Outlook for Bitcoin Layer2

Bitcoin was initially envisioned for use in electronic payment systems. Therefore, to ensure security and stability, the design of a non-Turing complete scripting language limited Bitcoin's ability to perform complex computations. Bitcoin exists more as digital gold for storing value. With the explosive growth of ecosystems on public chains like Ethereum and Solana, developers have been exploring scalability solutions for the Bitcoin ecosystem. However, the technical limitations of solutions such as sidechains and the Lightning Network still persist, keeping progress relatively stagnant.

In 2023, the emergence of the Inscription Tide by Ordinals introduced a new asset form to the Bitcoin ecosystem, sparking further discussions and explorations in the market regarding Bitcoin's scalability and programmability. A series of new Layer2 solutions such as Merlin and B² Network have emerged, creating a range of DeFi applications like swaps, lending, and liquidity mining to expand new use cases in the Bitcoin ecosystem.

Currently, most Layer2 solutions in the market bridge liquidity to the Ethereum ecosystem, participating in on-chain scenarios like DeFi by coupling with the Ethereum ecosystem. However, many Layer2 withdrawal bridges are essentially multi-signature bridges. The bridging solutions that manage public assets through multi-signatures often carry trust risks, making it impossible for users to withdraw assets in a trustless manner at any time. For many BTC holders, they lack the motivation and confidence to bridge their BTC assets to the Ethereum ecosystem to speculate on unknown profits, as asset security is the cornerstone of all gains. Therefore, an ideal Bitcoin Layer2 should inherit Bitcoin's security features and be able to build a scalable and programmable on-chain financial infrastructure.

BitLayer's High Expectations as the Core Support in Layer2

As a leader in BTC Layer2, BitLayer adopts Layered Virtual Machine technology, combining Zero-Knowledge Proofs (ZKP) and Optimistic Verification (OP) mechanisms to support a wide range of computational tasks. Additionally, BitLayer, through its innovative OP-DLC and BitVM bridge technologies, has built a dual-channel bidirectional locked asset bridge, inheriting the security of Bitcoin's first layer.

The main technological innovation of BitLayer lies in the adoption of the latest BitVM computing paradigm and OP-DLC bridge.

Compared to other Bitcoin Layer2 solutions, BitLayer aims to address the three core issues faced at the second layer and proposes corresponding solutions:

▪️ Trustless 2-Way Peg — By combining OP-DLC with BitVM bridge, a new model beyond traditional multi-signature patterns is proposed to achieve trustless bi-directional asset flow between the Bitcoin main chain and BitLayer.

▪️ Layer 1 Verification — By inheriting Bitcoin's security through BitVM.

▪️ Turing-Completeness — Supporting multiple virtual machines, achieving 100% compatibility with the Ethereum Virtual Machine (EVM) environment.

Airdrop (Ready Player One)

In addition to underlying technology, the prosperity of on-chain ecosystems is crucial for the development of a chain. To encourage projects like DEX, Wallet, NFT Marketplace, Lending, LSD, Bridge, Stablecoin, etc., to build on BitLayer, on March 29, BitLayer officially announced a series of ecosystem incentive plans. The first phase of the Ready Player One event will distribute $50 million worth of on-chain tokens to ecosystem builders and projects. According to official data, as of now, Ready Player One has attracted over 800 projects to sign up. Before the voting ends on May 10, users can actively participate in voting to earn "Top Player" activity points. At the same time, registered project teams can accumulate popularity points, which will help them secure a favorable position in the BitLayer official leaderboard to compete for more developer airdrop rewards and grants.

Overview of BitLayer's Native Projects

Native definition: exclusive to BitLayer, cross-chain and multi-chain projects are not included; top 30 in the leaderboard

Pumpad

Pumpad is BitLayer's native Launchpad project. According to official statements, Pumpad is a one-stop Launchpad for the BTC ecosystem that issues VGA assets based on the IPOS standard. After asset issuance, Pumpad can help the issuer automatically add liquidity to DEX and deploy automated market maker protocols. Pumpad is a platform that provides full-cycle services for project issuers, not just IDO services.

In terms of positioning, Pumpad introduces two concepts:

1️⃣ IPOS: Initial Pump Offering Standard refers to a set of full-cycle IDO service packages, including IDO mechanisms, market value management, etc., to allow project issuers to operate pre- and post-coin issuance affairs at minimal operational costs.

2️⃣ VGA: Value-Growing Asset Building refers to assets issued on Pumpad that will follow IPOS to ensure that project issuers cannot abscond or withdraw funds, and earn a certain commission income through this model.

Currently, there are no specific details on the above two concepts. Additionally, Pumpad's Pump Points, used to incentivize loyal and active users, may be used for airdrops of Pumpad's platform tokens or priority launches in the future.

Specifically, Pumpad has two main business operations:

1️⃣ Launchpad: Pumpad's Launchpad will support various issuance methods, including oversubscription lottery, weighted distribution, and first-come, first-served IDO methods.

2️⃣ Airdrop: Pumpad's Airdrop module is a platform for users to claim airdrop incentives, and project issuers can customize airdrop activities to incentivize different types of users.

