Bitcoin has long reigned as the cornerstone of digital currency. However, its journey has not been without challenges. As Bitcoin's popularity surged, so did concerns over its scalability and transaction costs. Bitcoin Layer 2 solutions sprung up to help Bitcoin scale.

At the forefront of this movement stands Rootstock (RSK), a Layer 2 platform designed to address Bitcoin's limitations head-on. Introduced in 2015, RSK offers a second-layer virtual machine tailored to enhance Bitcoin's transaction speeds and functionality. Its mission? To unlock the full potential of the Bitcoin blockchain and usher in a new era of decentralized finance.

Let’s explore the state of Rootstock and the Bitcoin Layer 2 ecosystem in detail.👇

Understanding Rootstock: How Does It Compare to Other Bitcoin Layer 2s?🟧

Rootstock (RSK) has emerged as a prominent player in the realm of Bitcoin Layer 2 solutions. But how does RSK stack up against other Bitcoin Layer 2 protocols? 

1. Merged Mining

Rootstock employs merged mining, allowing miners to mine both Bitcoin and Rootstock simultaneously using the same computational resources.

This technique leverages Bitcoin's Proof-of-Work (PoW) consensus, providing Rootstock with Bitcoin-level security and additional revenue for miners without extra resource expenditure.

2. Two-Way Peg (PoWpeg)

The PoWpeg system enables seamless value transfers between Bitcoin and Rootstock. Users can convert BTC to RBTC (Rootstock Bitcoin) at a 1:1 ratio. Pegging-in locks BTC on Bitcoin and unlocks the equivalent RBTC on Rootstock, while pegging-out does the reverse. This ensures RBTC maintains BTC's value, facilitating smooth transactions between the two chains.

3. Rootstock Virtual Machine (RVM)

The Rootstock Virtual Machine (RVM) is compatible with the Ethereum Virtual Machine (EVM), allowing developers to deploy Ethereum smart contracts on Rootstock. This compatibility means existing Ethereum tools and programming languages (like Solidity) can be used, leveraging Bitcoin's security with faster and cheaper transactions.

4. SmartBTC (RBTC)

Rootstock uses RBTC, pegged 1:1 to BTC, for transaction fees and smart contract execution. This simplifies the user experience by enabling Bitcoin holders to interact with Rootstock’s ecosystem without acquiring a new cryptocurrency, maintaining a seamless connection to the Bitcoin economy.

5. Fast Block Times and Scalability

Rootstock improves Bitcoin's transaction speed by creating new blocks every 30 seconds, compared to Bitcoin’s 10-minute block time. This rapid block generation allows for faster transaction confirmations and increased network throughput, handling more transactions per second and reducing congestion.

6. Security and Autonomy

Rootstock’s smart contracts are fully autonomous, eliminating intermediaries and reducing the risk of human error. The use of Bitcoin's PoW consensus and merged mining enhances the security of these smart contracts, providing a robust environment for dApps.

State of Rootstock 📊

The Rootstock ecosystem has been growing, with many projections indicating a

sustained interest in the platform. We analyzed some data from Footprint Analytics following their latest integration with Rootstock to understand the state of the sidechain in detail.

Below are key metrics indicating the state of Rootstock.

Daily Active Accounts

Rootstock’s daily active accounts have remained below 500 for the most part, shooting up to over 5000 in October. While these numbers might still be low compared to competitors, they indicate significant promise.

Daily Transactions

Rootstock has averaged a daily transaction count of 5000 transactions. The highest transaction count recorded, back in January, surpassed 25000 transactions. As a budding ecosystem, these numbers indicate that a consistent user base is already leveraging the platform.

Daily Active Addresses 

Daily active addresses on Rootsock have varied significantly. While the baseline remains below 500, there are many months where the number has shot up beyond 1000, reaching as high as 6000 in July 2023. Consistent wallet activity on the network shows constant interest in the platform beyond short-term hype.

Daily Average Transaction Fee

Rootstock boasts very low transaction fees compared to the Bitcoin protocol, and is even competitive against new generation blockchains like Solana and Ethereum Layer 2s. The average transaction fee, at current BTC prices, averages around $0.3, which is pretty impressive. Low fees like these are likely to attract and retain many users interested in Bitcoin DeFi.

Daily Transaction Fees

Rootstock’s average daily transaction fees have consistently hovered between 0.02-0.05 RBTC, reaching highs of up to 0.09 RBTC. At current BTC prices, the current daily transaction fee averages around $3000.

