Layer 2 innovation on Bitcoin: Willem Schroé on scaling the world’s first blockchain

‍

Can Bitcoin truly scale without compromising its decentralization and security?

In this episode of the Web3 with Sam Kamani podcast, I sat down with Willem Schroé, a leading expert in Bitcoin Layer 2 solutions, to discuss how Bitcoin can evolve beyond a store of value and become a scalable financial network.

While Ethereum has made strides in scaling via Layer 2 rollups and sidechains, Bitcoin has been slower to adopt similar innovations. However, with the rise of Bitcoin Layer 2 solutions, new possibilities are emerging for fast, low-cost transactions and enhanced programmability—all while staying true to Bitcoin’s core principles of security and decentralization.

We explored why scaling Bitcoin matters, how Layer 2 works, and what’s next for Bitcoin adoption.

Why does Bitcoin need Layer 2 scaling?

Bitcoin’s base layer is highly secure, but it wasn’t designed for high transaction throughput. This results in:

• Slow transaction speeds – Bitcoin blocks are mined every 10 minutes, making it impractical for fast payments.
• High fees during congestion – When demand spikes, Bitcoin transaction fees can become prohibitively expensive.
• Limited programmability – Unlike Ethereum, Bitcoin lacks smart contract flexibility, restricting its use cases beyond simple transactions.

Layer 2 solutions aim to solve these problems by enabling faster and cheaper transactions without overloading Bitcoin’s main chain.

How do Bitcoin Layer 2 solutions work?

Layer 2 solutions move most transactions off the main chain, settling them periodically on Bitcoin’s blockchain for security. Willem highlighted several major approaches:

1. The Lightning Network

• Designed for instant, low-fee Bitcoin payments.
• Uses payment channels that allow users to transact off-chain, only settling the final balance on Bitcoin’s base layer.
• Ideal for microtransactions and everyday spending.

2. Sidechains and Pegged Chains

• Separate chains that peg their value to Bitcoin.
• Allow for faster transactions and smart contract capabilities.
• Examples: Liquid Network (for privacy and faster transactions) and Rootstock (RSK) (which adds Ethereum-like smart contracts to Bitcoin).

3. Rollups on Bitcoin

• While rollups are more common on Ethereum, some developers are exploring Bitcoin rollups to enable higher throughput while maintaining security.
• This could bring DeFi, NFTs, and complex smart contracts to Bitcoin in the future.

Each approach has its trade-offs in terms of decentralization, speed, and flexibility, but together, they create a more scalable and functional Bitcoin ecosystem.

The potential impact of Bitcoin Layer 2

Willem explained how Layer 2 scaling could unlock new Bitcoin use cases beyond just holding and trading. Some key areas include:

1. Everyday payments and remittances

• The Lightning Network enables near-instant Bitcoin transactions with minimal fees.
• This makes it practical for cross-border payments, micropayments, and merchant transactions.

2. Bitcoin-based DeFi (BTC-Fi)

• Currently, most DeFi activity happens on Ethereum and other smart contract chains.
• Bitcoin Layer 2 solutions like Rootstock (RSK) could bring lending, borrowing, and staking to Bitcoin holders.

3. Gaming and NFTs on Bitcoin

• While Ethereum and Solana dominate NFTs and gaming, Bitcoin Layer 2 solutions could enable secure, decentralized digital asset ownership.
• Platforms like Ordinals and Stacks are already pushing this forward.

4. More scalable institutional adoption

• Institutions looking to settle transactions in Bitcoin need faster, cheaper options.
• Bitcoin Layer 2s could provide the infrastructure for financial institutions to integrate Bitcoin into global payment systems.

By expanding beyond simple transactions, Bitcoin Layer 2 solutions could help Bitcoin compete with traditional financial networks while maintaining its core decentralized and censorship-resistant properties.

The challenges of scaling Bitcoin

Despite the potential, Willem noted several challenges in scaling Bitcoin via Layer 2:

1. Liquidity and adoption barriers

• The Lightning Network requires users to lock up Bitcoin in payment channels, which can limit liquidity.
• Sidechains need strong adoption to become effective.

2. Security trade-offs

• Some Layer 2 solutions introduce trust assumptions or rely on federated security models.
• Ensuring that Bitcoin Layer 2 remains truly decentralized is crucial.

3. Developer ecosystem growth

• Ethereum has a vibrant developer community building DeFi, NFTs, and dApps.
• Bitcoin needs more developers focusing on smart contracts, Layer 2s, and advanced infrastructure.

While these challenges exist, Willem is optimistic that ongoing research and development will continue improving Bitcoin’s scalability.

The future of Bitcoin scalability

Looking ahead, Willem predicts major breakthroughs in Bitcoin Layer 2 technology over the next few years:

• More seamless Lightning Network integrations – Making Bitcoin payments as easy as using a debit card or Apple Pay.
• Better cross-chain interoperability – Allowing Bitcoin to interact seamlessly with Ethereum and other blockchains.
• Advancements in rollups and zk-tech on Bitcoin – Enabling more complex applications and smart contracts without bloating the main chain.
• Increased institutional involvement – As Bitcoin becomes more scalable, large enterprises and financial institutions will integrate it into real-world financial systems.

Bitcoin’s Layer 2 evolution is still in the early stages, but the progress is promising. If successful, it could help Bitcoin remain the dominant global store of value while also becoming a functional payment network.

Final thoughts

Bitcoin’s base layer is designed for security and decentralization, but without Layer 2 scaling, it struggles with transaction speed, fees, and usability.

With solutions like the Lightning Network, sidechains, and rollups, Bitcoin is moving towards a future where it can be used for everyday payments, DeFi, and more—without sacrificing what makes it unique.

Willem Schroé’s insights highlight why Bitcoin Layer 2 innovation is one of the most important developments in crypto today. If you’re a developer, investor, or enthusiast, this episode provides a deep dive into Bitcoin’s evolving infrastructure.

Listen to the full conversation

For a deeper dive into Bitcoin Layer 2 solutions, the Lightning Network, and scaling challenges, listen to the full episode on:

• Spotify: Listen here
• Apple Podcasts: Listen here

If you’re interested in Bitcoin’s future and Layer 2 innovations, share this episode with your network!

‍