As of May 10, BitLayer's Dapp Leaderboard ranking is 19, leading in this category. Other Launchpads have not shown attention or promotion from BitLayer, indicating Pumpad's strong legitimacy. The platform's first partnered project is $CBD, also known as MEME, a collaboration between "No.1 MEME+No.1 Launchpad," potentially achieving significant traffic benefits.

Official Twitter: https://twitter.com/pumpad_io

Macaron

Macaron is the first native DEX on BitLayer. Macaron provides users with a range of tools, including liquidity farming, staking incentives, trade-to-earn, airdrops, etc., to increase user earnings.

With the technical and ecosystem support from BitLayer, the Macaron team has been dedicated to creating excellent products to make the Macaron DEX more secure, cost-effective, and faster. As BitLayer's native DEX, Macaron will serve as a trading platform for BitLayer's ecosystem assets and mainstream BTC assets, offering the following advantages:

1️⃣ Industry-leading security: Utilizing technologies like multi-signature protocols to ensure fund security, Macaron can provide users with round-the-clock protection.

2️⃣ Advanced AMM algorithm: Macaron's unique AMM algorithm ensures efficient asset trading at lightning speed, providing high liquidity while minimizing slippage to optimize yield.

3️⃣ Liquidity provider rewards: When users provide liquidity, Macaron will reward them. Rewards will be calculated and distributed based on the fees collected. Macaron rewards can help teams continuously improve the liquidity provision experience.

4️⃣ Trading Profits: Macaron's Trade-to-earn reward program has introduced a revolutionary way of incentivizing trading. A certain proportion of tokens in the Macaron governance token will be distributed to users as rewards.

5️⃣ Low Gas Fees: Thanks to Bitlayer's excellent underlying functions, Macaron, as a native DEX, can achieve high performance such as low fees, lightning-fast confirmations, and seamless trading.

6️⃣ Seamless User Experience: Macaron DEX's advanced AMM algorithm and outstanding features ensure that users can enjoy a seamless trading experience, liquidity staking, similar to experiencing a top-tier CEX.

Macaron provides users with a comprehensive incentive plan, mainly including a points system, Macaron NFT, and based on Macaron's native DeFi revenue, namely trading profits, LP incentives, staking rewards, and more. The points system mainly consists of social points and DeFi points, with different ways of obtaining the two types of points and different conversion rates to the mainnet token in the future. Macaron NFT is a PFP NFT launched by the platform, with benefits including future airdrops, governance rights, and a series of empowering rights. DeFi native revenue includes earning stable assets through trading, staking, adding liquidity, etc., on Macaron. For more information on Macaron activities, you can refer to Macaron's official social media channels.

As of May 10th, Bitlayer Dapp Leaderboard ranks 2nd, just behind the stablecoin bitSmiley. There are already 49.2k followers on Twitter, indicating high popularity.

Official Twitter: https://twitter.com/macarondex

Cat Driving Bitcoin ($CBD)

Cat Driving Bitcoin($CBD) is the native MEME token on the Bitlayer chain, with the project's visual elements centered around cats and driving, aligning with Bitlayer's overall theme. According to the official statement, $CBD aims to disrupt the meme economy by building MEME CBD - a prosperous, modern, high-rise Bitcoin world. $CBD is committed to becoming the largest community asset on BitLayer, driving Bitcoin to become the best human asset on Earth. It has already gained attention from Bitlayer and Marcaron officials.

As of May 10th, Bitlayer Dapp Leaderboard ranks $CBD 3rd in the MEME track. Looking at previous data on $BONE, it ranked 9th in the MEME track, with the $BONE official account followed by bitSmiley and Bitlayer, accumulating 12.2k fans and experiencing a 10x increase in the first 24 hours after listing. In comparison, the potential of $CBD should not be underestimated.

In the token model, unlike $BONE, where most tokens were airdropped to bitSmiley testnet users, $CBD leans towards a more widespread airdrop model: 70% for airdrops, 20% for liquidity, and 10% for the treasury.

Based on current information, $CBD will be airdropped to 4 types of users:

1️⃣ Bitlayer Helmet NFT holders who have completed some cross-chain interactions

2️⃣ Holders of BTC-related assets who have recently executed BTC transactions

3️⃣ Participants in the community ecosystem, such as voting, co-building, etc.

4️⃣ Holders of other assets in the Bitlayer ecosystem

It is worth noting that the $CBD airdrop channel is not conducted by the project team itself but through Pumpad. Additionally, among the rules mentioned above, Bitlayer Helmet NFT holders have the clearest participation rules. For more airdrop rules, you can continue to follow updates on the official social media channels.

Official Twitter: https://twitter.com/catdrivebitcoin

TrustIn Finance

TrustIn Finance is the native permissionless lending protocol on Bitlayer, driven by a Layer2 solution based on BitVM that provides Bitcoin-level security.

TrustIn Finance adopts the following designs:

1️⃣ Floating Interest Rates: In TrustIn Finance, the interest rates for lenders and borrowers are determined based on the market's fund utilization. This maximizes participants' ability to obtain the most ideal rates while ensuring the safety of funds in the liquidity pool.

