Bitcoin’s secondary layer is often overlooked, despite its potential to enable even more advanced features of Bitcoin. Much of the focus has been on Lightning Network And its capabilities Process microtransactions quickly.
but Secondary layer (or Layer 2) can effectively process smart contracts, leverage cryptography for high levels of privacy, and establish decentralized identity and access solutions connected to the blockchain.
In this article, we explore these fascinating layers and their potential use cases, and how they define Bitcoin’s future beyond currency transactions. Bitcoin’s secondary layer is expected to provide the backbone of a complex ecosystem that will accelerate the growth of decentralized applications.
What is Bitcoin’s secondary layer?
The terms primary and secondary layer refer to different networks within a single blockchain, the shared database that powers cryptocurrencies and other projects.
The primary layer (Layer 1), sometimes called the parent chain or “mainnet”, is the blockchain itself and the basis for all operations. Meanwhile, the secondary layer (Layer 2) is Secondary Network Built on Blockchain (Layer 1), enabling third-party integration.
The secondary layer helps reduce the load on the blockchain Leveraging its strengths And they get around that limitation: these networks can process transactions externally and then send them back to the blockchain for processing and confirmation, thereby increasing the blockchain’s overall capacity and improving its usability and functionality.
The best known secondary layer is Lightning Network It enables microtransactions on the blockchain using state channels (a solution we will explain later), which allow users to send Bitcoin payments through encrypted peer-to-peer (P2P) channels that function similarly to smart contracts, creating a simple, efficient, and cost-effective channel between senders and receivers.
What are the main advantages of Bitcoin’s secondary layer?
Three Key Points Advantages of Bitcoin’s Secondary Layerincreasing scalability and extending blockchain capabilities while making it easier for businesses to comply with financial regulations.
Increased scalability
The Bitcoin network takes about 10 minutes to process one set of transactions, with an average of about 7 seconds per transaction. Network congestion During peak times, transaction fees will be higher, impacting the viability of microtransactions and point-of-sale transactions.
The Bitcoin blockchain cannot scale because it would undermine the two main pillars of the network: security and decentralization. Due to the high transaction volume across the network, secondary layers are being leveraged more to process transactions “off-chain”. Reduce the burden on the primary layer.
For decentralized applications, by distributing data across a network of nodes, the secondary layer reduces the risk of centralized points of failure or attacks, improving overall Security in the app deployment processpatching, updates, and any other form of modification.
Improved functionality and practicality
The Bitcoin network is designed to enable transparent P2P transactions and provide the resources for the digital currency to continually grow in value. By focusing only on these two main functions, the Bitcoin network is robust, secure, and prevents any possibility of tampering.
But without a second layer, future innovation would be limited. Layer 2 allows third-party developers to significantly Increasing Bitcoin’s functionalityexpanding use cases and leveraging new Web3 technologies such as NFTs and smart contracts.
compliance
With more secure payment channels, Comply with regulations It will be much easier and cheaper. Compliance is a key consideration for any business accepting cryptocurrency payments.
Both the secondary layer and the blockchain In current and future iterationscould be the key to establishing many of the tracking and security features that site owners and businesses should use. PCI Compliant Hosting (if you accept payment) or you’ll end up spending six figures on large amounts of testing.
How Bitcoin’s secondary layer works
The secondary layer can work in different ways, and there are three main Layer 2 solutions you need to know about to understand the process:
- State Channel – This solution gives users an end-to-end encrypted payment channel to send and receive Bitcoin, allowing them to avoid high transaction fees. State Channel It is effectively a micro-ledger, allowing users to make an unlimited number of transactions without incurring transaction fees, as only the opening and closing balances are reported to the blockchain, once a payment channel is closed.
- Sidechain – A sidechain is an independent blockchain that Creating a two-way bridge to the blockchainThis allows for easy and fast transfer of data assets between different transaction chains. As an independent blockchain, sidechains Integrate with other second-tier solutions.
- Rollup Chains – Rollup chains allow users to perform large volumes of transactions off-chain and then merge the individual transactions into a single block of data that is reported back to the blockchain. Two types of roll-up chains,Optimistic,ZK. Optimistic rollup automatically validates all merged transactions, but, ZK Rollup It generates a single cryptographic proof as verification.
Developing safer and faster systems is essential for businesses small and large. Corporate level Switching ERP software, Workday Staff Augmentation ImplementationAs third-party secondary layers become more sophisticated, these companies will likely rely more on blockchain over cloud solutions, further accelerating the growth of the Bitcoin ecosystem.
What is your most popular secondary layer?
We have already mentioned the most popular secondary layers. Lightning NetworkTherefore, to provide a more detailed overview of Layer 2 capabilities, we will focus on some of the other commonly used solutions.
Rootstock (RSK)
Rootstock (RSK), a popular sidechain, has been at the forefront of smart contract functionality on the Bitcoin blockchain. “Two-way peg” system Users send Bitcoin directly to RSK, where it is stored and secured in digital wallets as Smart Bitcoin (RBTC), and users can withdraw RBTC from the regular Bitcoin blockchain.
RSK offers significantly faster transaction speeds than the Bitcoin network, Ethereum Virtual Machine (EVM)This allows smart contracts to be run on an Ethereum-style blockchain.
Liquid Network
Liquid Network is Increased transaction speed Encryption technology is also used. Improving privacy for Bitcoin paymentsIt is another sidechain solution that runs in parallel to the blockchain but uses its own native asset Liquid (L-BTC) instead of standard Bitcoin. The Liquid Network also uses a two-way peg like RSK, converting BTC to L-BTC.
RGB
RGB is a smart contract protocol and a secondary layer of Bitcoin linked to the Lightning Network. Lightning Network users can: Designing a contract You can choose to create issued tokens or not. The system achieves great speed and low fees while using the primary blockchain as the mechanism for ownership control and confidentiality.
Working with the Bitcoin blockchain and Lightning Network, RGB will be able to explore advanced blockchain-level automation and further develop third-party solutions to further reduce transaction fees.
Stack Protocol
The protocol allows for self-executing smart contracts without the use of hard forks (adjustments to the Bitcoin blockchain that create an entirely new blockchain), which tend to be avoided as they often upset the community and cause instability.
Instead, the stack protocol uses microblocks that operate at high speed. Unique Proof of Exchange (PoX) mechanism By connecting to the Bitcoin blockchain, it becomes very easy to execute smart contracts. Decentralized Applications Without leaving the Bitcoin ecosystem.
Conclusion
The Bitcoin blockchain (the primary layer) has many limitations as it is designed to facilitate secure P2P transactions, hence the need for a secondary layer where third-party integrations can work with the blockchain to provide innovation.
These layers slow down transactions, minimize network congestion, improve processing times, and integrate advanced cryptographic privacy technologies.
In the future, the secondary layer is expected to foster further growth and support the Bitcoin ecosystem integrating a range of advanced decentralized applications that could revolutionize P2P transactions, POS payments, and more.
This is a guest post by Kiara Taylor. The opinions expressed here are entirely the author’s own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
