The Bitcoin ecosystem has seen a surge of interest in Layer 2 (L2) scaling solutions, with Merlin Chain emerging as one of the most discussed projects in 2025. However, despite high expectations from the community—especially among early adopters of Ordinals and Runes—the project has faced significant backlash following its much-anticipated token launch. The native token plunged from an initial ~$1 to as low as $0.15 shortly after listing, leading many to question whether "BTC L2" is more marketing than technical reality.
Adding fuel to the debate, technical experts have widely debunked the claim that most so-called Bitcoin L2s can actually post transaction proofs back to the Bitcoin mainnet for verification. Why? Because Bitcoin lacks smart contract functionality, making on-chain validation of off-chain activity impossible under current infrastructure.
Despite these challenges, Messari, a leading blockchain research firm, recently released a comprehensive report analyzing Merlin Chain’s architecture, goals, and long-term viability. The report offers a nuanced perspective that separates hype from innovation—and reveals how Merlin Chain may still play a pivotal role in Bitcoin's evolution.
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What Is Merlin Chain? Messari’s Take: A Native BTC EVM Sidechain
Contrary to popular narrative, Messari does not classify Merlin Chain as a true Bitcoin Layer 2. Instead, it defines Merlin Chain as a Bitcoin-native asset EVM sidechain—a crucial distinction.
To qualify as a Layer 2, a network typically executes transactions off-chain and posts cryptographic proofs (like ZK-proofs) back to the base layer for validation. Since Bitcoin’s Script language cannot process complex smart contracts or verify zero-knowledge proofs, this fundamental mechanism isn’t currently feasible.
So what is Merlin Chain doing instead?
It leverages Polygon’s CDK (Chain Development Kit) and partners with Lumoz, a Rollup-as-a-Service (RaaS) protocol, to build a zkValidium-based architecture. This setup allows Merlin Chain to benefit from:
- High throughput via off-chain execution
- Enhanced security through zero-knowledge proofs
- Data availability managed by a Data Availability Committee (DAC)
The DAC acts as a trusted intermediary, responsible for storing and verifying transaction data off-chain. While this improves scalability and efficiency, it introduces a level of trust not present in fully decentralized rollups.
“Merlin Chain trades some decentralization for scalability—a clear reflection of the blockchain trilemma.”
— Internal analysis based on Messari findings
Still, Merlin Chain aims to transition toward full Bitcoin settlement in the future by collaborating with projects like BitcoinOS and Nubit to develop ZK-proof verification on Bitcoin. Until then, it remains technically a sidechain—not a Layer 2.
“BTC Layer 2” – Marketing Hype or Future Reality?
At this stage, the label “Bitcoin Layer 2” appears more aspirational than accurate. As Messari highlights, the term is largely used as a marketing narrative rather than a technical descriptor.
Here’s why true BTC L2s remain elusive:
- No Smart Contract Support: Bitcoin’s scripting language doesn’t support the logic needed for fraud proofs or validity proofs.
- Withdrawal Trust Assumptions: Users must trust validators to withdraw funds safely—something true L2s aim to eliminate.
- Lack of On-Chain Verification: Without the ability to validate ZK-proofs directly on Bitcoin, finality isn’t cryptographically guaranteed by the base layer.
In contrast, sidechains like Merlin operate with independent consensus mechanisms and rely on external validators. They offer utility and speed but inherit less security from Bitcoin itself.
However, if Merlin succeeds in integrating with future Bitcoin upgrades—such as those enabled by BitcoinOS—it could evolve into a genuine L2. For now, it serves as a bridge between Bitcoin’s native assets (like Ordinals and Runes) and EVM-compatible applications.
zkProver & Zero-Knowledge Proof Infrastructure: The Path to Bitcoin Validation
Merlin Chain’s core innovation lies in its use of zkProver technology, designed to generate zero-knowledge proofs (ZKPs) that verify transaction integrity. These proofs are essential for any future transition to full L2 status.
