Bitcoin Layer-2 (L2) solutions have been widely regarded as the next evolution of the Bitcoin network, promising faster transactions, lower fees, and expanded functionality beyond just a store of value. However, according to Muneeb Ali, co-founder of Stacks, most Bitcoin L2 projects won’t survive in the long run.
Speaking at Consensus 2025, Ali predicted that over two-thirds of Bitcoin L2 projects will disappear within the next three years. The reason? A combination of hype-driven launches, a lack of long-term commitment, and the challenges of building on Bitcoin. While some projects, such as Stacks and Babylon, are thriving, many others may soon fade into irrelevance.
So, is Bitcoin’s Layer-2 movement doomed, or are we witnessing the natural selection of only the best projects? Let’s break it down.
The Bitcoin L2 ‘Honeymoon Phase’ Is Over
Muneeb Ali believes that the initial wave of excitement around Bitcoin L2s is wearing off. Many projects launched with ambitious goals, but as reality sets in, they are struggling to prove their value.
“The honeymoon phase [for Bitcoin L2s] is a little bit over.”
During the past few years, the Bitcoin ecosystem has seen a rise in L2 projects aimed at improving scalability and functionality. However, as the market matures, it’s becoming clear that not all projects have what it takes to sustain themselves. Investors who once rushed into the Bitcoin L2 space are now becoming more selective, favoring established projects with strong fundamentals over speculative ventures.
This shift mirrors past cycles in the crypto industry, where hype often gives way to consolidation. While some Bitcoin L2 projects will rise to prominence, many will fail to deliver on their promises and eventually disappear.
Why Most Bitcoin L2 Projects Will Fail
Ali outlined several key reasons why he believes most Bitcoin L2s will not survive:
1. Lack of Long-Term Vision
Many Bitcoin L2 projects were created to capitalize on the growing interest in scaling solutions but lack a solid long-term vision. Ali believes that only mission-driven teams with a clear development roadmap will make it through.
Some projects focused on short-term token speculation rather than actual product development. Without continuous innovation, these projects will struggle to retain users and developers. The Bitcoin ecosystem is known for its security and stability, meaning L2 solutions must meet high standards to be widely adopted.
2. Building on Bitcoin Is Challenging
Unlike Ethereum, which was designed for programmability, Bitcoin’s architecture makes it harder to develop decentralized applications and scaling solutions. Creating a secure and efficient L2 solution on Bitcoin requires significant expertise, and many projects underestimate the technical hurdles.
In addition to development challenges, Bitcoin’s decentralized nature means that upgrades and changes happen more slowly than on other blockchains. Projects that cannot navigate these constraints effectively may find themselves unable to keep up with user expectations.
3. Market and Investor Shifts
Ali pointed out that Bitcoin L2 projects face stiff competition for capital. While Bitcoin itself continues to attract new institutional investors through exchange-traded funds (ETFs) and long-term holders, L2 projects often compete for the same pool of funds as altcoins and speculative tokens.
“If memecoins are becoming trendy, capital will come out of L1 infrastructure projects and rotate into the memecoins, but it’s the same capital that’s cycling into different categories. Whereas Bitcoin is probably the only asset that has net new buyers.”
This means that as market trends shift, many L2 projects could struggle to maintain funding and liquidity. Without sustained interest from investors and developers, these projects could fade into irrelevance.
Stacks: A Bitcoin L2 That’s Here to Stay
Despite his bearish outlook on most Bitcoin L2 projects, Ali is confident in the future of Stacks, an L2 solution that he co-founded. Stacks recently launched its Nakamoto upgrade, which:
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Enhances security by leveraging 100% of Bitcoin’s hash power.
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Improves transaction speeds and confirmation times.
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Strengthens the overall user experience.
Stacks has positioned itself as a blue-chip Bitcoin L2 project, meaning it is seen as a reliable and long-term solution rather than a speculative bet. According to Ali, when investors look for safer, long-term options in the Bitcoin L2 space, they are more likely to choose Stacks over riskier alternatives.
Bitcoin vs. Ethereum & Solana: The Growing Divide
Ali also predicts that Bitcoin’s dominance will continue to grow, even at the expense of other major blockchains like Ethereum and Solana. Unlike altcoins, Bitcoin benefits from continuous new capital inflow through ETFs and institutional investments.
“Bitcoin is probably the only asset that has net new buyers.”
Ethereum and Solana, on the other hand, largely rely on recycled capital from within the crypto space. Investors often move money between DeFi, NFTs, and L1/L2 projects, but there is little fresh capital entering those ecosystems. If this trend continues, Bitcoin could become even more dominant, attracting developers and investors who previously focused on Ethereum and Solana.
While Bitcoin L2s may never fully replace Ethereum and Solana, Ali believes they will become increasingly competitive as they improve in functionality. With growing security and efficiency, Bitcoin L2 solutions could eventually challenge other smart contract platforms in areas such as DeFi, gaming, and tokenization.
Which Bitcoin L2s Will Survive?
Ali expects a major shakeout in the Bitcoin L2 space over the next few years. Some projects will prove their worth, while many will collapse due to lack of adoption or funding.
Potential Winners:
✅ Stacks (STX) – Strong security, major upgrades, and continuous adoption.
✅ Babylon – Another promising Bitcoin L2 project with a focus on security and usability.
Likely to Fail:
❌ Projects that fail to secure enough liquidity or developer support.
❌ L2s that rely purely on hype without real-world use cases.
Investors and developers should be cautious about which Bitcoin L2 projects they support. Those with strong fundamentals, real utility, and long-term commitment are more likely to survive the upcoming shakeout.
Conclusion
Bitcoin L2s have the potential to transform the Bitcoin ecosystem by making transactions faster and expanding its use cases. However, as Muneeb Ali warns, most of today’s Bitcoin L2 projects won’t survive beyond the next three years.
Only the strongest projects—those with real technological innovation and sustained adoption—will emerge as long-term winners. Bitcoin’s dominance in the crypto market is growing, and while L2s could play a crucial role in its future, only a handful will stand the test of time.
FAQs
What are Bitcoin Layer-2 solutions?
Bitcoin L2s are secondary protocols built on Bitcoin to improve scalability, reduce fees, and enable new features like smart contracts and DeFi.
Why does Muneeb Ali think most Bitcoin L2 projects will fail?
Ali believes that most Bitcoin L2 projects will fail due to a lack of long-term vision, technical challenges, and shifting investor trends.
What are the strongest Bitcoin L2 projects right now?
Stacks and Babylon are among the most promising Bitcoin L2 projects due to their strong security and development roadmaps.
How does Bitcoin’s dominance affect Ethereum and Solana?
Bitcoin is attracting institutional capital, while Ethereum and Solana rely on recycled funds within the crypto market. This could lead to Bitcoin’s increased dominance.