The initial excitement around Bitcoin layer-2 solutions appears to be cooling off as the ecosystem matures, according to industry experts. Bitlayer co-founder Charlie Hu points to declining interest in several key Bitcoin narratives that dominated early 2024.
"The honeymoon phase for Bitcoin layer-2s is over," notes Hu, revealing that approximately 80 layer-2 networks sought funding when the narrative peaked in early 2024. This sentiment echoes statements from Stacks co-founder Muneeb Ali, who predicts many projects will fade away as initial enthusiasm diminishes.
The cooling extends beyond layer-2s, affecting other Bitcoin-related trends. Bitcoin NFT trading volumes have plunged 80% from $1.4 billion in Q1 2024 to $280 million in Q1 2025. Bitcoin re-staking projects have also seen a dramatic decline, with only two or three projects surviving past the peak hype phase.
However, industry leaders remain optimistic about long-term prospects. Dominik Harz, co-founder of Build on Bitcoin (BOB), emphasizes that viewing layer-2 development through a short-term lens misses the bigger picture. "Bitcoin DeFi hasn't even really taken off yet. Only 0.3% of Bitcoin's market cap is active in DeFi compared to 30% for Ethereum," Harz explains.
Max Sanchez, CTO of Hemi Labs, suggests the sector is entering a maturation phase where fundamentals take precedence. He notes that many early projects simply imported Ethereum technology without properly adapting it to Bitcoin's unique architecture.
Looking ahead, Hu sees layer-2s as engines powering Bitcoin's DeFi ecosystem, potentially offering yield opportunities for institutional investors and large holders. This evolution suggests a shift from speculative hype toward sustainable, practical applications in the Bitcoin ecosystem.