Daily Average Block Time

Rootstock has consistently maintained a blocktime of around 31 seconds. This is a significant upgrade compared to Bitcoin’s 10 minutes. The steadiness in blocktime demonstated by Rootstock shows network resilience.

Want To Access The Data We Use For FREE?👀

We teamed up with Footprint Analytics to provide our readers 14-days FREE access to their full suite of analytics tools📊

🚨Don’t miss out on your opportunity to upgrade your data game - Claim Your 14-Days Free🚨

DeFi On Rootstock: Which Projects Are Building?💰

Rootstock (RSK), with its robust smart contract functionality and scalability enhancements, serves as a fertile ground for DeFi innovation. 

Let's explore some of the notable projects paving the way for DeFi on Rootstock:

a) Sovryn

Sovryn is a flagship project within the RSK ecosystem, offering a non-custodial platform for lending, borrowing, and margin trading with Bitcoin. By harnessing the power of smart contracts on Rootstock, Sovryn provides users with a decentralized and permissionless financial infrastructure, eliminating the need for intermediaries.

b) RSK Swap

RSK Swap brings DEX functionality to the RSK network, drawing inspiration from Ethereum's Uniswap protocol. Built on Rootstock, RSK Swap enables users to seamlessly exchange assets in a trustless and efficient manner, enhancing liquidity and accessibility within the RSK ecosystem.

c) Tropykus

Tropykus offers a digital savings protocol designed to remove barriers and limitations present in traditional banking systems. Tropykus empowers users to earn interest on their savings with transparency and security, regardless of geographic location or economic status.

Stablecoins

The RSK ecosystem is home to a variety of stablecoins, providing users with stability and predictability in their financial transactions. 

Projects like Dollar on Chain (DoC), BRZ Token, and RSK Dai (rDai) offer stablecoin solutions pegged to fiat currencies like the US Dollar and Brazilian Real, providing a bridge between traditional finance and the decentralized world.

Wallets and Bridges

The RSK ecosystem consists of a range of wallets and bridges facilitating seamless interaction with Rootstock's smart contracts and assets. 

Wallets like Beexo and MetaMask offer users convenient access to RSK's DeFi infrastructure, while bridges like Powpeg and RSK ETH enable cross-chain interoperability with Bitcoin and Ethereum.

Bitcoin DeFi Ecosystem🏦

The Bitcoin ecosystem is emerging as a powerhouse of innovation, blending stability with cutting-edge financial services.

Key players shaping this landscape are:

1. ALEX: Empowering Financial Exploration

ALEX is a super app ecosystem empowering developers, traders, and investors on the Bitcoin blockchain. With over $100 million Total Value Locked and a robust Total Transaction Volume, ALEX offers modules for asset management, trading, and bridging between blockchain networks.

Featured dApps on ALEX:

• SWAP (AMM DEX): A decentralized exchange for seamless asset swaps.

• KICKSTART (Launchpad on Bitcoin): Empowering new projects with visibility in the Bitcoin space.

• TRADE (B20): A dynamic trading platform for optimized price discovery.

• CONNECT (Bridge): Facilitating interoperability between blockchain networks.

2. LISA: Redefining Liquid Staking

LISA is a liquid staking protocol enabling flexibility and liquidity for STX holders. It introduces dual tokens, LiSTX and vLiSTX, for optimized yield without sacrificing liquidity.

3. XLink: Bridging EVM and Bitcoin

XLink is a bitcoin bridge connecting the Ethereum Virtual Machine (EVM) with the Bitcoin network, facilitating smoother DeFi experiences and interoperability.

4. Zest Protocol: Powering Bitcoin Lending

Zest Protocol enables on-chain BTC loans and BTC collateralized loans, providing efficient lending solutions within the Bitcoin ecosystem.

5. Velar: Facilitating Liquidity on Bitcoin

Velar is a DeFi liquidity protocol on the Bitcoin blockchain, designed for swap transactions with minimal fees and liquidity rewards.

Conclusion📄

The evolution of Bitcoin Layer 2 solutions like Rootstock represents a huge shift in the blockchain landscape, addressing limitations of Bitcoin’s base layer while unleashing its untapped potential. 

Rootstock, with its advanced smart contract capabilities and improved transaction speeds, stands at the forefront of this transformation, offering a robust foundation for dApps and financial services.

If you enjoyed the article from our research campaign subscribe below & check out more content like this👇