5 Bitcoin Layers You Should Know About

In 2009, Bitcoin was launched as a safe and secure medium of exchange. Initially, it was fast and great for global transactions, but it slowed down. Over time, this made fees high, waiting times long, and the network did not work as well.

Bitcoin Layer 2 solutions, which are like extra layers on top of Bitcoin, fix this by adding extra utility to handle larger transactions quickly. This post will discuss five different Bitcoin Layer 2 projects that are making the future of transactions with Bitcoin better.

What is a Bitcoin Layer?

You can think of Bitcoin layers as extra features that are added to the Bitcoin system to make it better for you. Layer-2 networks, or L2 for short, are like special tools that help Bitcoin work even more efficiently.

Bitcoin layers handle transactions in a way that speeds things up. Not only that, but they also offer you, as a Bitcoin user, extra benefits. These include stronger privacy, more advanced smart contract options, and the ability to create new types of digital assets.

The interesting thing is that each Bitcoin layer has its own unique approach to achieving these improvements. So, they’re not all the same; they each bring something special to the network. 

5 Bitcoin Layers You Should Know About

Here are five of the most significant Bitcoin layers you need to know about. 

Liquid Network

The Liquid Network is a layer-2 sidechain that helps Bitcoin become even more powerful by making very quick and large transactions possible. Blockstream came up with Liquid back in 2018, but is currently run by big financial companies, exchanges, and other Bitcoin businesses.

Liquid and Bitcoin are closely related thanks to a two-way peg system. You can easily move your BTC from the regular Bitcoin network to Liquid and back again. And when you’re on Liquid, you get the benefit of settling transactions in just 2 minutes.

To shift your money from Bitcoin to Liquid, you send your BTC to the Liquid client software and get an equal amount of Liquid Bitcoin (L-BTC). The Bitcoin you sent gets locked up on the Bitcoin network until you decide to let it out with a peg-out transaction. Once your Bitcoin is unlocked, the L-BTC goes to a burn address, where it’s gone for good.

Liquid uses a special consensus mechanism called Strong Federations to handle transactions and make sure your locked BTC is safe. It’s especially good for exchanges, big businesses, and traders who want to move a lot of money quickly and keep their businesses private.

Lightning Network

The Lightning Network is a Layer-2 payment protocol. It’s fast and works as a second layer for Bitcoin. It’s designed to help with the problem of too many people trying to use Bitcoin at the same time which makes the network slower and more expensive.

Imagine it as a special way of handling small Bitcoin payments off the main network by creating direct channels between two people who want to make a transaction. It means you can do transactions without having to wait for the main Bitcoin network to confirm them.

One of the best things about the Lightning Network is that it lets you do lots of transactions without needing validators on the main chain to approve the transactions. That’s why transactions happen almost instantly, and the fees are low. So, it’s a great solution for making Bitcoin work better when lots of people are using it at once.

The Lightning Network keeps your transactions safe through something called hashed timelock contracts (HTLCs). These smart contracts make sure that funds are only received when certain conditions are met within a set time frame (or block time). That way, you can be sure your transactions are secure when you use the Lightning Network.

Rootstock

Rootstock, also known as RSK, is an EVM-compatible layer-2 sidechain that was initiated by RSK Labs in 2018 It provides valuable enhancements and options for the Bitcoin community with its innovative features and flexibility. Developers on RSK can craft smart contracts using Solidity, the same language used in Ethereum.

RSK’s unique connection to Bitcoin is achieved through a process known as merged mining, where miners efficiently work on both Bitcoin and RSK simultaneously. One of RSK’s standout features is its ability to convert your regular Bitcoin into Smart Bitcoin (RBTC) and vice versa.

This conversion process is managed securely, allowing you to utilize RBTC for smart contracts while your Bitcoin holdings remain protected on the Bitcoin network. RSK excels in transaction speed, handling about 10 to 20 transactions per second.

This makes it ideal for creating secure financial applications. Notably, RSK also supports Ethereum’s language and programs, offering a dual-language compatibility that enhances its versatility.

Stacks Protocol

Stacks is an open-source Layer-2 blockchain that brings smart contracts and dApps to the Bitcoin ecosystem. It speeds up transactions with microblocks, reducing waiting times.

Stacks connects with Bitcoin through an innovative consensus model called Proof of Transfer (PoX), ensuring security without changing Bitcoin. Developers like you can build a wide range of dApps on Stacks.

Similar to RSK and Liquid, Stacks has a two-way peg token, sBTC, backed 1:1 by Bitcoin. You can lock BTC on Bitcoin to get sBTC for smart contracts, or the other way around.

Stacks also links with Bitcoin through PoX, where miners use BTC to mine STX, securing the network and settling Stacks blocks on the Bitcoin base layer.

Stack is a preferred platform for DeFi and NFTs secured by Bitcoin, processing around 19 transactions per second. Muneeb Ali introduced this Layer-2 protocol in 2017.

Omni Layer

The Omni Layer is a special software boost for Bitcoin, adding extra powers. If you are a vivid Bitcoin user and want to use something that will let you add functionalities with its unique features, try Omni Layer. It lets you create and trade digital items using existing Bitcoin.

For developers, Omni Layer is a tool to create new digital money and automate complex tasks, growing the Bitcoin network. Picture it as a superhero layer (HTTP) on Bitcoin’s strong foundation (TCP/IP).

Omni works in a simple way, improving Bitcoin without a new system. It adds attributes like creating new digital money and smart tasks. While Bitcoin handles basic money rules, Omni adds special rules without changing the main system.

In 2014, Bitcoin created OP_RETURN, a note area. Omni uses this to add details about smart tasks without messing up Bitcoin. By riding on Bitcoin’s back, Omni gets power and safety—like hitching a ride on a friend with superpowers (Bitcoin’s Proof of Work).

Final Verdict

Bitcoin layers are essential in ensuring the continuous growth of the Bitcoin network, making them fit into the goal of the network, which is to improve global peer-to-peer transactions. It is inevitable that more layers and innovations will be built on the Bitcoin network, to increase its functionality over time.