Key Takeaways:
Botanix Labs is shutting down its Bitcoin Layer 2 network less than a year after mainnet launch, citing insufficient fee revenue and weak DeFi adoption.
Botanix Labs will shut down its Bitcoin Layer 2 network on July 9, giving users 30 days to withdraw assets after failing to generate sustainable fee revenue. The EVM-compatible sidechain launched on mainnet July 1, 2025, and operated for roughly 11 months before the team concluded the business model was not viable.
"The project was unable to validate sufficient demand for a Bitcoin-native blockchain solution," the team said in a statement. Users have increasingly favored convenience over decentralization, with most Bitcoin DeFi demand already met by alternatives such as Wrapped Bitcoin and general-purpose Layer 2 environments on other networks.
The network launched with 16 node operators including Galaxy, Fireblocks, Alchemy and Antpool, plus integrations with Chainlink and GMX. It never issued a native token, instead requiring users to pay gas fees in Bitcoin — a design choice that limited the project's ability to bootstrap liquidity through incentives. Non-BTC assets left on the network after the July 9 deadline will be permanently lost, while Bitcoin will be transferred to a federation of validators.
The shutdown highlights the structural challenges facing Bitcoin L2 projects competing against Ethereum's DeFi ecosystem and tokenized Bitcoin products. WBTC, which tokenizes Bitcoin on Ethereum, has captured a significant share of Bitcoin DeFi activity by offering access to Ethereum's DeFi infrastructure without requiring users to leave the Bitcoin ecosystem. Botanix's decision not to launch a native token contrasts with most successful L2 ecosystems, which have used token incentives to bootstrap initial liquidity and user activity.
What the shutdown means for Bitcoin L2s
The closure comes as the broader crypto market faces headwinds. Bitcoin has fallen 21% this year, according to CoinGecko, while Ethereum, Solana and XRP have dropped 33%, 37% and 31% respectively. Bitwise Chief Investment Officer Matt Hougan described the current environment as a "contrarian investment" phase, where funds are abandoning speculative hype and turning to targets with strong fundamentals.
The challenging funding environment for Bitcoin-focused infrastructure projects has made it difficult for native L2s to secure the capital needed to sustain development. Botanix's spiderchain technology, designed to enhance Bitcoin's programmability while preserving its security properties, was not enough to attract sufficient user activity or transaction volume.
Withdrawal mechanics and user risk
The roughly 30-day window between the June 10 announcement and the July 9 deadline creates urgency for users who may not be actively monitoring the project. Bitcoin holders who miss the deadline will see their assets transferred to a federation of validators, while holders of any other tokens face permanent loss with no recovery mechanism. The project has urged all users to withdraw their funds promptly through official channels.
This article is for informational purposes only and does not constitute investment advice.
