Encryption researchers Glimmer and Hankester, under the guidance of mentors Jademont, Elaine, and Bill from Waterdrip Capital, conducted an investigation into BTC Layer 2. They comprehensively expounded on the current situation and problems of BTC, as well as the technical solutions and advantages and disadvantages of BTC Layer 2. They also provided a future outlook for BTC Layer 2.
As the number of cryptocurrency users grows, BTC struggles to meet the increasing demands for low transaction fees, convenience, speed, privacy protection, asset diversity, and application diversity in the cryptocurrency system. In the long run, BTC’s market capitalization as a proportion of the total cryptocurrency market capitalization is slowly declining. Compared to various public chains with their respective advantages, BTC seems to have no other core competitiveness besides its popularity and security, and faces the following problems: 1) slow transaction speed, long confirmation time, and inconvenience; 2) high transaction fees; 3) lack of support for smart contract programming.
Obstacles to improving BTC: 1) technical difficulty, outdated technical solutions cannot meet current needs, and even directly tweaking BTC cannot completely solve the problem, but rather give rise to new problems; 2) community resistance, BTC community prioritizes security over scalability. BTC core developers are very cautious about technical risks, making proposals for direct expansion of BTC very conservative. Solution, L2: Build a new level based on BTC, which is both compatible and does not affect the BTC system, and solves the above problems. BTC has extremely high security. Using BTC as the core layer and relying on BTC block data and BTC script programs, developers can build BTC-compatible systems on the upper layer of BTC, execute a large number of transactions outside of BTC, and only write the final state data into BTC. This type of solution is called BTC Layer 2.
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BTC L2 development goals: 1) improve transaction speed; 2) reduce transaction costs; 3) increase scalability. BTC L2 projects: 1) Lightning Network, using micro-payment channel technology, executes a large number of transactions outside of the Bitcoin blockchain, only confirming the key links on the chain. 2) Synscoin, developed by the SYSLab team, forks BTC source code to simultaneously utilize BTC’s security and be compatible with the Ethereum ecosystem. 3) RGB, a BTC smart contract system that integrates the Lightning Network, utilizes BTC to maintain anti-censorship and anti-double-spending attacks. Summary and outlook: In the future, we may see the Bitcoin ecosystem accelerate its expansion, and the Bitcoin ecosystem will open up a new track beyond payment, DeFi, NFT, and other fields, covering more users.