Botanix, Bitcoin’s layer 2 network, is shutting down a year after its mainnet went live.
The project cited market conditions and a broader indifference within the cryptocurrency industry towards establishing greater utility in the Bitcoin network, in a post on X on Tuesday.
“It didn’t work,” Botanix summarized. “At least not in this market and not on this timeline.”
Botanix’s goal was to bring Ethereum-equivalent functionality to the Bitcoin network, allowing applications and smart contracts to be effectively copied and pasted onto the world’s first blockchain. The project raised $14.4 million in two funding rounds in 2023 and 2024. Despite this, its total value locked (TVL) at closing was just $119,500, according to data from DeFiLlama.
Botanix was one of many protocols and layer 2s that have emerged in recent years, aiming to expand Bitcoin’s utility and help it evolve beyond just being a store of value.
The idea was that bitcoin holders wouldn’t have to simply leave their asset idle and wait for price appreciation. They can also use decentralized finance to generate additional income. This could involve staking tokens on other blockchain networks or using smart contract-enabled DeFi tools such as lending or decentralized exchanges (DEX).
Botanix post-mortem
However, it didn’t go as planned, at least not for Botanix.
The protocol highlighted that “making Bitcoin programmable, productive, and integrated into real financial activity is not what real-world users are looking for right now.”
This postmortem may raise questions about the broader viability of the Bitcoin development sector, which includes other layer 2s like Rootstock or accumulations like Citrea, during a prolonged period of muted sentiment in the cryptocurrency market.
CoinDesk reached out to both of these projects for comment, but none were received as of press time.
BTC has lost more than 50% of its value since reaching its all-time high of nearly $125,000 last October, which may make investors wonder why they should be interested in developing the use of bitcoin when it currently does not fulfill its most basic function of storing value very effectively.
“It’s possible that bitcoin’s role as a reserve asset is simply where it sits. If that’s true, there will never be a market for what we’re building and no amount of time or capital would change that,” Botanix said.
A simpler route to combining the secure store of wealth that BTC offers with the programmability and utility of other blockchain networks may involve synthetic or “wrapped” bitcoin tokens. These are tokens that represent BTC in a 1:1 ratio and can be traded and staked on networks like Ethereum.
The most established is wBTC, which was introduced in 2019, but more recently, Coinbase and Circle have developed their own synthetic bitcoin tokens to appeal to institutional investors and traders.
“For lending, yield, and leveraged exposure, wBTC on a mature general-purpose L2 is actually sufficient,” Botanix said.
“Users have voted based on their behavior, and the verdict is that the trust assumptions of an Ethereum-wrapped representation are acceptable to almost everyone who wants DeFi denominated in Bitcoin.”
