The fourth Bitcoin halving event on April 19 attracted attention not only for its memorable milestone, but also for its potential impact on the future of the network. The halving of new Bitcoins created through mining has raised questions about Bitcoin's scalability and the role of layer 2 solutions.
While it is difficult to predict whether this activity will sustain, some believe that “Era V” – the period leading up to the next halving in 2028 – will be when Bitcoin layer 2 solutions like Lightning Network really exploded.
Launched at the same time as the halving, the Runes protocol that allows creating meme coins on Bitcoin has contributed to the creation of hundreds of new tokens, bringing in more than $80 million in fees to miners. This increased trading activity also pushed Bitcoin transaction costs to an average above $70, up more than 1,300% from the previous 30-day average, according to TokenTerminal.
On April 20, Bitcoin fees hit a record high of $128
Ava Chow, Bitcoin Core developer, believes that rising transaction fees will push users to look for alternatives such as Lightning Network, Fedimint, Ark and other layer 2s. Messari's report agrees, saying that with on-chain activity increasing, layer 2 solutions are no longer a luxury but a necessity.
This change in thinking is driven by the Ordinals protocol, which allows data to be stored on satoshis, the smallest unit of BTC. More than $3 billion in revenue from Ordinal “inscription” sales and a transaction count of nearly 2 million shows Bitcoin's potential as a platform to build on.
However, Ordinals is not the only factor pushing up Bitcoin fees. BitVM – a protocol for off-chain computing, allowing people to build Ethereum-like smart contracts on top of Bitcoin. Babylon is building a way to stake and earn profits on BTC. Layer 2 solutions like Stacks and Merlin are becoming the breeding ground for decentralized applications and meme coins. Even tokens related to Layer 2 Bitcoin have outperformed BTC after the halving, for example Stack's STX increased by nearly 20%.
Current Bitcoin ecosystem
However, moving to layer 2 also has challenges. Users with low Bitcoin balances may have difficulty using platforms like the Lightning Network. This is a consequence of the previous “Block Size War”, when the community decided to extend the chain through layer 2 instead of increasing the Bitcoin block size.
Bitcoin halving has given new impetus to the development of layer 2 solutions. However, accessibility and scalability challenges still need to be addressed to ensure a sustainable future for the network Bitcoin.