
Why is it said that the Bitcoin ecosystem will inevitably surpass the Ethereum ecosystem?
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Why is it said that the Bitcoin ecosystem will inevitably surpass the Ethereum ecosystem?
The Bitcoin ecosystem is not built on Layer1, and the Bitcoin blockchain is inherently not Turing-complete.
Author: Web3CN
Preface
The Bitcoin ecosystem is not built on Layer1. The Bitcoin blockchain is inherently not Turing-complete, and its minimalist UTXO design along with limited block space cannot handle complex data and computation. Therefore, for Bitcoin to develop an ecosystem, it must rely on Layer2—specifically, a fully decentralized Bitcoin Layer2. Although Bitcoin has undergone several major upgrades over the past 15 years, bringing many technological innovations, these have largely been overlooked. As a result, most people believe that Bitcoin cannot build a fully decentralized Layer2 capable of supporting large-scale ecosystem applications. This reflects a lack of understanding of Bitcoin's development, a misunderstanding of the essence of Layer2, and arrogance and bias toward the Bitcoin ecosystem.
The greatest obstacle to human progress is precisely arrogance and prejudice. I urge you all to放下arrogance, approach with an open mind, and correct your perceptions. This article aims to vindicate decentralized Bitcoin Layer2 solutions.
1. What Is Layer2? What Is the Essence of Layer2?
The concept of Layer2 became widely known through the Ethereum ecosystem, but it was not originally invented there—it originated from Bitcoin.
Bitcoin’s version 0.1 codebase retains an early piece of original code left by Satoshi Nakamoto. This code supports transaction updates before miners confirm them. When one user's balance increases, another's decreases accordingly. Once transactions are completed, users can transmit only the final result back to the main chain and close their payment channel. Based on this “payment channel” concept, the Lightning Network emerged—the earliest Bitcoin Layer2 and also the earliest viable Layer2 in the entire crypto space.
Therefore, when discussing what Layer2 is, we should not take Ethereum Layer2 as the sole benchmark (after all, Ethereum Layer2 only recently converged on rollup designs as feasible). Instead, we must look beyond surface-level implementations to understand the fundamental nature of Layer2—only then can we design practical and effective Layer2 solutions.
Whether Bitcoin or Ethereum, Layer2 emerged under similar circumstances: when the Layer1 mainnet could no longer support more complex or higher-performance use cases, assets needed to be moved off-chain to Layer2. Ethereum needs Layer2 to scale performance; Bitcoin needs it even more urgently. For example, BTC enables fast, efficient payments via the Lightning Network, while ETH can move to Arbitrum for faster, lower-Gas, and more complex smart contract interactions.
Thus, regardless of whether it’s Bitcoin or Ethereum, the essence of Layer2 remains the same: enabling Layer1 assets to operate in more complex and high-performance environments on Layer2. In short, Layer2 is essentially a decentralized cross-chain solution combined with a high-performance, trustless second-layer network.
Accordingly, both Bitcoin and Ethereum Layer2 systems must adhere to some basic design principles:
1. Enable trustless transfer of Layer1 assets to Layer2—this is the most critical first step.
2. The Layer2 ledger must be secure and trustless.
Only by satisfying both conditions simultaneously can a truly usable and fully decentralized Layer2 exist.
2. Differences and Similarities Between Bitcoin Layer2 and Ethereum Layer2 Designs
Having clarified the essence of Layer2 and its core design principles, let us now examine how Bitcoin and Ethereum Layer2 differ and align in actual implementation.
1. Trustless Transfer of Layer1 Assets to Layer2
Ethereum achieves cross-layer transfers between Layer1 and Layer2 as follows: Layer2 operators deploy a smart contract on Ethereum mainnet to hold deposited assets. When users bridge ETH from Ethereum to Layer2, their ETH is locked in this contract, and an equivalent amount of ETH is minted 1:1 on Layer2. When users initiate a withdrawal, the Layer2 ETH is burned, triggering the release of ETH from the Layer1 contract. This mechanism relies on Ethereum smart contracts and inter-network communication, achieving trustlessness.
How, then, can Bitcoin achieve trustless BTC bridging?
Prior to Bitcoin’s Taproot upgrade in 2021, fully decentralized BTC bridging was impossible. However, the introduction of Schnorr signatures and MAST contracts with Taproot made fully decentralized Bitcoin cross-chain operations a reality.
