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- The Bitcoin network needs to diversify its layer two scaling solution to democratize Dapp’s adoption and enable multi-chain interoperability.
- The Bitcoin Lightning network accounts for the lion’s share with a TVL of about $150 million.
The vast growth of the Bitcoin network has inspired hundreds of other blockchains seeking to solve other real-world utilities that Satoshi may have omitted. Undeniably, the Bitcoin base layer cannot accommodate the entire universe without the help of a scaling solution. This particular challenge was largely observed during the past two major bull markets, 2017 and 2021 when transaction fees scaled so high in tandem with the processing time.
However, cryptocurrency exchanges that had adopted the Bitcoin lightning network, a layer two (L2) scaling solution, did manage to maneuver through the congestion challenges. Nonetheless, not all the Web3 projects have integrated with the Bitcoin Lightning network, which puts users at risk of being trapped in a congested Bitcoin route. For instance, the recent rise in Bitcoin NFT ordinals significantly raised the transaction fees and at one time even caused Binance to halt withdrawals due to network congestion.
Resultantly, Binance announced that it would be adopting the Lightning network to enable fast and cheap Bitcoin transactions.
Vitalik Urges Bitcoin to Adopt More Layer Two Scaling Solution
According to Ethereum co-founder Vitalik Buterin in a recent Twitter Spaces conversation with Eric Wall and Bitcoin developer Udi Wertheimer, the top blockchain should adopt layer two scaling solutions to secure future growth prospects.
Buterin highlighted that the Bitcoin network needs to adopt more layer-two scaling solutions just like Ethereum with its cluster of L2s including Polygon (MATIC), and Arbitrum (ARB). Moreover, the future of blockchain technology is multi-chain interoperability through decentralized applications (Dapps) like Uniswap. Buterin noted.
I think if we want Bitcoin to be more than just payments, it will need scaling options like Plasma or ZK Rollups.
Nonetheless, Buterin noted that the Bitcoin network is not easy to navigate and change the underlying technology. For instance, the Taproot upgrade in the Bitcoin network took several years of convincing the global miners to vote for its approval.
“Bitcoin has really weird politics, and I don’t vibe with them,” Buterin noted.
The Ethereum network on the other hand has made several transitions and upgrades in the past few years to enable fast adoption of smart contracts. According to the latest DeFi data, Ethereum had a total value locked (TVL) of about $26.275 billion with a stablecoins market cap of about $68.47 billion.
The Bitcoin network on the other hand has a total value locked (TVL) of about $183.4 million with the Lightning network accounting for the lion’s share.
Market Outlook
The need for more layer two scaling solutions for the Bitcoin network could significantly scale its mainstream adoption, especially as a form of payment in retail enterprises. However, development in the Bitcoin network by a single entity could arguably reduce its decentralized nature, which has helped it slide on US SEC’s regulation scrutiny.
