The rise of Bitcoin layer-2 (L2) solutions is gaining significant traction across Asia. Chinese miners, who account for over 50% of the Bitcoin network’s hashrate, are increasingly turning to these solutions to create alternative revenue streams, especially following the recent Bitcoin halving.
The Bitcoin halving, which concluded on April 19, reduced mining rewards from 6.25 BTC to 3.125 BTC, making profitability more challenging for miners.
However, Bitcoin L2 technologies offer a lifeline to these network participants. Robbie Liu, head of Asia at Polyhedra Network, told Cointelegraph:
“Bitcoin L2s are not just an innovation; they’re a necessity for the evolving crypto ecosystem in Asia.
“With the recent halving, miners are looking for ways to maintain profitability, and L2 solutions offer just that.”
Liu noted the dominance of Asian projects in the Bitcoin L2 space, such as Singapore-based Bitlayer, which leads in total value locked (TVL).
He also mentioned notable Western projects like Stacks, BOB, and Anduro.
Despite regulatory challenges, Chinese miners remain resilient, with Bitcoin L2s helping them stay profitable through staking. Recent developments in the Bitcoin L2 space include various staking mechanisms, allowing Bitcoin holders to earn additional income without selling their holdings.
Yongjin Kim, CEO of Flipster, highlighted the importance of staking projects like Babylon for capital efficiency, stating:
“In recent years, there has been a market trend in maximizing capital efficiency, where the rise of real-world assets (RWA), security token offerings and restaking protocols are all part of the boat.
“Asia has followed this lead, and the regional Bitcoin community has begun to think about how to maximize capital efficiency on Bitcoin, which has led to the emergence of these L2s.”
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Investor interest in extending Bitcoin’s utility has surged, leading to increased funding for infrastructure development in Asia. Alex Zuo, vice president of Cobo, said:
“The surge of capital into the Bitcoin L2 ecosystem has accelerated infrastructure development in Asia, attracting more developers to Bitcoin L2 projects and expanding the ecosystem beyond peer-to-peer transactions.”
Zuo highlighted the success of Bitcoin L2 projects like Merlin Chain, which amassed over $3.5 billion in TVL within 30 days of its mainnet launch.
Despite the enthusiasm, challenges remain, particularly in asset and security management protocols.
Alvin Kan, COO of Bitget Wallet, pointed to the complexity and risks of managing decentralized systems and cited projects like the Lightning Network, Rootstock, and Liquid Network as initiatives addressing these issues.
Kan predicts significant growth in the Bitcoin L2 ecosystem, driven by trends like the widespread adoption of solutions such as the Lightning Network and the expansion of cross-chain interoperability solutions.
As countries like Vietnam, Thailand, Singapore, and Hong Kong position themselves as crypto-friendly jurisdictions, Asia is set to lead in Bitcoin L2 innovation, transforming both the Bitcoin network and the broader financial landscape.
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