Protos: How many L2s does Bitcoin have? Why are there so many L2s?

Source: Protos; Compiled by: Tao Zhu, Golden Finance

Unbeknownst to most of the Bitcoin community, there are 400 "layer 2s" running on the blockchain.This rough estimate comes from Shehzan, the founder of Lava.

On the August 25th YouTube Gwart Show, Shehzan, along with Gwart and commentator Shinobi, questioned the benefits of hundreds of Rollups and alternative blockchains using the Bitcoin ledger.

Some estimates put the number at a much lower 80 or 85, while others put it at over 1,000. Estimates vary widely because anyone can “Rollup” data and broadcast a tiny hash to any miner, technically creating a “Bitcoin Layer 2.”

In fact, many are simple clones of Ethereum’s Rollup, handling almost all activity on centralized servers outside the Bitcoin network and broadcasting periodic hashes of that state into Bitcoin blocks.

Plus, they’re easy to create. In fact, one developer created one for $20. Anyone can pay miners to include data in a block; if that data is a hash of an alternative blockchain, the system can advertise itself as “Bitcoin Layer 2.”

Anyone can clone their own Bitcoin Layer 2

So what does it mean to say there are hundreds of Bitcoin Layer 2s? The answer to this question begins to illustrate the problem with this particular area of ​​crypto: few people agree on a definition.

Originally, Layer 2 strictly referred to the trustless integration and execution of off-blockchain activities through the base blockchain. However, over the years, the term has changed and now vaguely refers to crypto platforms that broadcast data onto the base blockchain.

Sometimes, the interaction is two-way, and there are many different ways to use Bitcoin transactions to enforce rights on alternative blockchains.

Examples include Layer 2s without proprietary tokens, such as Lightning, Liquid, Ark, or BitVM. More popular Bitcoin Layer 2s introduce proprietary tokens, such as Rootstock, Stacks, Libre, or Merlin. As of February, the total value of Bitcoin Layer 2 was $5 billion and will grow 20 times, according to the Stacks founder. Some developers are very excited. Attempting to independently verify the exact number of Bitcoin Layer 2s will be difficult without translating the marketing language piece by piece. Projects that are essentially alternative blockchains with their own tokens are clearly hoping to avoid drawing attention to the economic realities of their efforts.

Instead, project leaders write evasive project descriptions that focus on Bitcoin language and obscure their use of alternative blockchains and tokens.