Between Bridge and Market: Evaluating Bitcoin Layer-2 Infrastructure Against the Architectural Conditions for Institutional DeFi

Abstract

This technical report provides an empirical evaluation of Bitcoin Layer-2 execution environments (BOB, Bitlayer, Citrea, Stacks, and Rootstock) against a six-layer architectural framework designed for institutional-grade decentralized finance (DeFi). Using Tage_Root — a purpose-built reference implementation operationalizing Bitcoin-native execution (L1) and trust-minimized bridging (L2) — the analysis assesses conditions required for credible BTC-denominated yield markets, including intent-based routing, autonomous capital allocation, zero-knowledge compliance, and accountable governance. The findings reveal that while several systems have substantially solved the bridge problem at the technical level, critical higher-layer infrastructure remains absent or weak. This architectural gap explains the persistent idleness of bridged BTC and the low capital efficiency observed in BTCFi protocols, despite significant growth in bridging capacity. The report offers a code-grounded diagnostic benchmark and lays the empirical foundation for forthcoming theoretical work on the “Bridge Problem” and the pricing of Bitcoin-denominated yield. It argues that trust-minimized execution alone is insufficient for institutional capital formation in Bitcoin DeFi.