Bitcoin’s L2 drive double the traffic of the main chain

Bitcoin (BTC) may be sliding, but the chain retains an active L2 ecosystem. After months of slow growth, L2 traffic has surpassed transactions on the main chain.

Bitcoin (BTC) carries double the amount of transactions on L2 protocols compared to the main L1 chain. As BTC is considered a store of value and moved only for trading, L2 are gaining activity. 

The Bitcoin main network carries just around 325K transactions per day, falling from a recent peak of 497K transactions per day. 

At the same time, the Core DAO ecosystem carries over 724K transactions per day, with more rapid growth in the past two weeks. Core supports a total of 31 projects with use cases ranging from DeFi to utility, including specialized wallets for the Bitcoin L2 ecosystem.

The long-term activity chart reveals BTC gets more transfers during bull markets, when traders move coins to and from exchanges. BTC also carries some residual Ordinals, Runes and other types of transactional activity, but the L1 is mostly used for regular coin transfers. 

L2 activity, on the other hand, has been growing since last November. In 2024, Bitcoin L2 failed to bring a DeFi summer, but built the foundations of a new L2 ecosystem. 

Signal21 also confirms the L2 narrative, singling out the most successful projects. Those include Core, B2, Bitlayer, BOB, Merlin, Rootstock, and Stacks. Core is the leader with over 896K transactions for some of its most active periods. 

The collective activity on L2 has surpassed BTC for a while, but now, the Core ecosystem has caught up with the main network and surpassed it. 

The recent success of L2 projects shows BTC may have additional use cases and demand for staked or locked coins. The expansion of L2 was somewhat delayed but arrived at a time when BTC was again standing at a crossroads after a 25% price drawdown. Despite the lowered coin performance, L2 chains posted above-average activity. 

Core is ahead of the pack of other L2, mostly due to its reliance on multiple apps and use cases. The Bitcoin L2 ecosystem lags far behind Ethereum but may become one of the new narratives as traders look for new sources of growth.

L2 protocols seek more BTC collaterals

One of the functions of L2 protocols is they use various forms of non-custodial or custodial staking. This technique does not move coins from wallets, but the coins cannot be spent. Stacks Protocol opened its latest staking round, seeking to lock 3,000 BTC as collateral. 

Stakers will receive sBTC tokens, with up to 5% APY for simply holding BTC. In its first round, Stacks collected 1,000 BTC to produce sBTC. After a successful performance, another 3,000 sBTC will enter the market.

The recent drive to collect more BTC to secure apps also answers the question of more use cases for the leading coin. The current expansion of L2 also targets whales and long-term holders, who can access passive income against a BTC collateral.

Bitcoin grows L2 value locked

The recent expansion of BTC, even after the latest correction, retains significant value locked in L2 protocols. Core DAO carries some of the busiest apps, while Babylon Labs drew in the bulk of the locked value. Of all L2 value locked in BTC collaterals, Babylon Labs contains $4.45B. 

In total, the Bitcoin L2 ecosystem locks in $5.4B, though recently, the value peaked above $7B. The current L2 protocols rely on BTC as collateral while providing secured and much cheaper transactions. 

BTC transaction fees are near the lower end of their range at $2.20, while Core DAO relies on gas fees. As of February 28, transactions on Core DAO are on average $0.25. 

BTC is important for the L2 ecosystem, though mostly as collateral for staking. Core DAO itself is built as an EVM-compatible network, which still hinges on support from BTC miners. The main difference is that the chain is secured by BTC staking, tapping the value of an asset that has proven more stable.

Core network secures its chain with 5,400 BTC staked and 165M CORE. The chain was the first to introduce non-custodial staking as a form of security.

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