Bitcoin rollups require up to $2.3M/month in high-fee scenarios to remain viable.
Each rollup data posting can consume 10% of a Bitcoin block's capacity.
BitcoinOS aims for 10x transaction scale using zero-knowledge proofs.
A recent analysis by Galaxy Research has shed light on the potential difficulties that Bitcoin layer-2 scaling solutions, specifically rollups, might encounter. Rollups are mechanisms where transactions are processed off-chain and later consolidated into the base layer, and have been a pivotal technology for Ethereum. However, their adaptation to Bitcoin's architecture presents unique challenges due to the limited block space and high data posting costs.
https://twitter.com/intangiblecoins/status/1819356123247370448
Gabe Parker from Galaxy highlights that Bitcoin rollups must accumulate substantial fee revenue from their networks to afford the costs associated with data posting to the blockchain. This requirement emerges from the necessity to post transaction data to the blockchain, allowing anyone running a Bitcoin node to verify the state of the layer-2 network. The reality that each data posting could use up to 10% of a block's capacity underscores the intense competition for space on Bitcoin’s ledger.
Economic Viability of Bitcoin Rollups
Galaxy’s report details the financial burdens of operating rollups on Bitcoin. In environments with low base-layer transaction fees, such as 10 satoshis per vByte, monthly rollup costs can reach around $460,000. This expense dramatically increases in high-fee scenarios, potentially escalating to $2.3 million per month, driven by increased demand for block space for activities such as creating Ordinals or tokens.
These costs will inevitably impact the economic feasibility of Bitcoin rollups. Only those that can generate enough transaction fee revenue to secure block space may remain viable. This economic model could lead to a situation where only the most popular and heavily used rollups can sustain their operations over time.
Technological Prospects and Innovations
Despite the financial hurdles, technological advancements could improve the outlook for Bitcoin rollups. BitcoinOS, a project that pioneered the use of zero-knowledge proofs on Bitcoin, anticipates significant scaling improvements that could lower the cost per transaction. The ongoing research into data compression and optimization techniques also promises to reduce the size of zk-proof and state difference data, which are critical components of each transaction's data footprint on the blockchain.
Furthermore, alternative strategies for enhancing Bitcoin layer-2 solutions are being explored. Alexei Zamayatin, co-founder of the “Build on Bitcoin” (BOB) system, suggests not using Bitcoin’s main chain for data availability to cut costs. Instead, he proposes using platforms like Celestia or merge-mined Bitcoin sidechains, which could offer cheaper solutions at the expense of some decentralization and security.
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The post Galaxy Research Predicts Sustainability Challenges for Most Bitcoin Layer-2 Networks appeared first on Crypto News Land.
