# The Next Big L2 Runs on Bitcoin Source: https://research.auditless.com/p/the-next-big-l2-runs-on-bitcoin Kiwi News: https://news.kiwistand.com/stories/The-Next-Big-L2-Runs-on-Bitcoin?index=0x67d15e9e02da8d96a49549530a482633ecc113ec361c9ff99e3f4cd493a145e50a64e8d7 Submitted by auditless.eth on 2025-03-12 UTC, 6 upvotes, 4 comments ## Summary The article argues that the existing Bitcoin network can serve as a base layer on which new L2 rollups and smart contract systems are built without changing Bitcoin's core protocol. It says Bitcoin was closer to hosting smart contracts than originally thought, and that recent Bitcoin protocol updates plus lessons from Ethereum's scaling work are now converging to make rollups possible on it. The author notes that Bitcoin's permissionless nature may give it an unexpected advantage in becoming a smart contract platform, despite the community's resistance to other smart contract networks. The piece is disclosed as supported by a grant from StarkWare. ## Article We claim that the existing bitcoin network can be used as a protocol layer, on top of which new currency layers with new rules can be built without changing the foundation. –The Second Bitcoin Whitepaper (by “dacoinminster”) The path to running smart contracts on distributed state machines began over ten years ago. Long before crypto was making its way into government reserves there was a thriving community of tinkerers exploring ways blockchains could do more – such as how different currencies could co-exist as applications on the same blockchain. That blockchain was Bitcoin of course. The smart contract idea maze was really difficult to navigate at first. The concept of creating transactions that operate in an enshrined virtual machine seems obvious now. And while there are some degrees of freedom – whether state is stored in the applications or attached to user wallets, for example – they aren't material deviations. But it wasn't obvious, you just have to study some of the early proposals on extending Bitcoin to realize that Ethereum was a conceptual leap. There were proposals for coins built on “MasterCoin” yet economically tied to it. And even Colored Coins while simple in name had more enshrined functionality than memecoins do today. The crypto industry is still excellent at making things sound way more complicated than they are but both of these proposals are irreducibly complicated. Easy, but complex is how Rich Hickey would put it. While being involved in both (and other) projects in various capacities, Vitalik was arguably even more limited by Bitcoin’s social layer at the time, not the technology itself. And while he had found one of the exits in the maze, it wasn't clear even to him that it was. Alex Danco correctly pointed out that the technology for Bitcoin was merely a starting point for the “crowd” to form. The crowd is more important that the technology and a core reason why Bitcoin is still the leading cryptocurrency. The “Bitcoin crowd” has been pretty aligned on two things: That this technological starting point is really valuable; That changes to it should be very limited. But it would be a mistake to consider Bitcoiners blindly aligned on everything as the words “Bitcoin maxi” may seem to imply. In Visions of Bitcoin, Nic Carter highlighted how many different narratives have been developing in parallel from the early days of Bitcoin. Out of those visions, programmable shared database stands out as closest to what we see as describing a modern smart contract chain. Of course it’s also clear from the chart that this vision never really enjoyed majority support. It's rare for Bitcoin advocates to admit any value in what Ethereum or related networks are trying to do. And until recent, there wasn't a way to deliver it without that support. The idea that the permissionless nature of Bitcoin itself is what will allow rollups to be built on it is creating major narrative confusion. And yet it makes sense. Ironically, the network that most violently rejects other smart contract platforms may very well have an unfair advantage in becoming one. Zeneca’s tweet from 2023 still reads pretty well: It feels like we’re arriving at an inevitable destination, but not in the way we expected to. In retrospect, Bitcoin was a lot closer to hosting smart contracts than originally thought. Last June, we surveyed that only a few key protocol updates contribute to making rollups possible on Bitcoin: But the architectural insight wasn't there. It took a lot of learning and experimentation developing Ethereum, figuring out different scaling paths, embracing the L2 scaling roadmap, learning how to remove trust assumptions and developing Zero Knowledge technology. Both recent evolutions in Bitcoin capabilities and the accumulated technical learnings of the Ethereum community are now converging to make rollups possible on Bitcoin. Admittedly, many of us joined crypto to study and enjoy what felt like alien technology at first glance. Me running Ganache in 2018 All we used to talk about was the tech and it was glorious. It’s worth remembering one of those conversations from 2013 which will turn out to be quite impactful. Get ready anon, Bitcoin is finally getting a trustless general purpose L2. Disclaimer: This research is supported by a grant from StarkWare. The views expressed are solely those of the author and do not represent the views of StarkWare or their employers, clients or affiliates. This report does not constitute financial advice. Peteris and Auditless are $STRK airdrop recipients. Thanks to the StarkWare team for providing valuable research input for this article. ## Comments **auditless.eth**: Note: This is Ethereum related because the L2 in question also settles on Ethereum :). **tim**: I‘m honestly pretty disillusioned with L2s, so I don‘t understand the excitement here. Just ship the L2 and that‘s fine 😅 We‘re going to need something better to galvanize a new generation of builders. Something that can go beyond the uses of memecoin trading etc **naomiii.eth**: Also wasn't Rootstock already saying that 6 years ago? And if not them then Stacks - I don't feel L2 on Bitcoin is a really new thing, they just call L2 was technically is a sidechain and that's that. I haven't seen meaningful adoption of either of the above so I doubt this makes a big difference. **auditless.eth**: Great points, here's why I'm excited: 1) This knocks Ethereum down a peg on the hardness spectrum. One common thing we hear in Ethereum vs. Solana comparisons is "yes we are slower, more expensive transactions, we don't exactly know our north star, etc. but our rollups are pretty performant and have much better security than Solana which is not even a blockchain". Sidechains and Stacks don't offer those same security guarantees but a ZKR that settles on Bitcoin is going to be the "hardest" performant form of block space we've seen so far. For people who really deeply care about the crypto ethos (uncensorability, decentralization) and the Ethereum ethos (composability, permissionless innovation), this is going to hit a sweet spot. 2) I think the ability to interop with Ethereum DeFi is an important bootstrapping factor. Lombard alone is $1.6B in TVL so there is real demand for BTC finance on Ethereum. The fact that this L2 is not just a Bitcoin or Ethereum L2 but both is crucial. 3) Building on the above, Ethereum is struggling on a monetary level. A Bitcoin rollup that can allow its existing Ethereum ecosystem to natively access a more liquid, reserve grade asset will be super interesting. 4) L2 aside, the floor case is that this is the most secure ETH/BTC bridge ever built and fully programmable. Huge for Ethereum. Huge for Bitcoin.