Blood, sweat and tiers: Why layer-2 remains the bedrock of Bitcoin development

Word on the Block | Forkast.News

From the recent launch of Bitcoin-based exchange-traded funds in the U.S. to El Salvador’s plan to raise US$1 billion through BTC bonds to fund its “Bitcoin City” property development, growing mainstream adoption of the world’s original cryptocurrency is demanding increased scalability.

Adam Back, a Bitcoin development veteran and CEO of blockchain technology company Blockstream, which is working in partnership with El Salvador’s government on its Bitcoin-backed bond plan. says the solution lies in layer-2 networks.

Layer-2 is a secondary protocol built on top of a blockchain such as the Bitcoin network or Ethereum. Mirroring the protocol evolution of the internet, layer-2 technology such as Bitcoin’s Lightning and Liquid networks tackle scalability issues by moving processes off the main chain.

“While it's difficult for (all) potential users of Bitcoin to directly hold it on-chain, there are different use cases that can use it in different ways,” Back told Forkast.News in a video interview. “[Layer-2] provides a different kind of section of transactional capacity-optimized for use cases.”

“You can onboard more users and there's less data hitting the main chain ... it has some trade-offs, but it provides similar kinds of assurances to the main Bitcoin chain.” Back said, “It's difficult to have a single protocol that's optimal for everything.”

Taproot — the last major upgrade of the Bitcoin network, which went live last November — came four years after the SegWit soft fork, the only other big change to the network, implemented in 2017. Given the slow and irregular pace of upgrades, most Bitcoin network innovations take place on layer-2.

“If you look at the internet and the base layer of the internet being TCP/IP … the TCP/IP protocol essentially hasn't changed in decades, yet there's an enormous amount of innovation on the internet. But it's happening in the layer above, or in the application layer,” Back said. “And that's considered, in engineering terms, a good way to do it, because you want the best technology to be robust.”

Watch Back’s full interview with Forkast.News Editor-in-Chief Angie Lau to learn more about layer-2 solutions, the “block war” between layer-2 providers, the Bitcoin Taproot upgrade and BTC’s mainstream adoption.