Bitcoin Layer 2 Projects Gain Traction as BTC Aims for DeFi Dominance
Bitcoin's Layer 2 development is gaining momentum as projects aim to turn BTC from a passive store of value into an asset usable for payments, lending, trading, and decentralized finance. Unlike Ethereum, Bitcoin L2 encompasses various architectures, including rollups, sidechains, and smart-contract networks with different security assumptions.
One notable project is Stacks, which remains one of the most established Bitcoin scaling ecosystems. It uses Proof of Transfer and Clarity smart-contract language while settling transactions with Bitcoin finality. The sBTC asset is backed 1:1 by BTC and allows Bitcoin to be used across DeFi applications.
Bitlayer is another notable project, focusing on building Bitcoin DeFi infrastructure around BitVM-based infrastructure. Its YBTC ecosystem has become a central growth driver, with nearly $100 million in TVL in March 2026. The project's current BTCFi platform shows more than $52 million deployed across yield strategies.
Citrea stands out for its EVM-compatible zero-knowledge rollup design, which uses Bitcoin for settlement and data availability. Its mainnet went live in January 2026, enabling BTC-based lending, trading, and settlement applications.