Is the "Medium of Exchange" narrative dying due to L2 dominance?

[aldianoktoey]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

[UchihaSarada]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

The majority of daily transactions will be on the main chain, Bitcoin blockchain while Lightning Network or other side chains will be supplementary ones but will not become main one.

Sidechain Observer - Bitcoin L2 Projects & current state of development.
Bitcoin layer two resources.

[(BTC)]

When something is considered a store of value, not many people care about how fast it can be transmitted. Bitcoin is slow compared to altcoins and even it's L2, but people are content because it's bitcoin that's being transmitted.

People dealt with gold even though transmitting it was way harder than fiat, stocks, and even other precious metals depending on how you frame it from a geopolitical and transporation logistics perspective. Bitcoin is lightspeed compared to moving gold when you look at movements of 1M+ $USD. It's insane.

L2 dominance won't ever be a thing when bitcoin is in the picture. Some of them have uses, but won't ever beat bitcoin value-wise.

[rat03gopoh]

L1 doesn't prioritize speed, but network security. L2s may offer that, but they sacrifice some other aspects. Now, TPS is no longer important; finality is what matters. Once you complete a transaction, you don't have to worry about having to go through another (more technical) settlement.

We've never actually lost the narrative of L1's superiority; now Iran is pushing back the narrative naturally as a solution to their problems.

[arzuo]

While your assumption is somewhat correct, it also contains some important observations!

In fact, it makes sense to view Bitcoin not as a financial system, but rather as the foundation of a robust financial structure.
In my opinion, if the goal is to buy and sell coffee and the occasional L1 shutdown occurs, the actual economic activity on-chain does not stop; the on-chain structure is compressed but its progress is not hindered.

Therefore, any reduction in volatility or the use of staking does not indicate uncertainty, but rather successful scaling.

[Smartprofit]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

I think this is a very interesting topic! 🙋 The thing is, Bitcoin is such a complex entity that it's practically impossible to understand it using old concepts. And it's worth noting that this is how people are used to understanding the world (using old analogies).

So, what is Bitcoin? A means of payment? Digital gold? Digital diamonds? A protocol for transferring value in virtual space? A store of value? An underlying asset for spot ETFs? A component of central bank reserves? A complex computer virus for the modern financial system?

Since we don't understand the ultimate goal of Bitcoin's evolution, we don't know how to evaluate certain events (positively or negatively).

For example, are the ultra-low fees on the Bitcoin network already a disaster for the first cryptocurrency or not? Or (perhaps) within the logic of Bitcoin's evolution, this circumstance is completely irrelevant? Is it good or bad that Iran wants to accept Bitcoin as payment for oil transit through the Strait of Hormuz?  We don't know, perhaps this will lead to new controls over blockchain transactions...

Similarly, we can't objectively assess the impact of spot Bitcoin ETFs on Bitcoin's long-term success. Is Michael Saylor Bitcoin's savior or its killer?

Perhaps those of us who live to see 2050 will be able to answer the question: what is Bitcoin? As for the present, in my opinion, there is no definitive answer. There is only faith in Bitcoin's bright future among Bitcoin maximalists and crypto enthusiasts. But faith is merely a figment of magical thinking (when the scientific approach 🧑‍🔬 fails for some reason). We don't know for sure, so we believe. 🧖

P.S.

And if we can't answer the question of what Bitcoin is, then we can't adequately assess the prospects of second-layer (L2) solutions. Perhaps this is a dead end for Bitcoin's evolution. We don't know for sure.

[hd49728]

I think this is a very interesting topic! 🙋 The thing is, Bitcoin is such a complex entity that it's practically impossible to understand it using old concepts. And it's worth noting that this is how people are used to understanding the world (using old analogies).

So, what is Bitcoin? A means of payment? Digital gold? Digital diamonds? A protocol for transferring value in virtual space? A store of value? An underlying asset for spot ETFs? A component of central bank reserves? A complex computer virus for the modern financial system?

Since we don't understand the ultimate goal of Bitcoin's evolution, we don't know how to evaluate certain events (positively or negatively).

Whatever term you use to call Bitcoin and think it is a Bitcoin usecase are all not too important with Bitcoin. Bitcoin is just Bitcoin, and it has many use cases that are opened for everyone to use Bitcoin in their own favorite ways and for practical needs.

It's endless to try finding agreement with other people about a good or best term to say about Bitcoin, and its use case. It's impossible so let's forget about it, and just know that with any term, any use case, they are all good contributors to bring Bitcoin to more people, more institutional investors, more companies, more nations and governments and they all together make Bitcoin adoption grows bigger with time.

The bullish case for Bitcoin.
An accounting revolution with Bitcoin.

