what we’ve discovered

What Is Bitlayer? A Guide to the Bitcoin L2 Built on BitVM Technology

January 17, 2025

Samara Asset Group's corporate news image, White logo on black background.Samara Asset Group's corporate news image, White logo on black background.Samara Asset Group's Ad Hoc news image, White logo on black background.Samara Asset Group's Ad Hoc news image, White logo on black background.

Bitlayer is a Layer 2 scaling solution that brings native smart contracts to the Bitcoin ecosystem. It does this through various technologies, including Bitcoin Virtual Machine (BitVM) computing and, therefore, provides an immense capacity for developing and launching different types of decentralized applications (dApps).

In this guide, we explain what Bitlayer is, how it works, and what makes it different from other Bitcoin L2s. 

What Is Bitlayer?

Bitlayer is a Bitcoin Layer 2 protocol that combines several technologies, including BitVM and Zero-Knowledge (ZK) Proofs, to scale Bitcoin. 

Most notably, it batches transactions together before they are confirmed on the Bitcoin public ledger. This is similar to how an optimistic rollup network functions on the Ethereum network.

The other way Bitlayer is innovative is that it is compatible and can integrate, through bridges, with other blockchain virtual machines, in particular, the Ethereum Virtual Machine (EVM). This means that applications that are built for one can easily be launched on the other without having to make significant changes to the code. Also, the two versions running on the two blockchains can share data and assets.

Like most other L2 solutions, Bitlayer aims to securely scale the Bitcoin network. But it’s also doing something else: giving Bitcoin ways to innovate and diversify the assets that can be developed on top of it. 

Besides increasing the capacity to process transactions, Bitlayer supports the deployment of complex smart contracts, which makes it possible to build and run different kinds of applications on top of it. 

How Does Bitlayer Work?

In simple terms, Bitlayer is a Turing-complete computing layer on top of Bitcoin. In contrast to many other L2s, Bitlayer is designed to entirely inherit the security of the base layer, which means it is secured through mining by the Bitcoin network. 

Bitlayer implements a BitVM (Bitcoin Virtual Machine) and a Zero Knowledge (ZK) proof protocol together. While these two technologies have been successfully implemented on other blockchains, this is the first serious attempt, especially for the virtual machine framework, to be made on Bitcoin.

Having these two work together means Bitlayer can perform two critical functions: 

  • It can execute smart contracts to scale for a wide range of decentralized applications. 
  • It can generate ZKs to process transactions off-chain and, therefore, scale for speed.

However, these two functions on Bitlayer are done with some level of isolation for security and efficiency reasons, made possible through the use of Layered Virtual Machine (LVM), which means having one virtual machine to execute smart contracts on the front end and another to process Zero Knowledge transactions in the backend.

Bitlayer uses Taproot and FRI (Fast Reed Solomon IOP of Proximity) technologies to achieve the most efficient Zero-Knowledge Scalable Transparent Argument of Knowledge  (ZK STARK) Verifier. Regarding cross-chain transactions, Bitlayer has developed a bridge that uses BitVM and OPDLC (Optimistic-Discreet Log Contract) technologies.

As part of its design, the Bitlayer network has nodes that play different roles, including those that order and prepare transactions and those that submit the transactions to the Bitcoin network for confirmation. Others help with executing smart contracts that are launched on the layer.

Bitlayer achieves all of this without altering the initial design of the Bitcoin network.

The Bitlayer Token

Bitlayer also plans to launch a native token ($BTR) that will play a key role in the ecosystem. 

The BTR token will be exchangeable with BTC and other Layer 2 Bitcoin assets, as well as assets on other blockchains, in particular, Ethereum. It will be Bitlayer’s governance token and used for staking to help secure the network. 

The supply of $BTL tokens will be capped at 2.1 billion, which mirrors the limited supply of Bitcoin. According to the tokenomics of the project, 80% of these coins are set aside to be released into circulation through liquidity pools, while the remaining amount goes to incubation projects (15%) and governance (5%).

Leading dApps in the Bitlayer Ecosystem

The Bitlayer ecosystem already has multiple already functioning dApps in various sectors, including exchange, gaming, lending, and staking. Let’s take a look at a few. 

Decentralized Finance (DeFi)

Bitlayer is designed to support Bitcoin DeFi thanks to its inbuilt smart contract functionality. According to DeFiLlama, an online tool that aggregates data on decentralized finance (DeFi) platforms, there are close to twenty different DeFi applications already using the Bitlayer platform. 

The list of DeFi applications on Bitlayer includes the lending platforms Trustin Finance, ENZO Finance, and LayerBank. There are also stablecoin projects, with the most notable being Satoshi Protocol.

Gaming and Non-Fungible Tokens (NFTs)

As it is designed to help improve Bitcoin’s programmability, Bitlayer offers developers and users a scalable infrastructure for blockchain-based games and Bitcoin NFT marketplaces. 

The OKX NFT marketplace is an example of an integrated marketplace on Bitlayer, supporting NFTs, Ordinals, Runes, and more. 

Moonshot is a gaming platform on Bitlayer that features three different games, and Anome is another decentralized application designed to offer Web3 Gaming. 

Launchpad

Several launchpads have been set up on Bitlayer to help those who need to design and deploy tokens. Pumpad is a notable example of an asset launchpad on Bitlayer. 

Other categories of dApps that are already found on Bitlayer include decentralized exchanges such as Macaron and prediction markets such as PredX AI.

What Does Bitlayer Bring to Bitcoin?

There are several ways that developers and users can benefit from using Bitlayer. These include:

Cross-Chain Transactions

Bitlayer helps users move their assets freely from one blockchain to another. Also, the protocol’s asset bridge offers users access to liquidity and ways to securely transfer assets between Bitcoin and other L2 protocols. 

dApps

Bitlayer’s use of smart virtual machines and off-chain transaction processing helps reduce Bitcoin’s network congestion. In turn, this helps to expand Bitcoin’s use cases, especially through decentralized applications. 

Faster Transaction Speeds

The protocol leverages ZK proofs to speed up asset transfers and verifications, which also ensures transaction validity and privacy. Bitlayer’s three-second block confirmation time means transactions are much cheaper and faster than on the Bitcoin blockchain. 

Smart Contracts

Through its BitVM framework, Bitlayer gives developers the opportunity to easily build on top of Bitcoin and have their solutions benefit from the security that the network has to offer. The BitVM is Turing-complete, and that means it supports and can run highly complex smart contracts.  

The Takeaway

The Bitlayer protocol has been designed to bring smart contract functionality to the Bitcoin network, which scales it and fosters innovation. 

Bitlayer aims to drive the wider adoption of Bitcoin and enhance the overall user experience thanks to its EVM compatibility, lower transaction fees, and fast block times. 

Similar to many other new Bitcoin Layer 2s, we are yet to see Bitlayer's impact on the Bitcoin ecosystem but it’s arguably an interesting project to follow. 

‍Click here to sign up for Samara’s Monthly Market Commentary to stay up to date with the latest trends and developments in Bitcoin and tech-driven alternative assets. 

FAQs

Is Bitlayer EVM-compatible?

Yes, Bitlayer is 100% EVM-compatible. Its EVM compatibility allows it to seamlessly integrate with Ethereum-based dApps and solutions, which is an important advancement for the Bitcoin blockchain as that allows it to play a central role in the growing DeFi economy. 

Does Bitlayer have a token?

Yes, Bitlayer will eventually have a native token that is planned to trade under the ticker $BTR and serves as a governance token within the Bitlayer ecosystem. Users can earn the BTR token as a reward for participating in various events on Bitlayer.