Is there still opportunity in the Bitcoin ecosystem as the bull market passes its midpoint?
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Is there still opportunity in the Bitcoin ecosystem as the bull market passes its midpoint?
Bitcoin Ecosystem Project Analysis and Development Trend Forecast
Navigating Web3 tides with focused insightsAuthor: Louis Wang, Core Contributor at Biteye
Editor: Crush, Core Contributor at Biteye
The Bitcoin network, renowned for its exceptional stability and security, has not only endowed BTC with lasting value but also accumulated substantial capital.
With the approval of BTC spot ETFs, massive inflows of traditional capital have driven its market capitalization beyond $1.3 trillion.
However, people often overlook the distinction between Bitcoin as a network and BTC as a digital asset. To unlock Bitcoin's full potential, the key lies in leveraging its network functionality to transform Bitcoin from a simple store of value into core infrastructure for a Bitcoin-based economy.
In December 2022, the emergence of the Ordinals protocol brought an unexpected revolution to the Bitcoin ecosystem.
The explosive popularity of "inscriptions" not only captured public and developer attention but also revealed the possibility of unlocking Bitcoin’s immense potential.
Within just 12 months, the total market cap of inscription tokens based on Ordinals surpassed $3.5 billion, demonstrating astonishing growth. Even today, daily NFT trading volume on the Bitcoin network exceeds that of Solana.
Yet, high market expectations for the Bitcoin ecosystem have been followed by inevitable setbacks.
The rapid cooling of the inscription craze, underwhelming performance after the much-anticipated Runes launch, and Merlin’s dramatic fall from peak TVL to post-launch price collapse have all left the market uncertain about Bitcoin’s ecosystem future.
Meanwhile, market attention has significantly shifted toward Memecoins.
This cycle of boom and bust within the Bitcoin ecosystem resembles the "high-temperature annealing" process in semiconductor manufacturing—a technique designed to release internal material stress and enhance ductility and resilience.
We believe this principle equally applies to the development of the Bitcoin ecosystem. After the FOMO sentiment fades, which projects continue building? What are the direction and trends shaping the evolution of the Bitcoin ecosystem?
This article will explore key trends and representative projects across different sectors, analyzing how they tackle challenges and their roles within the broader Bitcoin ecosystem.
01 BTC Layer
As the first successful cryptocurrency, Bitcoin was originally designed with a primary focus on security and decentralization—design choices that inherently limit programmability and transaction speed.
Although upgrades like SegWit and Taproot have mitigated some issues, the surge in Ordinals asset issuance clearly exposed the network’s limitations: severe congestion, soaring gas fees, and urgent demand for more powerful smart contract capabilities.
As users increasingly seek scalability and additional functionalities beyond Bitcoin’s native offerings, the ecosystem has begun exploring various scaling solutions. Most draw inspiration from Ethereum’s ecosystem, adopting modular layered architectures—giving rise to the concept of “Bitcoin Layers.”
This architecture includes L2 layers (such as Lightning Network, sidechains, and Rollups), aiming to increase throughput by moving transactions off-chain while maintaining security links to the main chain;
Settlement layers that further optimize performance and functionality for specific use cases; data layers providing data availability and storage; and application layers enabling diverse decentralized applications built atop foundational infrastructure.
Such multi-layered designs improve programmability, enabling more complex smart contracts; significantly boost transaction processing speeds; enhance data availability; and expand overall ecosystem possibilities.
Currently, most competitive Bitcoin Layer2 projects adopt EVM tech stacks combined with cross-chain bridges to address scalability. While this enables rapid ecosystem development in the short term, these solutions lack strong binding to Bitcoin’s mainnet and heavily rely on bridges—introducing potential security risks.
Moreover, extending a UTXO-based system like Bitcoin using Ethereum’s account model and EVM contradicts the “Bitcoin Native” philosophy to some extent. Technically, L2 approaches can be broadly categorized into three types:
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Rollup-based: These prioritize Layer1 verifiability and aim to extend Layer1 security to Layer2.
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Sidechain-based: These benefit from relatively mature technology and ecosystems.