[Nathrixxx]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

Each of these channel play a unique role when it comes to making transactions, are we considering it from our business perspective whereby we adopt for the layer 2 implementation or we consider for an individual or personal use for the onchain transaction.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value?

Onchain transaction is still going to be more relevant and we only have to figure this out by the need to why everyone making transaction should go through either layer 2 or onchain transaction as preference.

[KingsDen]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

It is because the onchain velocity will not be enough to handle too many transactions or let's say all the bitcoin transactions, that is the reason behind the L2 solutions. Now that the L2 solutions are functioning while they were invented (relieving the burden of coffee kind of transactions on the main chain), we shouldn't complain, rather use the main chain for the security purpose which should be it's most important function.

Besides, the L2 solutions isn't still widely accepted and they come mostly with soft forks and additional protocols to make them function well.  So, I think many people apart from whales and institutions still interact with the main chain.

[retreat]

L2 solutions are preferred for daily transactions because they offer users faster transaction speeds, as transactions don't need to be validated directly on the mainnet. This reduces confirmation times, as no one wants to wait several minutes and pay higher fees just to buy a cup of coffee.

However, even if some people use L2 solutions for faster transaction processing, this doesn't affect Bitcoin as a secure and reliable medium of exchange, as L2 still has its drawbacks and isn't as reliable as L1.

[Alphakilo]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

Due to technical advancement and adjustments of rising adoption and investment in Bitcoin, it is important to note that the L1 solution is evolving to fit the massive block size of transactions on the network, because as it is known, the L1 solution has a limit and using that mostly as a payment solution for businesses would always be hectic and pose a problem of inefficiency.
The evolution is leading to the use of more secondary layers like L2 solution, which suits the velocity of money being transacted on the network because that's what makes up for its current utility value.

[Darker45]

Quite frankly, this narrative has already been dying from the very beginning. This was already a significant issue back then because of ridiculous fees and delayed confirmation. If anything, on the contrary, we have a much improved situation recently. We can send high priority transactions with only 1 Sat/vB today.

The dying "medium of exchange" narrative early on was precisely the reason why the development of the Lightning network was somehow urgent. It was a response to Bitcoin's impracticality as a day-to-day medium of exchange. So, Bitcoin's dying "medium of exchange" narrative doesn't come after L2 dominance; it came before.

Interestingly, since L2 dominance would take a considerable amount of load from the mempool, the main network itself would become an attractive option for transactions. So, because of L2 dominance, Bitcoin's "medium of exchange" narrative would get resuscitated instead of being rendered dying.

[tbct_mt2]

Quite frankly, this narrative has already been dying from the very beginning. This was already a significant issue back then because of ridiculous fees and delayed confirmation. If anything, on the contrary, we have a much improved situation recently. We can send high priority transactions with only 1 Sat/vB today.

1 sat/vbyte for transactions to have a first confirmation in a next block is quite popular in recent months, and it's a very good fee rate to use compares to how considerable higher fee rates Bitcoin users had to use in past years.

They even can get a first confirmation quickly for their transaction with fee rate lower than 1 sat/vbyte but they must check Bitcoin mempools and choose a proper fee rate for their favorite waiting time.
How to make a bitcoin transaction and pay less than 1 sat/vByte.
LoyceV's 0.1 sat/vbyte Electrum Server Adventure.

[X-ray]

Each layer have different purpose. An L2 is faster because it is a less secure blockchain than the L1. People who are doing daily transaction don't mind that in exchange for speed because daily transaction don't need that much security to guarantee the transaction.

Institutional and whales need security because each transaction carry big value. I do think that it's already the best for L1 and L2 in their own respective utility. But frankly, Bitcoin is already very cheap that we don't really need L2 in the mean time.

I prefer it this way than seeing the blockchain getting spammed like before.

[LoyceV]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026.

Where have "we" seen this? I haven't seen it at all!

[pawanjain]

We’ve seen massive growth in Layer 2 solutions and sidechains throughout 2025 and early 2026. While this is great for scalability, it feels like the main chain is strictly becoming a "settlement layer" for institutions and whales.

If the majority of daily transactions (coffee, retail, etc.) move to Lightning or other L2s, does the on-chain velocity even matter anymore for Bitcoin's fundamental value? I'd love to hear your thoughts on whether we should stop looking at on-chain volume as a health metric for "money velocity.

The medium of exchange will remain the same and that is bitcoin. The velocity might reduce on the main blockchain but I don't think that will matter much.
At the end of the day, the opening and closing channels will still have to go through the main blockchain and that will keep the main blockchain running long.
L2 layer development is a good thing for the bitcoin community as it scales bitcoin and helps in decreasing the overall fees.