Bitcoin Layer-2s Fall Short: They Aren’t Real L2s

True Bitcoin scaling hinges on preserving Layer-1 security and avoiding bridges, tokens, and custodial risk.

2026-02-15

The Bitcoin ecosystem is being overrun by a wave of layer-2 solutions that are not scaling Bitcoin at all; they are attempting to extract from it.
Most “Bitcoin L2s” aren’t L2s at all: They’re sidechains with bridges, new tokens, and weaker security models that don’t inherit Bitcoin’s base-layer guarantees.

First, each project relies on bridges or federations to facilitate the movement of BTC in and out of the network. This creates a centralized chokepoint and massive custodial risk.
Second, these projects are “token first.” They lead with tokens that have no necessary function for the protocol’s core operation.
Third, users must sacrifice the security of Bitcoin to use these networks. They must leave Bitcoin’s sovereign, proof-of-work security model and submit to a new, often proof-of-stake consensus run by a small set of validators.
The numbers tell the story better than any technical argument. Merlin Chain once topped Bitcoin L2 total value locked (TVL) rankings, but now it is bleeding value daily.

Babylon promised the “Bitcoin staking revolution” and delivered an 84% loss.
These projects raised millions, launched with fanfare, and collapsed within months.
Lightning processes real payments, while these L2s process exit liquidity.
As research shows, projects like BitVM are working toward realistic rollups that actually inherit Bitcoin security.