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Bitcoin Layer 2 chains could catalyze BTC recovery in bear market

  • Bitcoin’s scalability solution BitVM released statistics that show more than 30 Layer 2 chains for BTC are available in the market. 
  • Bitcoin Layer 2 expansion is likely to become mainstream within the next few months with the launch of sidechains. 
  • Tapscript’s latest upgrade allows for Layer 2 withdrawals and other operations. 
Bitcoin Layer 2 chains could catalyze BTC recovery in bear market
Ekta MouryaEkta MouryaFXStreet

BitVM is a Bitcoin scalability solution. The protocol’s community noted on Wednesday that there are currently several Layer 2 projects that can be subdivided into side chains, off-chain computing, rollups,and others, on the Bitcoin blockchain. 

These Layer 2 chains could boost the utility of the Bitcoin blockchain and increase the asset’s relevance and demand among market participants. 

Also read: Bitcoin price decline triggers nearly $83 million in liquidations, BTC price recovers from drop below $39,000

Bitcoin Layer 2 chains and why they matter

A Layer 2 chain is a network protocol that is layered on top of a Layer 1 blockchain, in this case, Bitcoin. Layer 2 protocols use the Layer 1 blockchain for its security infrastructure and boost the underlying chain’s scalability. 

According to BitVM’s statistics, there are several Layer 2 chains that are currently publicly available, and the latest Tapscript upgrade will allow verification of a series of scripts to determine whether UTXO can be spent. The community believes more than 100 Bitcoin Layer 2 chains are likely to debut in the ongoing cycle. 

The arrival of these Layer 2 chains could fuel a bullish narrative for Bitcoin price as it is likely to attract more traders to the BTC chain and network. This lays the groundwork for Bitcoin’s expansion plan, and Layer 2 chains are likely to tap into the potential of Bitcoin with the Taproot upgrade. 

The Taproot upgrade has streamlined transaction processing. It boosts the effectiveness of the Bitcoin blockchain, enhances speed, and reduces transaction costs. Tapscript is the scripting language that is used by Taproot.

Layer 2 chains have the ability to create assets on the underlying Bitcoin blockchain. Experts at BitVM believe that it is likely that the BTC ecosystem surpasses Ethereum in the future. Further details on the same are awaited, and the release of Layer 2 chains on the BTC blockchain will offer insights on their impact on the chain and its scalability. 

Author

Ekta Mourya

Ekta Mourya

FXStreet

Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.

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