Bitcoin’s Layer-2 Ecosystem is Booming as Fourth Halving Approaches
Although many crypto experts rightly revere Bitcoin as the world’s most valuable blockchain, until relatively recently it could not be described as scalable.
With the ability to process just seven transactions per second – compared to 24,000 for Visa – the network’s technical limitations made it ill-suited to handling large transaction volumes. Moreover, its lack of support for smart contracts saw it play second fiddle in the DeFi arms race as close competitor Ethereum became the home of financial dApps and NFTs.
In the words of the late, great Notorious B.I.G., things done changed. The emergence of Layer-2 scaling solutions building on top of Bitcoin have provided much-needed scalability, relieving the burden on the main chain and causing a preponderance of new BTC use cases.
As with Ethereum’s extensive L2 ecosystem, the auxiliary networks that have anchored to Bitcoin have attracted developers, investors and NFT collectors en masse, bringing things like smart contract functionality and non-fungible tokens to the Proof-of-Work (PoW) chain.
They’ve also prompted a renaissance of so-called builder culture in the Bitcoin community, as enterprising technologists have busily set about developing L2s to address the network’s long-standing limitations.
The interplay between the main Bitcoin network and these L2s is fascinating: effectively, secondary solutions and sidechains leverage the robust security model and decentralization of the base layer, while imbuing it with additional utility and helping it cope with a higher volume of transactions.
Some might argue that Bitcoin did not need L2 solutions. But this camp is very much of the belief that bitcoin’s sole appeal is as a store of value. Others contend that it can be both a
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