> For the complete documentation index, see [llms.txt](https://docs.merlinchain.io/merlin-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.merlinchain.io/merlin-docs/user-quick-start/important-concepts/btc-layer2.md).

# BTC Layer2

## Why BTC Network Need Layer2?

Blockchain, often described as a "world computer," boasts key attributes like transparency, decentralization, security, computational power, performance, storage, and privacy protection. Users typically perceive these attributes through the network's computational power and performance, commonly measured by Turing completeness and transactions per second (TPS). However, Bitcoin stands apart because Satoshi Nakamoto deliberately designed it to be Turing incomplete, prioritizing network stability and security. Moreover, certain instruction sets were intentionally removed during its development. As a result, the Bitcoin network cannot deploy smart contracts and struggles with efficiently handling large volumes of transactions. This is due to the need to balance decentralization, security, and scalability, as well as the pressing need to overcome the limitations imposed by Turing incompleteness to facilitate broader ecosystem development.

Given that the Ethereum Layer2 landscape has already matured, future market solutions aimed at enhancing blockchain system capacity, reducing costs, and providing custom features are collectively referred to as Layer2. However, because the Bitcoin network cannot run smart contracts, all existing Bitcoin Layer 2 solutions fundamentally differ from those of Ethereum Layer 2.

## What is Side Chain?

> I think the term "Layer 2" is more of a branding term for various projects, but essentially, we are a side chain, aiming to add smart contracts to Bitcoin assets. —— Jeff, Founder of Merlin Chain

A sidechain is essentially an independent public blockchain designed to enable asset transfers between itself and the Bitcoin network. It features its own unique accounting methods, consensus mechanisms, and support for smart contracts and scripts, all while connecting to the Bitcoin mainnet through specific cross-chain technologies. Since the Bitcoin was not designed to support smart contracts, sidechains provide a way to achieve smart contract compatibility. This allows developers to build applications independently without leaving the Bitcoin ecosystem, thereby enhancing scalability and composability. To address the critical congestion issues of the Bitcoin network, sidechains use customized consensus mechanisms and block generation times to improve transaction confirmation speeds.

Merlin Chain, fundamentally a sidechain anchored to Bitcoin Layer 1 (L1), facilitates asset interaction with L1 through an official bridge. It periodically submits transaction records back to L1, leveraging the inherent security features of the Bitcoin network to enhance its own security.


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