Programming on Bitcoin: A Survey of Layer 1 and Layer 2 Technologies in Bitcoin Ecosystem

This paper surveys the innovative protocols designed to enhance the programming functionality of the Bitcoin blockchain, collectively forming a significant component of the esteemed “Bitcoin Ecosystem”. While Bitcoin was originally designed for peer-to-peer payments using a basic scripting language, developers have found ways to significantly expand its programming capabilities. A key milestone in this evolution is the 2021 Taproot upgrade, which introduced new cryptographic tools that made Bitcoin more private and programmable. This upgrade enabled the development of new protocols for digital assets, such as NFTs and fungible tokens, which have significantly broadened Bitcoin's capabilities beyond basic payments. At the same time, a new series of protocols has emerged within the Bitcoin ecosystem, which we categorize as Layer 2 solutions akin to Ethereum's Layer 2. These protocols further enhance Bitcoin's performance and programming capability. Although prior studies have explored Bitcoin's programming capability, there remains a lack of comprehensive review and empirical analysis of ecosystem protocols. This research bridges this gaps and offers valuable insights for both practitioners and researchers alike.