According to a recent report, Bitcoin could grow auxiliary layer-2 network to address its inherent limitations. This is because the oldest blockchain was clogged up with NFTs and other tokens.

According to the “Bitcoin Layers”, a report released Thursday by Spartan Group, a Singapore-based blockchain asset management company, and Kyle Ellicott who served as a recent partner at the Bitcoin Frontier Fund, existing solutions such as Lightning Network may see growth. However, new projects are in the works.

This trend seems to be influenced by Ethereum’s architecture. Over the last year, dozens of layer-2 projects have sprouted within the Ethereum ecosystem, including Base from the U.S. cryptocurrency exchange Coinbase. Big projects like Arbitrum and Optimism are now pushing for additional networks based upon their own blueprints.

According to the authors, layer-2 networks are still in a relatively early stage of development compared to other blockchains. However, they are on the rise.

According to the report’s findings, Bitcoin is well positioned to unlock its full potential, with layered architecture that mirrors that of Ethereum. The report argues that the advent of the Ordinals Protocol a year earlier “brought about a renaissance in Bitcoin builder culture.”

Ordinals allowed the network to support non-fungible (NFT) tokens and paved way for the BRC-20 standard. This token standard uses a technology different from Ethereum’s ERC-20 but is based on the same concept.

The “Big Four”

The report claims that Bitcoin’s limitations are largely due to its lack of application functionality or programmability, as well as the slow speed of transactions.

While the Lightning Network of Bitcoin has been working to speed up payments for Bitcoin over a period of time, other layers aim to add functionalities like programmability and applications functionality to enhance the utility beyond just storing value.

The report calls the layer-2 projects Stacks Liquid Rootstock the “Big Four” because they together make up the majority L2 transactions. They have been focused on bringing faster transaction speeds and smart contracts to Bitcoin.

According to the authors, the projects will require refinement to ensure they do not fall victim to the inherent limits of the Bitcoin network. One upgrade that is on the radar, Stacks Nakamoto Release is designed to allow cheap BTC transfers on a level 2, improving transaction speeds from 10 to 30 minutes to as little as five seconds.

The report highlights a number of other emerging innovations that can help fill in the technical gaps.

Ark is an example of a L2 protocol that allows off-chain payment, where recipients receive payments, without having to acquire inbound liquidity. The goal is to have lower costs than Lightning.

MintLayer, another Bitcoin sidechain designed for DeFi activities, is also available.

These developments could leverage Bitcoin’s tailwinds, including the recent listing and halving of ETFs in the U.S. to inspire new uses for Bitcoin. This would in turn encourage further adoption.

Read more: Bitcoin Inscriptions Divide BTC community Amid Network Congestion but are ‘Unstoppable.’

Bradley Keoun is the editor.