Layer-2 Solutions Struggle to Gain Traction

The pioneer cryptocurrency network faces a new wave of disruption due to Ordinals, a recently launched protocol that enables adding digital content such as art — i.e., nonfungible tokens — to its blockchain.

Since the launch of Ordinal NFTs on the Bitcoin mainnet in January 2023, the traffic has significantly increased, driving up transaction fees and bringing to light Bitcoin’s flaws.

At the time of writing, the Bitcoin mempool, the “waiting area” for incoming transactions on the network, contained more than 286,000 pending transactions.

Even though the number is lower than the peak of 400,000 backed-up transactions at the start of the month, it is still historically high.

“Bitcoin is the most valuable asset. Ali stated, “We should have the best developers and scientists working on Bitcoin layer-2s.”

He believes that the fee spike has demonstrated to developers and investors that layer-2 Bitcoin protocols are in high demand.

Layer-2 enhances the scalability, privacy, and other characteristics of layer-1 blockchains, such as the Bitcoin network.

Ali’s Trust Machines is a layer-agnostic ecosystem for Bitcoin applications built on multiple network layers.

Ali asserts that the BTC network has an untapped market potential of $500 billion, referring to BTC’s current market capitalization of $521 billion.

In 2023, the number of products, users, and Bitcoin sent on the Lightning Network (LN), a layer-2 payment solution built atop its blockchain, skyrocketed.

Despite the numbers, the Bitcoin industry continues to struggle to attract developers, and no entities are “playing the game,” as Ali explained.

Bitcoin, according to the CEO, is “so decent,” a benefit that can still impede the growth of a robust developer ecosystem.

There is no department of marketing, no foundation, and no incentive. “Therefore, it is grassroots-driven and decentralized to the greatest extent.”

Ali argues that increasing Bitcoin fees may attract more developers but will not unlock its global potential unless layer-2 solutions gain traction as a venture capital category.

“It is also a narrative if Bitcoin layer-2s emerge collectively as a beautiful category and there is better education about why it is interesting. I believe the community can have a very grass-roots narrative, and there is a tremendous amount of support for Bitcoin.” Ali stated.