Bitcoin Layer 2 Wars: Lightning, Liquid, and Stacks
Introduction Bitcoin was designed as a secure, decentralized ledger for peer-to-peer value transfer. Its conservative approach to scalability and limited scripting language make it exceptionally secure, but also restrict throughput and programmability. To overcome these limits without changing Bitcoin’s base protocol, developers have built a growing ecosystem of Layer 2 (L2) solutions - protocols that extend Bitcoin’s functionality while inheriting its security. This first part of the Bitcoin L2 series provides a technical and economic overview of Lightning , Liquid , and Stacks - three of the most established Bitcoin extensions. We will cover their underlying technologies, use cases, security models, protocol dependencies, tokenomics, and associated risks. 1. The Lightning Network Technology and architecture The Lightning Network is an off-chain payment network built on Bitcoin’s existing scripting capabilities. It uses hashed timelock contracts (HTLCs) to establish payme...