2️⃣ Risk Isolation: To simplify the protocol and enhance security, TrustIn Finance isolates asset pools based on different underlying assets to prevent a large number of defaults from overwhelming the protocol and mitigate potential uncontrollable consequences.

3️⃣ Reserve Fund: The reserve fund is another important security measure introduced by TrustIn Finance to address potential debt loss issues in the protocol. TrustIn Finance allocates a portion of the loan interest as a reserve fund based on the reserve coefficient, further safeguarding the assets within the protocol.

4️⃣ Early Contributor Incentive Mechanism: TrustIn Finance aims to grow together with each participant and is committed to incentivizing all contributors. Specific incentive mechanisms are yet to be announced by the official team.

TrustIn Finance is expected to announce a points incentive plan soon, where users can earn points by depositing or interacting with assets. Points will serve as an important reference for TrustIn Finance governance token airdrops and will be distributed to users who hold points in a certain proportion. For more information, you can follow TrustIn Finance's official social media channels.

As of May 10th, TrustIn Finance ranks 6th on the Bitlayer Dapp Leaderboard, with a vote count close to Nekoswap. It has 38.1k followers on Twitter.

Official Twitter: https://twitter.com/TrustIn_Finance

Nekoswap

Nekoswap is the first native decentralized runic and token cross-chain exchange on Bitlayer.

NekoRunes will be the first runic asset token on Neko swap. NekoSats promises a Fair launch, where except for the project team holding 2% of $RNeko, all other tokens will be airdropped and added to the liquidity pool. Additionally, Neko will attempt to solve the circulation of Layer 1 and Layer 2 runic assets through mapping, and if the technical time cost is high, other methods will be used to realize asset monetization. In terms of token holder rights, Nekoswap has made a series of commitments, including Nekosats holders permanently sharing Nekoswap's trading fee dividends, among others.

Nekoswap's work is currently in progress, with no official website or documentation yet. Nekoswap aims to be a fully community-driven, fair, transparent, and decentralized exchange, offering functions such as Swap, liquidity pools, Farm, Launchpad, runic trading, etc. Regarding access, deployment, and development on public chains, the project team has stated that they will consider community feedback and decide on development direction through voting, AMAs, and other means. For more information, you can follow Nekoswap's official social media channels.

As of May 10th, Nekoswap ranks 4th on the Bitlayer Dapp Leaderboard, with 23k followers on Twitter.

Official Twitter: https://twitter.com/NekoSwap

Ecosystem Puzzle

On March 29th, Bitlayer launched an ecosystem incentive plan, announcing a $50 million investment to incentivize major early builders and contributors. As of the article's deadline (May 10th), a total of over 280 projects have been deployed on Bitlayer.

It is evident that Bitlayer's ecosystem is rapidly expanding, with more and more projects entering Bitlayer. This gives Bitlayer a significant advantage in the current competitive BTC Layer2 landscape.

Where is the Endgame of Bitcoin Layer2

In the current intense competition in the Bitcoin Layer2 arena, we have summarized three core solutions: the rollup series (emphasizing Layer1 verifiability), the sidechain series (emphasizing solution maturity), and client verification (emphasizing Layer1 native DA). Undoubtedly, the market has not yet determined a winner, but we believe that the greatest value of Bitcoin lies in its Layer1 security. Therefore, it is crucial for Layer2 to inherit this security. Although client verification can to a large extent ensure that all ledger records occur on Layer1, the user's trust cost in the client is inherent and unavoidable. On the other hand, the rollup series, while ensuring Layer1 verifiability, controls the user's trust cost through various modular solutions. Therefore, starting from this value system, we believe that the rollup series will ultimately outperform the other two.

Among the rollup series, Bitlayer is considered more comprehensive. Bitlayer highlights Bitcoin's verifiability through the BitVM solution and adds fraud proof to the original DLC bridge to ensure oracle trust. Although current cross-chain bridge solutions still require external trust in oracles, Bitlayer's security is almost equivalent to what a "rollup" native bridge should have.

Furthermore, the prosperity of the Bitlayer ecosystem has been pushed to its peak with the token expectations on Leadboard. Currently, a large number of native projects have joined the ecosystem construction, including DEX, permissionless lending protocols, MEME, and more. As of now, Bitlayer's ecosystem has attracted over 280 projects.

At the early stage of the current bull market, Eureka Partners still maintain an optimistic and cautious attitude towards the overall development of Bitcoin Layer2. Although the current market sentiment is weak, we believe that when liquidity is sufficient, market enthusiasm will still be reflected in the Bitcoin ecosystem, including Bitcoin-related assets and Layer2. At that time, Bitlayer will definitely be an ecosystem not to be missed.

Reference

1. "CN" ABCDE: Why We Invest in Bitlayer

https://medium.com/@ABCDE.com/cn-abcde-why-we-invest-in-bitlayer-2ed2269fca43

2. Ready Player One Event

https://www.bitlayer.org/ready-player-one/rank