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Client-side validation: These emphasize leveraging Layer1-native data availability (DA).
Rollup-based solutions pursue Layer1 verifiability while using modular designs to control user trust costs—ensuring security while reducing trust burden.
In contrast, sidechains, despite technological maturity, may face greater challenges inheriting Layer1 security.
Client-side validation ensures ledger records reside on Layer1 but requires high client-side trust—an intrinsic cost difficult to eliminate entirely.
02 Rollup
The advent of Ordinals transformed the Bitcoin network into a highly secure database capable of storing various data—including Rollup proof data.
However, merely uploading Rollup proof data onto the BTC network is insufficient to ensure transaction validity and correctness within Rollups. The core challenge for BTC Rollups lies in verification.
Currently, most BTC Rollups may opt for sovereign rollups (client-side validation), where validators sync all Rollup data off-chain and perform independent checks.
A key limitation is the inability to fully leverage Bitcoin’s greatest strength—the POW consensus secured by hundreds of thousands of nodes—to safeguard Rollup security.
Ideally, the BTC network should actively verify Rollup proofs—similar to Ethereum—and have the ability to reject invalid block data.
Additionally, assets within Rollups must remain securely withdrawable back to the BTC network via trustless escape hatches—even under extreme conditions such as long-term node or sequencer downtime or transaction rejection.
Bitlayer
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Bitlayer is the first Bitcoin Layer 2 network based on the BitVM scheme, aiming to provide Bitcoin-equivalent security alongside Turing-complete computational capabilities.
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The project's core technical innovations lie in adopting the latest BitVM computation paradigm and OP-DLC bridge, addressing three major Layer 2 challenges:
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Trustless two-way peg: Combines OP-DLC with BitVM bridge to enable trustless bidirectional asset movement between Bitcoin mainnet and Bitlayer
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Layer1 verification: Inherits Bitcoin’s security through BitVM
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Turing completeness: Supports multiple VMs, achieving 100% compatibility with Ethereum Virtual Machine (EVM)
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On March 29 this year, Bitlayer launched a $50 million ecosystem incentive program to attract early builders and contributors. Several native projects have already joined, including DEXs, permissionless lending protocols, and MEMEs.
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Recently, Bitlayer announced an $11 million Series A round led by Franklin Templeton, becoming the first Bitcoin infrastructure project funded by an ETF-approved institution.
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The project has launched a user center featuring three modules: beginner tasks, advanced tasks, and daily tasks. Users earn Bitlayer points by completing tasks and receive exclusive racers as drivers. Future $BTR airdrops will be allocated based on user points and racer tiers.
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Bitlayer’s innovative technical approach and proactive ecosystem strategy make it one of the most promising Bitcoin Layer 2 projects to watch.
https://www.bitlayer.org/ready-player-one/dapps-center
B² Network
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B² Network is an EVM-compatible Layer2 on BTC, offering an off-chain trading platform supporting Turing-complete smart contracts to improve efficiency and reduce costs.
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By integrating zero-knowledge proof (ZKP) technology with Bitcoin’s Taproot, B² Network enhances transaction privacy and security. It aims to evolve Bitcoin into a dynamic platform hosting innovative applications like DeFi and NFTs—applicable to both native Bitcoin assets and emerging derivatives.
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B² Network’s technical architecture consists of two layers:
1. Rollup Layer: Uses ZK-Rollup and zkEVM solutions to execute user transactions and generate corresponding proofs.
2. Data Availability (DA) Layer: Includes distributed storage, B² nodes, and the Bitcoin network, responsible for permanently storing Rollup data, verifying zero-knowledge proofs, and executing final confirmations on Bitcoin.
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Distributed storage, a critical component of B² Network, acts as a repository for ZK-Rollup transaction and proof data, enhancing network security, reducing single points of failure, and ensuring data immutability.
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B² Buzz has entered its third phase, launching Buzz Farming in collaboration with prominent BTCFi projects including Babylon, Unirouter, Lombard, and Bedrock, offering diversified yield strategies.