The system operates through three key components:
Nodes
Responsible for processing transactions, nodes transmit Merkle tree data to databases and feed transaction inputs into the zkProver. They also interact with zkProver to ensure correctness before recording results.
zkProver
Using zkSNARKs, the zkProver generates validity proofs that include:
- Merkle Root
- Sibling keys (hash values from sibling nodes in a Merkle tree)
- Transaction hashes
These proofs allow efficient verification without revealing full transaction data—critical for privacy and scalability.
What Are Sibling Keys?
In a Merkle tree, sibling keys are the hash values of adjacent child nodes under the same parent. They enable lightweight clients to verify whether a specific transaction exists within a block—without downloading the entire dataset.
Database
Stores Merkle tree structures and transaction metadata, providing necessary data for proof generation. It works closely with both nodes and zkProver to maintain data consistency.
Merlin Chain is also working with Nubit to integrate a Bitcoin-native data availability layer. If successful, this would allow full and light Bitcoin nodes to participate in data validation—boosting decentralization and long-term security.
Secure Cross-Chain Bridges & Account Abstraction: Connecting BTC Wallets to EVM dApps
Interoperability is central to Merlin Chain’s value proposition. Two major collaborations enable seamless interaction between Bitcoin and EVM ecosystems:
MPC-TSS Multi-Sig Wallets for Asset Bridging
In partnership with Cobo, Merlin uses Multi-Party Computation – Threshold Signature Scheme (MPC-TSS) to secure asset transfers from Bitcoin to Merlin Chain.
Instead of a single private key, control is distributed across multiple parties. This eliminates single points of failure and ensures no single entity can compromise bridged assets.
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BTC Connect with Particle Network
Through integration with Particle Network, Merlin enables native Bitcoin wallets (e.g., Unisat, Xverse) to interact directly with EVM dApps via account abstraction (AA).
Key features:
- No need to switch wallets
- Gas fees paid automatically via Paymaster contracts
- Smooth user experience for non-EVM-native users
This opens up DeFi, NFTs, and other Web3 applications to millions of Bitcoin holders who previously lacked easy access.
Core Keywords
- Bitcoin Layer 2
- Merlin Chain
- zkValidium
- Zero-Knowledge Proofs (ZKP)
- Data Availability Committee (DAC)
- Account Abstraction
- BTC Sidechain
- Blockchain Trilemma
Frequently Asked Questions
Q: Is Merlin Chain a true Bitcoin Layer 2?
A: Not currently. It functions as an EVM-compatible sidechain using zkValidium architecture. True L2 functionality requires on-chain proof verification on Bitcoin, which isn't yet possible.
Q: Why did the Merlin token drop so sharply after launch?
A: Several factors contributed: market saturation of BTC L2 projects, skepticism around fair distribution methods (e.g., "treasure box" campaigns), and unmet expectations about technical capabilities.
Q: Can I use my Bitcoin wallet on Merlin Chain dApps?
A: Yes—thanks to account abstraction via Particle Network’s BTC Connect, native BTC wallets can interact seamlessly with EVM dApps without switching wallets.
Q: How does Merlin Chain ensure security without Bitcoin-level validation?
A: It relies on a DAC for data availability and MPC-TSS multi-sig bridges for asset protection. Future integration with BitcoinOS may enable true ZK-proof validation on Bitcoin.
Q: What’s the difference between zkRollup and zkValidium?
A: zkRollups store transaction data on-chain (high security); zkValidium stores it off-chain via DACs (higher scalability but added trust assumptions).
Q: Will Merlin Chain ever become a full BTC L2?
A: That’s the goal. With ongoing development in ZKP verification via BitcoinOS and Nubit, Merlin aims to transition once technical barriers are overcome.
Merlin Chain represents an ambitious step toward expanding Bitcoin’s utility beyond simple transfers. While not yet a true Layer 2, its hybrid model offers practical benefits today—bridging native BTC assets with the rich EVM ecosystem.
As infrastructure evolves and Bitcoin gains enhanced computational capabilities, projects like Merlin may pave the way for a new era of scalable, secure, and interoperable Bitcoin applications.
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