Schnorr signature is a signing algorithm better suited for Bitcoin than ECDSA. Ethereum has long considered adopting Schnorr, but due to complexities involving account system upgrades, it has not done so. A key feature of Schnorr is signature aggregation—enabling up to 1,000 Bitcoin addresses to jointly sign a single transaction. This enhances privacy and reduces data bloat caused by multisig transactions. It breaks through Bitcoin’s previous limit of 15-of-15 multisig, enabling fully decentralized asset management.
MAST (Merkle Abstract Syntax Tree) uses Merkle trees to encrypt complex locking scripts. Its leaves consist of non-overlapping scripts; upon spending, only the relevant script and its path to the root need to be revealed.
Simply put, MAST contracts offer VM-like functionality (akin to smart contracts), allowing predefined actions to be executed via instructions. Combined with Schnorr signatures, MAST can trigger automated signing by 1,000 decentralized nodes managing BTC according to contractual rules—without human intervention, fully executing based on code. This enables truly decentralized Bitcoin management. See BEVM whitepaper for details: https://github.com/btclayer2/BEVM-white-paper
Take BEVM, a BTC Layer2 project, as an example: when users bridge BTC from Bitcoin mainnet to BEVM, their BTC enters a contract managed by 1,000 nodes, and an equal amount of BTC is issued 1:1 on BEVM. When users request to withdraw BTC back to mainnet, BEVM nodes trigger the MAST contract, prompting the 1,000 custodial nodes to automatically sign and return BTC to the user’s address. This entire process is fully decentralized and trustless.
As shown above, using the combination of MAST contracts and Schnorr signatures introduced by Taproot, Bitcoin can achieve trustless cross-chain transfers just like Ethereum Layer2—this is the foundational first step toward fully decentralized BTC Layer2.
2. The Layer2 Ledger Must Be Secure and Trustless
In Ethereum Layer2, ledgers are managed by sequencers. Periodically—typically at a 10:1 ratio—Layer2 transaction batches are rolled up and submitted to Ethereum mainnet for verification by Ethereum nodes. However, the sequencer (the node operating Layer2, usually just one) is fully centralized and controlled by the Layer2 team. How can such a centralized setup earn user trust? Primarily through optimistic assumptions: fraud proofs allow users to challenge invalid state transitions off-chain within a challenge period. Hence, Optimistic Rollups are called "optimistic"—they assume operators won’t cheat, but if they do, fraud can be proven. These mechanisms generally ensure ledger credibility, but come with drawbacks: assets on Ethereum Layer2 are censorable and can be forcibly frozen by external forces because the sequencer is centrally controlled. This imposes a ceiling on asset scale, as large holders may hesitate to deposit significant funds. Imagine holding 100,000 ETH—would you dare bridge them to a censorable Ethereum Layer2?
This also introduces two user-unfriendly issues:
a. Due to the 7-day challenge window in Optimistic Rollups, users must wait at least seven days to withdraw ETH from Layer2 back to mainnet.
b. Since the sequencer is solely operated by the project team, all cross-chain and transaction fees go exclusively to the operator (e.g., Base, ZKsync reportedly earn over $5 million monthly, peaking above $10 million). Layer2 users cannot share in this network revenue growth.
So how does Bitcoin Layer2 achieve ledger trustworthiness?
Again taking BEVM as an example: as previously mentioned, BEVM uses MAST + Schnorr for decentralized BTC bridging. To enable real-time Layer1-Layer2 communication, BEVM runs a full network of lightweight Bitcoin nodes—making BEVM a trusted network composed of 1,000 Bitcoin light nodes.
To ensure absolute ledger security and prevent node misbehavior, BEVM adopts Bitcoin’s economic game-theoretic model. It merges the roles of BTC custodians and Layer2 operators: nodes that run the Layer2 network and validate transactions are also those holding BTC deposits. Additionally, BEVM implements a fully automated, economics-driven dynamic staking mechanism ensuring that the total value of BTC/stablecoins staked by Layer2 nodes always exceeds the value of assets they custody. This economic incentive structure removes any motivation for malicious behavior, guaranteeing the Layer2 ledger is absolutely secure and trustworthy.
Moreover, BEVM’s design brings two additional advantages absent in Ethereum Layer2:
a. BEVM’s network nodes are fully decentralized and not controlled by any single entity. Thus, BTC on BEVM is censorship-resistant, immune to freezing by any authority, and freely interoperable with Bitcoin mainnet at any time—addressing trust concerns of large capital holders.
b. Because BEVM is operated by decentralized nodes, cross-chain and network fees are shared among nodes and users—not monopolized by the project team.
