Bitcoin Magazine Sets Standards for Bitcoin Layer 2

In a rapidly evolving crypto landscape, Bitcoin Magazine asserts three crucial conditions for Bitcoin Layer 2 (L2) protocols. With the emergence of Ordinals protocol and BitVM whitepaper in 2023, Bitcoin's underlying potential is being reshaped to accommodate diverse blockchain demands.

Since its inception 15 years ago, Bitcoin developers have sought to expand its functionalities, from early sidechains like Liquid and Rootstock to forthcoming L2 solutions. However, the recent influx of imitators aims to leverage these advancements to promote arbitrary cryptocurrency tokens within the Bitcoin L2 sphere.

Bitcoin L2 Must:

1. Utilize Bitcoin as Native Asset: L2 protocols must inherently utilise Bitcoin as their primary token or accounting unit, alongside serving as the payment mechanism within the system. Any token within L2 must be backed by Bitcoin.
2. Employ Bitcoin for Transaction Settlement: L2 users should have the capability to exit the system via a mechanism, whether trusted or untrusted, thus relinquishing control of their funds back to Layer 1 (L1).
3. Demonstrate Functional Dependence on Bitcoin: A system's classification as a Bitcoin Layer 2 hinges on its functional reliance on Bitcoin. If the system can sustain operation even in the event of complete Bitcoin collapse, it is not considered a Bitcoin Layer 2.

Exclusions from Bitcoin Layer 2 Category:

• Protocol of Protocols: Protocols such as Counterparty (XCP) or Ordinals operate on Bitcoin Layer 1 but lack an independent blockchain of their own.
• "Parasitic" Layer: Systems dependent on Bitcoin for operation but fail to meet other criteria for Layer 2 classification.

In the midst of the Bitcoin L2 gold rush, Bitcoin Magazine's editorial committee aims to clarify its stance on L2 reporting, emphasizing adherence to these essential standards to maintain integrity within the ecosystem.