As Merlin rises to become the ninth-largest network, Bitcoin faces point farming

As Merlin rises to become the ninth-largest network, Bitcoin faces point farming

Over the previous month, the Merlin Chain Bitcoin layer-2 increased by over 2,000%.

Speculative point farming seems to be present in every blockchain community, and it has now reached the Bitcoin ecosystem.

In terms of assets stored in layer-2 and sidechain Bitcoin wallets, Merlin was an also-ran less than a month ago. However, Merlin has over $1 billion in total value locked (TVL) after growing by around 2,000% over the last 30 days, according to DeFiLlama, making it by far the biggest Bitcoin sidechain and more than three times larger than the payments-focused Lightning Network. 

According to DeFiLlama statistics, Merlin is now the ninth-most capitalized blockchain, having more TVL than well-known layer-1s like Avalanche and Polygon.

Solv Finance, a platform that enables users to deposit wrapped bitcoin and earn "Solv Points" in return, is where Merlin holds more than half of his $1 billion. A campaign by Solv and Merlin encourages users to farm for tokens and points.

Points in the cryptocurrency world are meaningless participation counts that often decide token distributions in upcoming airdrops. Points farming may have found a home in the Bitcoin ecosystem after a run of recent airdrops that yielded converted points to substantial amounts of tokens associated with Solana and EigenLayer.

Moreover, users received an airdrop of Merlin's native MERL token last week. Since becoming live on CoinGecko, the token's value has dropped by around 40%.

By using Taproot to integrate zero-knowledge proofs with the Bitcoin blockchain, Merlin presents itself as a layer-2 solution for the cryptocurrency. The system may greatly improve transaction efficiency and privacy thanks to this integration.

Nevertheless, Merlin's proofs are validated off-chain by a decentralized network of oracle nodes prior to being batched and sent to Bitcoin's blockchain via Taproot, in contrast to Ethereum zk rollups where proofs are validated on-chain. Without overburdening the Bitcoin mainnet with data, our off-chain management of proofs and data guarantees scalability and security.

It's important to remember that a lot of what are known as Bitcoin layer-2 solutions, such as the Lightning Network and other sidechains, often handle transactions by moving assets between separate but related blockchains and Bitcoin. Adding direct features on top of Bitcoin's current infrastructure is not the same as this.

Merlin's expansion indicates a wider pattern of resurging curiosity in speculative applications of bitcoin that go beyond the asset's valuation. Runes, a development of the Ordinal inscription idea, became operational during the halving and resulted in an increase in transaction costs throughout the network. Additionally, venture money has begun to enter the Bitcoin ecosystem after previously remaining neutral, according to a recent analysis from Blockworks.

Alongside Merlin, there's a race to provide liquidity to layer-2 Bitcoin solutions. In an effort to improve the speed and dependability of its product, Stacks, a separate Bitcoin layer-2, has completed its Nakamoto update.