3. The Right Path for Bitcoin Layer2
From the above comparison, clear differences and similarities emerge between Bitcoin and Ethereum Layer2. Given their inherent distinctions, Bitcoin Layer2 cannot simply copy Ethereum’s model. Only by understanding the true essence of Layer2 and adapting to Bitcoin’s unique characteristics can we chart the correct course forward.
Key directions for proper Bitcoin Layer2 design:
1. Bitcoin Layer1 is inherently not Turing-complete. Its minimal UTXO design and limited block space cannot verify complex computations or programs. Attempting client-side validation or modifying Bitcoin’s constrained UTXO/block space leads to overly complex schemes. Such approaches might support simple token issuance at best, but fail to enable high-performance Layer2 expansion. The only viable path is to decentralize BTC movement to Layer2, unlocking advanced, high-performance use cases.
2. Decentralized cross-chain bridging of BTC to Layer2 must be solved—it is the foundation. Traditional methods like Hash Time Locks, pegging, wrapping, or multisig struggle to gain user trust. The MAST + Schnorr combination enabled by Bitcoin’s 2021 Taproot upgrade offers a promising solution and a highly valuable direction for Bitcoin Layer2 exploration.
3. Security and trustworthiness of the Layer2 ledger must not mimic Ethereum’s model. Compressing and submitting BTC Layer2 ledgers to Bitcoin via rollups is unfeasible—Bitcoin does not support OP or ZKP verification, miners won’t validate Layer2 states, and storing proofs on-chain serves only as meaningless evidence. To secure the ledger, learn from Bitcoin’s economic game theory: design dynamic staking mechanisms where node incentives prevent malicious behavior, thus securing the Layer2 ledger.
4. We hope for future BIP-level upgrades enabling Bitcoin to verify OPs or ZKPs and allowing Bitcoin miners to perform ZKP computations. At that point, ZK-Rollups could integrate into Bitcoin, enabling ultimate Layer2 solutions. But this may take 5–10 years to realize.
Based on this analysis, the most practical current BTC Layer2 solution leverages Taproot’s MAST + Schnorr, combined with a dynamic staking network of Bitcoin light nodes enabling real-time Layer1-Layer2 communication and network security—precisely what BEVM has already implemented.
4. Bitcoin Layer2 Will Surpass Ethereum Layer2, and the Bitcoin Ecosystem Will Outpace Ethereum’s
Why do we believe Bitcoin Layer2 will surpass Ethereum Layer2, and that the Bitcoin ecosystem will eventually overtake Ethereum’s?
At least four reasons support this view:
1. Fully decentralized BTC Layer2 solutions now exist. Before such solutions, the largest wrapped BTC asset was WBTC, issued centrally by BitGo, currently valued at ~$6.5 billion. With the emergence of decentralized alternatives (like BEVM), this market is expected to grow 5–10x, reaching $32.5–65 billion—far exceeding Ethereum Layer2’s current total TVL of ~$20 billion (which includes both bridged ETH and other assets on Layer2; actual bridged ETH is much less).
2. Since Bitcoin is natively not Turing-complete, it has a stronger necessity for Layer2 to expand its ecosystem compared to Ethereum. Consequently, massive amounts of BTC will flow to Layer2 to build diverse decentralized BTC applications—driven by market demand.
3. Bitcoin Layer2 can offer stronger censorship resistance than Ethereum Layer2, making it more trustworthy and attractive—especially to large-capital investors.
4. Bitcoin’s market cap is roughly three times that of Ethereum. Currently, Ethereum Layer2’s total TVL (~$20 billion) represents about 10% of Ethereum’s market cap. Applying the same ratio, if 10% of BTC flows into Bitcoin Layer2, the resulting TVL would reach $85 billion—over three times larger than Ethereum Layer2’s current size.
Conclusion
We have analyzed the essence of Layer2, compared Bitcoin and Ethereum Layer2 design philosophies, and identified practical, implementable paths for Bitcoin Layer2. Furthermore, considering the technical superiority of Bitcoin Layer2 designs, Bitcoin’s market size, and the pressing need for ecosystem growth, we conclude that Bitcoin Layer2 will inevitably surpass Ethereum Layer2.
Ultimately, the Bitcoin ecosystem will surpass Ethereum’s as well.
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