Bitcoin's Big Three: The Best Layer 2s in 2024

It has been a huge year for Bitcoin, the world’s largest cryptocurrency. It hit a new all-time high this year as ETFs were approved in the US, Australia, and Hong Kong and institutions jumped on the BTC bandwagon. New exciting ways to interact with Bitcoin also emerged such as Casey Rodarmor’s Runes protocol and there have also been several significant technological breakthroughs making advanced computation possible on Bitcoin for the first time such as BitVMX and SNARKnado.

At the same time, a huge wave of new projects emerged claiming to have built new innovations on top of Bitcoin, some of them raising ridiculous amounts of money. Many have already fallen foul to criticism or called scams such as SatoshiVM and Merlin. Others have yet to prove they have real connections to Bitcoin beyond just marketing and hype.

But what many people don’t know is that real layers on top of Bitcoin have existed for some time and a dedicated crew of cypherpunks, freedom maximalists, and daring developers have been building on top of Bitcoin for years, taking it from a store of value and transforming it into something that could power the global financial system of the future.

In this article, I wanted to shine a light on the true Bitcoin L2s with real use cases and adoption that I believe will gain even greater popularity in 2024 and beyond.

Enter the world of Bitcoin L2s & Sidechains

So first, what is a Bitcoin Layer Two? I think that Sergio Lerner, long-time Bitcoin contributor and creator of Rootstock, explained it well in a recent interview with CoinTelegraph.

“It must use BTC as its native asset and as a settlement mechanism to enforce transactions and demonstrate a functional dependence on Bitcoin.”

Many people have different ideas than this but for me this definition is close. It’s a great litmus test to avoid scammers and shilling.

Beyond the technological dependence of Bitcoin, my definition is that a true Bitcoin layer two should support the growth and adoption of layer one Bitcoin. A real Bitcoin Layer 2s should ultimately contribute to the success of Bitcoin but it should exist to provide functionality that the layer one was never designed for. This allows Bitcoin to remain secure, pure and home of the hardest form of money while allowing new features and functionality to be developed on top of it.

So which Bitcoin L2s should we be exploring in 2024?

Lightning

Lightning is essentially the payment network for Bitcoin. It allows for near-instantaneous Bitcoin payments and has gained widespread adoption in retail environments. I’ve personally paid for many a beer and coffee with Lightning over the years. It allows for the unilateral transfer of Bitcoin between the main chain and the Lightning layer2 and its laser focus on Bitcoin payments has made it a critical piece of the Bitcoin puzzle.

Image source: https://bitpay.com/blog/what-is-the-lightning-network/

Lightning launched in 2019 with a smart “Pass The Torch” campaign where users would add 10,000 SATS (0.00002451 BTC) to a Lightning payment and pass it one. The campaign reached the likes of Block Inc founder, Jack Dorsey, Litecoin Creator Charlie Lee, Lightning Labs CEO Elizabeth Stark, and CZ of BINANCE fame.

One really cool feature of Lightning Network is that an increasing amount of crypto exchanges have started adding Lightning support as way for users to withdraw and deposit Bitcoin from the exchange. This means faster transaction times and cheaper fees. The most recent exchange to do this was Coinbase in partnership with Lightspark.

There are many different wallets available that support Lightning. Some custodial and non-custodial. Its always worth doing your research thoroughly before deciding on which one is for you. Custodial lightning wallets tend to be easier to use but you are reliant on a third party to keep your bitcoin safe.

Rootstock

Rootstock is the home of apps on Bitcoin. It combines all the programmability of Ethereum with the security and store of value of Bitcoin.

Developers have launched lots of different dApps on top of Bitcoin using Rootstock including DEXes like Sovryn, Bitcoin collateralized stablecoins like Money on Chain, and even a naming service known as RIF Name Service which is similar to Ethereum’s ENS. Rootstock uses the Solidity programming language and has all the same developer tools as Ethereum Layer2s making it easy to get started on. It is also supported by METAMASK which makes it easy for users of other EVM chains to easily connect to the network.

One neat dApp on Rootstock I discovered recently is called Asami Club. It pays people in Bitcoin-backed stablecoins for sharing content on social media. The Rootstock ecosystem site has over 100 different apps, exchanges, and wallets listed.

Image Source: https://www.coindesk.com/tech/2024/05/01/bitcoins-ethereum-style-programmability-could-come-in-12-months-rootstock-founder-says/

Users move their Bitcoin into Rootstock through a bridge known as the PowPeg, described as the most secure, permissionless, and uncensorable Bitcoin bridge. From my research, it seems it was also the first-ever bridge between Bitcoin and another network. Some of the contributors to the network are still working on ways to improve this connection using BitVMX.

Rootstock was created by a group of Bitcoin OGs out of Argentina in 2015. It was launched to the public in 2018. The cool thing for me is anyone can build whatever they want on the blockchain in a truly permissionless manner, it’s fully open source and already has lots of individuals and organizations around the world working on it.

Liquid

For me, Liquid is exciting as it was created by Adam Back, a British cryptographer, and cypherpunk who spoke directly to Satoshi Nakamoto, the legendary creator of Bitcoin. Satoshi credits Adam’s work in the original Bitcoin whitepaper.

Liquid has a different focus from Lightning and Rootstock as it is primarily focused on enabling the issuance of security tokens and other digital assets secured by Bitcoin. This is things like the much discussed El Salvador Bitcoin Bond which will be tokenized on Liquid as well as the recently announced tokenized version of MicroStrategy's Class A Common Stock known as CMSTR Note.

Image source: https://www.coindesk.com/markets/2021/11/22/junk-rated-el-salvadors-bitcoin-bonds-look-explosive-think-volcano/

Liquid is one to watch as we see more institutions exploring how they tokenize assets on Bitcoin whether it be fine art or real estate. In fact, while researching this article I found some very recent news that Bitfinex just launched a $6.25 million token bond on Liquid to fund the construction of a Hilton hotel at the San Salvador International Airport. Sounds like things are taking off! (pun intended)

Beyond Bitcoin’s Big Three

In this article, I’ve written about what I believe to be three of the critical networks for scaling Bitcoin and allowing it to reach worldwide adoption. I’ve intentionally avoided talking about the typical crypto casino world of meme coins. These can be a lot of fun to play around with but ultimately have no real value or utility to the world. The three examples given above all support real use cases and will prosper whatever current crypto cycle we are in which is a major reason I’m so bullish on them.

There is a lot of innovation happening right now on Bitcoin. I’m excited to see what comes next for the world’s most decentralized cryptocurrency as well as the three most important layers built on top of it. I’m sure that the innovations will continue and there is much more to explore. Perhaps in 2035, I’ll write another article diving into just how far Bitcoin’s Big Three have come and what other interesting networks have emerged onto the scene.