What is Bitcoin's second layer network? What are the functions of Bitcoin's second layer network?

The Bitcoin second-layer network refers to a scalable solution built on the Bitcoin blockchain. It separates transactions from the main chain by establishing an independent network outside the blockchain, achieving higher transaction speeds and lower handling fees. There are many specific forms of Bitcoin's second-layer network, and common ones include lightning networks, side chains, and state channels. These technologies can provide faster and cheaper ways to transact while also increasing Bitcoin’s scalability and privacy. The development of Bitcoin's second-layer network is of great significance to promoting the popularity and application of cryptocurrency.

What does Bitcoin’s second-layer network mean?

The Bitcoin second-layer network is a solution located on top of the Bitcoin network. It is designed to deal with the problems of insufficient transaction throughput, excessive transaction fees, and difficulty in expansion of the Bitcoin network. To put it simply, the first layer of Bitcoin is the Bitcoin public chain. In order to improve transaction throughput and reduce fees, transactions can be moved to the second-layer network for processing, and then the processing results are returned to the first layer to alleviate Bitcoin Network pressure. The result of this is increased liquidity and scalability of Bitcoin.

BTC’s expansion plan predates Ethereum’s proposal, with different protocols and architectures in place since 2012. These solutions take advantage of Bitcoin's characteristics as a settlement network and aim to increase the functionality of the main chain while avoiding risks.

In 2012, colored coins became all the rage for their ability to exploit the Bitcoin blockchain. Its goal is to leverage Bitcoin and its existing infrastructure for non-monetary transactions by coloring a specific Bitcoin to distinguish it from other Bitcoins. Although colored coins did not develop entirely independently, their emergence inspired new technologies that are widely used today.

Until 2018, developers gradually launched the Lightning Network and side chains, which made Bitcoin’s second-layer solutions begin to attract public attention. With the launch of the Taproot upgrade in 2021, Bitcoin’s security, efficiency, and privacy have been further improved. In 2023, the emergence of the BRC-20 protocol will further enrich the Bitcoin ecosystem. Currently, the mainstream protocols in the Bitcoin ecosystem mainly include side chains and Lightning Network.

What are the second-layer Bitcoin networks?

There are currently many Bitcoin second-layer network solutions. The more well-known ones include Lightning Network, Rootstock, Stacks, Liquid, Rollkit, RGB and other projects and protocols. The following is a detailed introduction:

1. Lightning Network

Lightning Network is a second-layer expansion solution for Bitcoin, designed to increase the speed of Bitcoin transactions and reduce costs. The Bitcoin mainnet can only handle 7 transactions per second, causing congestion. In order to have their transactions packaged into blocks as quickly as possible, users need to pay higher miner fees to obtain priority. This is also the reason for increased congestion and fees on the Bitcoin chain. After the introduction of the BRC-20 protocol, the problems on the Bitcoin chain have been further highlighted.

The core logic of the Lightning Network is to place the user's transaction links off-chain and the final transaction results on the chain, thereby improving the transaction efficiency of the Bitcoin network and allowing users to complete payments quickly and efficiently.

2. Rootstock

Rootstock is a side chain on the Bitcoin network that is compatible with EVM. It is a smart contract platform that allows developers to build smart contracts using the language of Ethereum. The highlight of Rootstock is merged mining, which means that Bitcoin miners can mine Bitcoin and RSK blocks at the same time, allowing developers to obtain better benefits.

Rootstock is a side chain of Bitcoin, so it has its own network and blockchain. Compared with Bitcoin, Rootstock provides richer functions.

3. Stacks

Stacks is Bitcoin’s smart contract layer, which brings smart contract functionality to Bitcoin without modifying Bitcoin itself. Stacks takes a pyramid approach, with a base settlement layer at the bottom (Bitcoin), then adding smart contracts and programmability layers on top of that (Stacks), and then layering on top of that for scalability and speed (Hiro subnet). By taking this layered approach, it is able to have the same functionality as chains such as Ethereum.

Stacks can be seen as Bitcoin Layer2, with some unique properties, such as having its own token, which acts as an incentive mechanism to maintain a historical ledger of all transactions and operate with its own security budget.

4. Liquid

LiquidNetwork is a side chain network based on Bitcoin. It aims to solve the liquidity problem of Bitcoin and enhance the speed and privacy of Bitcoin transactions. It can also be found in this New digital assets are issued on the chain. Like RSK, the L-BTC used by Liquid is anchored 1:1 with the mainnet BTC. At the same time, it also supports the deployment of smart contracts. Currently, the applications that have been built include DEXSideswap and the lending platform Hodl.

5、RGB

The RGB protocol is a protocol for asset issuance, asset transfer and smart contract implementation based on the Bitcoin network. It is scalable and can support developers to deploy smart contracts on Bitcoin and Lightning Network to maintain developer data security. . Its vision is to make the Bitcoin network develop based on smart contracts like Ethereum, which can deploy tokens on the network, issue NFT assets, implement Defi applications, etc.

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