Ethereum Layer-2 Starknet has announced plans to launch a Bitcoin L2 to unify the two biggest blockchain ecosystems. In a post on X, Starknet added that it will become the first L2 to settle on both networks. According to Starknet , this move is necessary to unlock new DeFi opportunities and use Bitcoin liquidity. Bitcoin is the most valuable crypto asset, with a 61% dominance, per CoinMarketCap. However, around 99% of the Bitcoin circulating supply is held in wallets or traded on exchanges, with only around 1% being used for DeFi. Starknet considers this a problem while highlighting the challenges of the Bitcoin Network. It said: “Most Bitcoin remains HODLed in wallets & CEX due to three main factors: Network limitations, no general-purpose computation, Expensive to transact on the base layer, Most BTC DeFi requires custodial or centralized solutions.” To solve this problem, Starknet said it is building a Bitcoin L2. While there is no information on when the L2 will launch, the blockchain scaling solution provider said it will be powered by Zero-Knowledge (ZK) technology and STARK proofs. How Starknet will change Bitcoin (Source: Starknet on X) It added that through the L2, Starknet will change this by becoming the execution layer for Bitcoin, improving its performance and utility with transactions per second reaching thousands and gas fees reducing drastically. The move will also bring several Bitcoin-native DeFi platforms to Starknet. Meanwhile, Starknet explained why it is replicating its Ethereum scaling technology on the Bitcoin network instead of building another L2 altogether. These include the technical strength of the team behind the protocol and the reputation of its ZK rollup on Ethereum. It said: “Beyond performance & UX, Starknet is the most battle-tested ZK rollup, operating as a secure public L2 on Ethereum since 2021. And Starknet was built by core contributor @StarkWareLtd, the team that invented STARK proofs, pioneered zkRollups, Validium, L3s, Proof Aggregation, and much more.” Additionally, Starknet noted that L2 will benefit Bitcoin and Ethereum. For Bitcoin, it would mean more DeFi applications, increased adoption, and another source of revenue for miners through the L2 settlements. Ethereum will also enjoy better interoperability with Bitcoin and have native access to BTC as collateral for DeFi use. Starknet announces upcoming integration with Xverse Wallet Although there is no information on when Bitcoin capabilities will become available, Starknet has already announced an upcoming integration with the popular Bitcoin Web3 wallet Xverse by Q2 2025. The CEO of StarkWare, Eli Ben-Sasson , also said in an interview that this integration is the first step towards becoming a Bitcoin execution layer. He further explained that the expansion into Bitcoin highlights the improvements in its technology. According to him, the company’s goal is to bring Starknet technology to all blockchains that need scalability, but they could not start with Bitcoin due to its complexity. Ben-Sasson said: “We are approaching a point where it will be technically possible to verify STARK proofs on Bitcoin. This is a game-changer and is pushing us to prepare ourselves to help Bitcoin evolve, particularly in terms of scalability.” Meanwhile, Starknet is also working on a BitVM-powered bridge and federated bridges to ensure cross-operability between Bitcoin and Starknet. Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
