Bitcoin once set the gold standard for security and decentralization, becoming the cornerstone of the blockchain revolution. Its Proof of Work (PoW) consensus mechanism and immutable ledger offered unprecedented trust and integrity, making it the go-to choice for a decentralized digital currency. 

However, this architecture, prioritizing security and decentralization above all else, now shows significant limitations as the digital economy grows and evolves.

Bitcoin's Design Intent and Limitations 

Since its inception, Bitcoin has aimed to become a "secure and decentralized" digital currency. Bitcoin's consensus mechanism and block size limits are relatively conservative in achieving this goal.

Although this conservative design ensures the security and decentralization of the network, it also brings performance bottlenecks.

Due to the fixed block size, the number of transactions that the Bitcoin network can process per second is limited, especially during peak transaction periods. Network congestion and high transaction fees become problems that users have to face.

Users often need to pay higher transaction fees to get transactions confirmed faster, increasing the cost of Bitcoin. Moreover, Bitcoin's scripting language has limited functionality and does not support complex smart contracts, making it unable to meet the needs of large-scale applications.

Bitcoin's Need for Layer 2 

Bitcoin’s original design did not account for today's massive transaction volumes. Making large-scale changes to the main chain at this point could potentially compromise Bitcoin’s security, which remains a cornerstone of its value proposition. 

Furthermore, the Bitcoin community is known for its cautious approach to network modifications. Any significant changes to the protocol require extensive discussions and broad consensus, often resulting in considerable resistance to major upgrades.

These factors have driven the community to explore Layer 2 solutions as a means to enhance Bitcoin’s capabilities without altering its core architecture. Layer 2 technology addresses the main chain’s limitations by handling transactions off-chain, thereby improving transaction speed, reducing costs, and enabling advanced functionalities such as smart contracts. 

The key benefits of Layer 2 include:

• Improving Transaction Speed: By processing transactions off-chain, Layer 2 significantly reduces the load on the main chain, allowing for faster transaction completion.

• Reducing Transaction Fees: With fewer transactions burdening the main chain, the associated fees for users are also lowered, making Bitcoin more cost-effective.

• Increasing Network Capacity: Layer 2 solutions expand the Bitcoin network’s ability to process more transactions and support more users and applications.

Through these enhancements, Layer 2 technology preserves Bitcoin’s foundational security and opens up new possibilities for its use in a rapidly evolving digital landscape.

Do New-Generation Public Chains Really Not Need Layer 2?

Unlike Bitcoin, which was initially designed without scalability in mind, new-generation public chains have incorporated scalability solutions from the outset. By leveraging innovative consensus mechanisms, virtual machines, and sharding technologies, these chains are equipped to handle higher transaction volumes to meet the growing demands of blockchain applications.

However, as the blockchain ecosystem rapidly expands with the rise of DeFi, NFTs, and other applications, even these advanced public chains are feeling the strain. The increasing performance requirements challenge the notion that new-generation chains are immune to the need for Layer 2 solutions. While they may have an edge in scalability, that doesn’t mean Layer 2 technology is entirely unnecessary.

In fact, when faced with specific high-demand scenarios—such as large-scale DApp operations—Layer 2 can still play a crucial role in boosting performance. For example, Vibhu Norby, the founder of DRiP, highlighted that network congestion on Solana has caused project value to migrate to the base layer, indicating that even Solana, with its advanced architecture, could benefit from Layer 2 solutions like rollups.

To combat network congestion, Solana introduced a new technology called “ZK Compression” in July this year. This technology compresses the blockchain's state data to reduce network storage costs and improve transaction processing efficiency. 

According to the Solana team, this innovation could allow Solana to achieve greater scalability directly on the main chain, ostensibly bypassing the need for traditional Layer 2 solutions.

However, this approach has sparked debate. Some argue that ZK Compression is, in essence, a Layer 2 solution with a different implementation. Additionally, ZK Compression is still in its developmental phase, and whether it can truly deliver the full scalability promised for Layer 1 remains to be seen through further testing and verification.

Why Layer 2 Still Matters for New-Generation Public Chains

As new-generation public chains like Solana push the boundaries of blockchain performance with innovations like ZK Compression, the need for Layer 2 solutions remains significant.

 While ZK Compression represents a cutting-edge attempt to enhance scalability and reduce costs, Layer 2 technologies are far from obsolete in the landscape of blockchain development.

 Here’s why:

• Meeting High-Performance Demands: Certain applications, particularly in DeFi, require ultra-fast and low-cost transactions. Complex smart contracts need an environment that can handle their demands efficiently. Layer 2 solutions provide the necessary execution environment, ensuring these applications run smoothly without overburdening the main chain.

• Supporting Ecosystem Growth: As public chain ecosystems expand, the sheer number and complexity of on-chain applications will continue to increase. This growth will place additional strain on the main chain’s performance. Layer 2 can offer additional computing resources and storage, alleviating this burden and enhancing system stability.

• Providing a Safety Net: In cases where the main chain encounters issues, Layer 2 can act as a backup, ensuring continuous operation. This redundancy is crucial for maintaining user trust and ensuring that the network remains resilient.

• Driving Innovation: Layer 2 technologies are not static; they are constantly evolving. By exploring and integrating Layer 2 solutions, public chains can spur innovation within the broader blockchain industry. The advancements in Layer 2 can also drive upgrades and improvements in the main chain itself.

Why Your Blockchain Strategy Should Include Layer 2

Layer 2 does not compete with new-generation public chains but rather complements them. For both mature and emerging public chains, it is a powerful tool that enhances performance, expands application possibilities, reduces risk, and drives innovation. 

As the blockchain ecosystem continues to evolve, integrating Layer 2 into the development strategy of public chains will become increasingly important.

Whether it’s Bitcoin or a new-generation public chain, the question isn’t whether Layer 2 is needed but how it can best be leveraged to ensure scalability and long-term success. Layer 2 will become indispensable in developing all public chains, regardless of their inherent performance advantages.