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Buzz Farming rewards include:
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14,580 B² tokens daily from the B² network
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Rewards from BTCFi partner chains and key collaborators including Babylon, Aptos, Bedrock, Lombard, and others
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As B² Network’s native yield aggregator, Buzz Farming continues expanding user opportunities and pathways, showcasing innovation in the DeFi space.
https://buzz.bsquared.network/farming
QED
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QED Protocol is a ZK rollup on BTC running on zkevm. Unlike other zk rollups, QED does not generate zk proofs for all Rollup transactions but only creates ZK proofs for withdrawals from the rollup to BTC L1, validating these proofs on BTC L1 by composing scripts into logical circuits.
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Each user’s public key serves as a custom ZK circuit, enabling “smart signature” functionality akin to smart contracts.
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Similar to BitVM, QED composes scripts into logic circuits to validate withdrawal transaction ZK proofs directly on BTC L1. Each such circuit contains 1,000 UTXOs—achieving direct verification at significant cost.
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Decentralized apps built on QED can locally prove transactions, offering users fixed gas fees and unlimited computation.
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Founder Carter Feldman stated QED can process over 150,000 transactions per second, plans to launch its testnet within 3–4 months, deploy mainnet upon community consensus, and introduce a native token to incentivize high-performance infrastructure operation.
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QED raised $6 million in seed funding led by Blockchain Capital, achieving a valuation of at least $100 million. Previously, it secured $3.25 million in Pre-seed and $1.35 million in angel rounds.
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QED uses STARK-based ZK technology, pioneering Starkware<>BTC integration and receiving early investment and support from Starkware.
GOAT Network
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GOAT Network is a BTC Rollup Layer2 launched by ZKM, a project incubated by MetisDAO, making it the first decentralized Bitcoin L2 with shared network ownership.
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Technically, it introduces the Optimistic Challenge Protocol (GOAT-OCP), utilizing BTC script locking for native security, and adopts ZKM Entangled Rollup as a universal settlement layer to improve transaction inclusion and finality.
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GOAT Network supports direct asset deposits without requiring external bridges, securing assets through a decentralized Sequencer network.
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The development team comes from MetisDAO—currently the only Ethereum L2 with a decentralized sequencer—and brings this technical advantage to BTC Layer2. The decentralized Sequencer network allows any Bitcoin holder to lock up as a node or delegate to existing ones.
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GOAT has received commitments of 5,000 BTC from five institutional node operators, planning to launch with seven and scale to dozens.
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Potential rewards from participating in GOAT Network include:
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Gas fees in BTC form
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Mining rewards in GOAT tokens
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Returns from yBTC (receipt token issued upon locking BTC on GOAT Network)
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yBTC unlocks further yield opportunities within the GOAT Network ecosystem
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The first phase of the decentralized sequencer campaign is now live, allowing users to bind wallets (requiring 0.001 BTC), social accounts, and complete social tasks.
https://club.goat.network/goatlist
Mezo
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Mezo is a Bitcoin Layer2 network aiming to shift Bitcoin from a “savings technology” toward a circular economy.
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It features a unique Proof of HODL mechanism, where users secure the network by locking BTC and MEZO tokens and validating transactions.
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Using CometBFT consensus combined with the innovative Proof of HODL concept, users lock BTC on Mezo—the longer the lock-up period, the higher their HODL score—enabling them to contribute to network security and earn rewards upon mainnet launch.
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Launched by startup studio Thesis—experienced in BTC ecosystem development, having previously created tBTC.
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According to Mezo’s official website, it currently has nearly 12,000 users and over 2,333 BTC staked.
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Mezo recently announced a new $7.5 million funding round, bringing total funding to $30 million. The new capital will expand network adoption, including integrations with products like the Bitcoin staking platform Acre.
https://mezo.org/hodl
Bitfinity Network
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Bitfinity Network EVM is an Ethereum-compatible blockchain built on the Internet Computer (IC), developed using Solidity. Developers can deploy Bitcoin, Ordinals, and BRC-20 smart contracts written in Solidity via Bitfinity, potentially enhancing Bitcoin’s utility.
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Thanks to IC’s unique architecture and Chain Key technology, Bitfinity Network EVM outperforms traditional EVM implementations—offering on-chain storage and processing speeds comparable to conventional web services—all without gas fees.
