Starknet Plans to Merge Bitcoin & Ethereum on a Single Layer: Details

Starknet unveiled plans to become the first Layer 2 (L2) network to settle transactions on both Bitcoin and Ethereum, marking a major step toward unifying the two largest blockchain ecosystems. 

The move aims to enhance Bitcoin’s functionality and expand DeFi capabilities, enabling Bitcoin users to access a wider range of financial applications while maintaining the network’s core principles of security and decentralization.

Bridging Bitcoin and Ethereum: A Bold Vision

Bitcoin, often seen as digital gold, has remained largely static—used primarily for storing value rather than interacting with decentralized finance (DeFi) applications. Starknet intends to change that dynamic by introducing scalability, smart contracts, and lower fees to the Bitcoin network.

As an L2 solution, Starknet will process transactions off-chain, bundle them into STARK proofs, and then settle them on both Bitcoin and Ethereum. This approach will allow Bitcoin to support a range of DeFi activities, including staking, lending, borrowing, and trading, without compromising security.

The Challenges Bitcoin Faces Today

Despite its dominance, Bitcoin has several limitations that hinder its broader adoption in DeFi:

• Limited Functionality – Bitcoin’s design only supports basic transactions, making it difficult to develop smart contracts and complex financial applications.
• Security Risks – Many existing Bitcoin DeFi solutions require custodial services, which introduce third-party risks (e.g., FTX, BlockFi, Celsius collapses).
• High Fees & Slow Transactions – Bitcoin’s block times and congestion issues make it expensive and inefficient for frequent transactions.

How Starknet Plans to Solve These Issues

According to the team, Starknet will act as Bitcoin’s execution layer, enabling faster and cheaper transactions while unlocking new DeFi use cases:

• Layer 2 Scaling – Bundles multiple transactions into a single proof, reducing congestion and lowering costs.
• STARK Proofs – Quantum-resistant cryptographic proofs ensure transactions are secure and trustless.
• Instant & Low-Cost Transactions – Finalizes transactions within seconds at a fraction of the cost.
• Smart Contracts on Bitcoin – Developers will be able to build staking, lending, leveraged trading, and yield farming applications natively on Bitcoin.

Key Announcements from Starknet

Starknet’s ambitious roadmap includes several major initiatives to integrate Bitcoin into its ecosystem:

• Xverse Wallet Integration – The leading Bitcoin wallet will integrate Starknet, enabling users to utilize Bitcoin assets on Starknet for the first time.
• BTCFi Season – A program designed to create new opportunities for Bitcoin holders to participate in DeFi activities on Starknet.
• Strategic Bitcoin Reserve (SBR) – StarkWare, the company behind STARK proofs, has moved a portion of its treasury into Bitcoin, solidifying its commitment to the network.

Breaking New Ground

Per reports, StarkWare has been investing in Bitcoin research and promoting the OP_CAT upgrade, a proposed soft fork that could enable native smart contracts on Bitcoin. Key developments include:

• Collider-Script – A novel approach to enforce covenants on Bitcoin, paving the way for programmable transactions.
• ZK Proofs on Bitcoin – Per reports, StarkWare successfully verified the first-ever zero-knowledge proof on Bitcoin’s Signet test network.
• BitVM – A proposed verification method that would allow Bitcoin to execute smart contract logic without modifying its base layer.

Starknet’s pivot toward Bitcoin aligns with the growing demand for secure and scalable DeFi solutions on the network. Ethereum co-founder Vitalik Buterin recently backed the idea of a high-security Bitcoin Layer 2, stating that it could “make crypto payments great again.”

Over the coming months, Starknet will roll out new partnerships, research initiatives, and incentives to drive Bitcoin adoption within its ecosystem. The BTCFi Season program will introduce rewards and opportunities for Bitcoin users to explore DeFi applications on Starknet.

Additionally, Starknet will continue advocating for Bitcoin upgrades like OP_CAT while developing alternative bridging solutions such as BitVM and multisig federated models.