards in UX with Fast transactions, Bridge dashboards, Wallet-native interfaces. Thus, Bitcoin L2s can’t afford to fall behind — they need to meet or beat this level of polish.
Kevin highlights the ways to achieve this:
Bitcoin Layer 2s should balance UX enhancements and protocol purity by adopting a layered architecture. The whole architecture includes Layer 1, Layer 2, and Unified UX Layer (e.g., Account Abstraction).
Maybe you are addressing the issue of Layer 2 UX fragmentation. For this question, interoperability is inevitable, and it’s the future direction of blockchains, as no single chain fulfills all needs. Bitcoin’s L2s should embrace this multichain future but avoid forcing protocol changes for UX convenience. Instead, UX should evolve independently through tools like universal wallets or atomic swaps, enabling users to interact with diverse L2s (or even cross-chain assets) through a single interface—mirroring how people manage multiple bank accounts via unified apps.
The future isn’t about choosing between decentralization and convenience. After all, most people have multiple bank accounts, but we can also enjoy unified UX akin to Paypal/Alipay.
Notably since 2021, the ecosystem of Bitcoin Layer 2 (L2) solutions has expanded significantly, with the number of active projects rising from just 10 to 75—a more than sevenfold increase.
According to Galaxy forecasts, by 2030, more than $47 billion worth of BTC could be transitioned onto Layer 2 networks.
Is Bitcoin DeFi The Future?
A recently published report from Binance Research says that over the past year, Bitcoin DeFi (BTCFi) has become one of the fastest-growing sectors.
With the growing opportunities of using BTC in dApps, it is now among the top three DeFi ecosystems with current TVL at US$8.6B.
Kevin says, “Bitcoin Layer 2s can catalyze a liquidity flywheel, but with a distinct driver: migrating value from offchain (e.g., centralized exchanges, custodial services) to onchain Bitcoin-native ecosystems, rather than redistributing existing onchain liquidity like Ethereum.
The key catalyst will be infrastructure enabling fully onchain Bitcoin DeFi, combining three elements: BitVM bridge, High-Performance L2s, and Native Yield Opportunities.
The BitVM Bridge is developed and maintained by Bitlayer. It serves as a trust-minimized protocol designed to securely bridge Bitcoin to various blockchain ecosystems, including Ethereum and other EVM-compatible chains.
This bridge enables the integration of Bitcoin’s liquidity into decentralized finance (DeFi) applications and was recently the centre of Bitlayer’s partnership with key players, viz., Arbitrum, Statknet, Base, SonicSVM and Plume Network.
The flywheel would start with users migrating BTC from custodial platforms to L2s for DeFi access, attracting developers to build onchain tools, which in turn draw more liquidity.
That’s the key reason why we develop BitVM Bridge, facilitating the secure migration of Bitcoin into the Bitlayer ecosystem, enabling it to be seamlessly integrated into BTCFi, a rapidly expanding decentralized financial infrastructure for Bitcoin.
Final Lesson for Developing Bitcoin Layer 2s
Thus, there are many lessons that Bitcoin L2s can learn from Ethereum’s security incidents in the L2 space (e.g., bridge hacks, smart contract bugs) but one final lesson according to Kevin is:
Bitcoin’s greatest advantage is its community’s security-first mindset. Bitcoin Layer 2s can avoid Ethereum’s security pitfalls by adopting a more proactive, Bitcoin-native defense mechanism—prioritizing robustness over feature velocity.
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