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Bitfinity plans to integrate Ethereum and other EVM-compatible chains by running lightweight clients on IC, requiring protocol adjustments to interface with full nodes and synchronize entire blockchains.
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The project supports connecting ICRC-1 tokens and ERC777/ERC20 tokens, with Bitcoin itself represented as an ICRC-1 token.
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Raised $7 million at a $130 million valuation earlier this year.
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Tokenomics: BITFINITY is the official governance token approved by Bitfinity DAO and native token of Bitfinity EVM, with a total supply of 1 billion, classified as an ERC-20 token.
Arch Network
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Arch Network is an innovative Bitcoin-native programmability solution. Unlike traditional L2s, it aims to directly bring programmable functions to the Bitcoin network.
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Arch is a parallelized PoS network using ZK proofs to enhance Bitcoin-native programmability. It consists of a Rust-based zkVM (ArchVM) and a decentralized validator network.
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Inspired by Solana and SVM (Solana Virtual Machine), Arch does not rely on bridges or L2s. It emphasizes three features: programmability, parallel execution speed, and trustless interoperability and composability.
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On Arch, asset transfers and state changes on the Bitcoin chain occur directly on Bitcoin L1. Arch leverages ordinals via a state chain to commit state changes within single transactions, reducing fees and ensuring atomic execution.
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Arch’s fee model includes infrastructure processing fees and a dynamic pricing mechanism. Infrastructure fees apply to each BTC transaction—including smart contract deployment, trading, NFT minting. Dynamic pricing works like priority tips, adjusting based on network congestion and transaction complexity.
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Arch Network raised $7 million in seed funding led by Multicoin Capital, with participation from OKX Ventures, CMS Holdings, and others.
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Currently, Arch’s products and roadmap remain under development, with no specific launch timeline disclosed.
03 BTC Sidechains
The sidechain concept originated from the 2014 paper “Enabling Blockchain Innovations with Pegged Sidechains” by Adam Back et al., proposing to enhance Bitcoin’s service capabilities by enabling asset transfers across multiple blockchains.
Sidechains are essentially independent blockchain networks running parallel to the main chain, characterized by:
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High customizability: Can implement specific rules and features, improving scalability and flexibility.
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Independent security: Maintains its own security mechanisms and consensus protocols, with security dependent on sidechain design.
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High autonomy: Offers greater design freedom compared to the main chain.
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Interoperability: May have lower interoperability with the main chain but supports cross-chain asset transfers.
The core function of sidechains is enabling asset transfer and usage from main chain to sidechain, typically involving cross-chain transfers and asset locking. This design opens new possibilities for the Bitcoin ecosystem—allowing quick porting of Ethereum-like systems to Bitcoin—but also introduces challenges around security and interoperability.
Merlin
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Merlin Chain is a Bitcoin sidechain launched by Brc420 and one of the earliest operational Bitcoin Layer2s, consistently maintaining a large TVL. Even after disappointing post-launch token performance, according to BTCEden data, Merlin still leads other BTC L2 projects with a TVL of $1.28 billion.
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Built on Bitcoin L1’s native assets, protocols, and products, Merlin aims to empower L1 assets, protocols, and user ecosystems at L2—for example, constructing a user-friendly metaverse based on Bitmap and building DeFi protocols using BRC-420.
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Merlin uses Cobo Wallet’s MPC solution for BTC cross-chain transfers. While slightly less secure than Taproot-upgraded BTC multisig, MPC has been extensively validated. It employs ParticleNetwork’s account abstraction technology, allowing users to interact with the sidechain using familiar Bitcoin wallets and addresses—more user-friendly than requiring MetaMask-style tools.
https://www.btceden.org/?type=all
Stacks
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Stacks is a sidechain tightly integrated with Bitcoin, featuring a unique consensus mechanism and smart contract functionality. It uses an innovative Proof-of-Transfer (PoX) consensus, where miners don’t burn Bitcoin but allocate it to participants securing network safety.
