Bitcoin Layer-2 Sector Is Overlooked: Why and What to Expect Moving Forward

Bitcoin Layer-2 (L2) projects experienced substantial growth, particularly as decentralized finance (DeFi) use cases expanded within the Bitcoin ecosystem.

A November 2024 report by digital asset platform Galaxy revealed that Bitcoin L2 networks increased from just 10 in 2021 to 75 in 2023.

The report further stated that over 36% of all Bitcoin Layer-2 venture funding had been raised in 2024. It also projected that more than $47 billion worth of BTC could be bridged into Bitcoin L2s by 2030.

Early Bitcoin Adopters Have Yet to Fully Embrace L2s

Despite growing interest, industry experts believe Bitcoin L2s remain overlooked.

Willem Schroé, CEO and co-founder of L2 network Botanix Labs, told Cryptonews that many early Bitcoin adopters have held onto their BTC for years without utilizing its on-chain potential.

"Bitcoin ‘hodlers' can earn passive, low-lift yield without selling their BTC," Schroé said. "L2 programmability allows Bitcoiners to participate in DeFi-like ecosystems – whether through lending, staking, or providing liquidity – while still securing their assets on Bitcoin's base layer."

Despite its potential, the Bitcoin L2 concept remains complex for many users.

Rena Shah, chief operating officer of Bitcoin developer ecosystem Trust Machines, told Cryptonews that the Bitcoin community must first address what Layer-1 (L1) users need before promoting L2 adoption.

"Many have spent years in ‘hodl' mode, believing their Bitcoin was the best hedge against things like inflation," Shah said. "But what the Bitcoin L2 space has now done is highlight that Bitcoin shouldn't be overlooked as a productive asset."

Bitcoiners Will Put Their BTC to “Work” This Year

According to DeFiLlama, the current total value locked (TVL) in Bitcoin is $6.618 billion. Industry experts believe that as L2 solutions mature, Bitcoin holders will begin utilizing their BTC more actively.

"For years, Bitcoin has largely been viewed as a store of value, with most holders simply HODLing, leaving trillions of dollars in dormant capital," Schroé remarked. "However, Bitcoin L2s are changing that by introducing programmability and financial utility without compromising security."

Schroé added that rather than requiring users to wrap Bitcoin onto Ethereum or other chains, new Bitcoin-native solutions will allow BTC to generate yield directly on Bitcoin infrastructure through lending, staking, and liquidity provisioning.

"This opens the door for Bitcoiners to put their assets to work without losing exposure to the asset they trust most," he said.

Bitcoin L2s Advance to Improve Secure DeFi

New standards are emerging to improve Bitcoin Layer 2 solutions. Kevin Liu, co-founder of the Bitcoin L2 firm GOAT Network, told Cryptonews that the introduction of BitVM smart contracts represents a key milestone for Bitcoin's scalability and programmability.

Every Bitcoin L2 only earns that status when it inherits native Bitcoin security. That means adopting BitVM for its bridge.

Many are building. Rather than working behind closed doors, we wanted a fun way for everyone to try it out.

Welcome to GOAT Network's BitVM2 Playground! pic.twitter.com/NhsWRKc3JR

— GOAT Network Market News and Data brought to you by Benzinga APIs

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