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Stacks plans to launch its Nakamoto upgrade this year, transitioning into a true Layer2 solution. All upgrade code is complete and ready for mainnet deployment. The upgrade aims to significantly boost transaction throughput, achieve 100% finality for Bitcoin transactions, and reduce confirmation times from 10 minutes to about 10 seconds.
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The Nakamoto upgrade will also enhance Stacks’ security, aligning it with the Bitcoin network. Even during Bitcoin reorganizations, most Stacks transactions will remain valid, improving overall reliability.
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Alongside the Nakamoto upgrade, Stacks will launch sBTC—a decentralized, programmable 1:1 Bitcoin-backed asset transferable between Bitcoin and Stacks (L2).
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sBTC enables smart contracts to write transactions directly to the Bitcoin blockchain, secured by the entire Bitcoin hash power.
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Stacks already hosts a rich ecosystem, with current TVL reaching $200 million.
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For instance, Alex is a DEX and launchpad in the Stacks ecosystem with $30 million TVL; the liquid staking project StackingDAO has locked $100 million in liquidity.
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The STX token is currently the highest-market-cap token among Bitcoin sidechain projects and the only one ranked in CoinMarketCap’s top 100.
https://defillama.com/chain/Stacks?pool2=false&staking=false
Citrea
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Citrea is an innovative Bitcoin scaling solution using zero-knowledge proofs to scale within the Bitcoin network, ensuring on-chain verifiability and data availability. Its core advantage is supporting more complex applications without compromising Bitcoin’s security or altering its consensus rules.
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Citrea’s technical features include:
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Batching large volumes of transactions and generating succinct validity proofs in a zkVM
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First-ever burning and native validation of validity proofs on the Bitcoin blockchain
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Native ZK proof verifier smart contract embedded in BitVM on Bitcoin L1
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Unlike traditional sidechains, Citrea creates a modular ecosystem for Bitcoin through execution sharding, keeping settlement and data availability on Bitcoin mainnet.
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In February this year, Citrea announced a $2.7 million seed round led by Galaxy.
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Currently, Citrea’s public developer network is live, with three one-week testing phases scheduled from July to August, where participants can earn NFT rewards on Galaxy.
Fractal Bitcoin
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Fractal BTC is a Bitcoin Layer2 solution developed by the Unisats team—the only solution recursively extending infinite layers atop the Bitcoin blockchain using Bitcoin core code, with BRC20 token Sats used as gas fees.
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Fractal forks Bitcoin core code with several key modifications. Notable features include reducing block confirmation time to 30 seconds and planning faster implementation of controversial opcodes like OP_CAT and native ZK-verified opcodes, eventually enabling smart contracts via scripts.
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It uses Bitcoin-consistent Proof-of-Work (PoW) consensus, allowing miners to use existing ASICs, GPUs, and other hardware.
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Fractal introduces Cadence Mining, where two out of every three blocks are mined permissionlessly and one via merged mining, balancing decentralization and security.
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As a native extension solution, Fractal supports secure cross-layer asset transfers from Bitcoin mainnet, including decentralized bridging for BRC-20 and Ordinals.
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Key applications include Fractal Swap (flexible BRC20 exchange), Asset Bridge (asset bridge between mainnet and Fractal), and UniWorlds (real-world transaction app).
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Unisats completed a Pre-A round in May this year led by Binance; funding amount undisclosed.
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During the recent Ordinals wave, Unisats emerged as one of the most reliable infrastructures. Its wallet and trading platform gained strong user traction and solidified its user base. Developing such a shadow chain feels natural for Unisats, and the new funding round demonstrates enhanced resource capabilities—anticipating more pioneering applications.
https://unisat-wallet.medium.com/2024-07-unisat-swap-product-important-update-e974084074a1
Botanix
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Botanix Labs is building the first fully decentralized EVM-equivalent L2 on Bitcoin, combining EVM’s usability and versatility with Bitcoin’s decentralization and security.
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The project uses Bitcoin’s Proof-of-Work (PoW) as the foundational settlement and decentralized Layer 1, while employing a Proof-of-Stake consensus model. Stake (represented in Bitcoin) is securely stored on the distributed
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