Galaxy Research, the research arm of digital asset management company Galaxy, pointed out in a report that most Bitcoin second-layer scaling networks may be unsustainable in the long term, especially "Rollups", although they are generally regarded as maintaining Bitcoin's Coin is a promising way to make payments cheap, fast and decentralized.
In a report published on Friday (2nd), Galaxy analyst Gabe Parker emphasized that the cost of publishing data is a fundamental challenge faced by Bitcoin rollups. He explained that for Bitcoin rollups to thrive, they need to generate significant revenue from transaction fees on their own network, which must come from a large number of users willing to pay transaction fees on the second-layer network.
Source: Gabe Parker
Rollups work by compressing many transactions into a single batch and then publishing the digest of that batch back to the main blockchain. Bitcoin rollups use the blockchain as a "data availability layer" to publish enough data so that any ordinary Bitcoin node can reconstruct the latest state of the rollup network at any time. However, the storage capacity of Bitcoin blocks is limited to 4 MB. Publishing data to Bitcoin requires a large amount of data usage. Each data publishing transaction can consume up to 400 KB (0.4MB) of block space, effectively occupying the entire 10% of the block.
In anticipation of multiple Rollups publishing their data every 6 to 8 blocks, base layer fees are likely to rise significantly, which could crowd out smaller transactions. To survive, Rollups must outperform each other in generating fee revenue, as this will determine their priority in the block.
Galaxy Research estimates that in a low-fee environment (the cost of a normal transaction is 10 Sat/VB (per vByte/Satoshi), a unit of measurement for block space data), Rollups would incur a monthly fee of $460,000 to maintain Bitcoin security. sex. In a high-fee environment (50 Sat/VB), monthly costs can soar to $2.3 million.
Alexei Zamayatin, co-founder of the Hybrid Rollup project BOB, believes that Bitcoin Rollup can be as cost-effective as Ethereum Rollup, but he is opposed to using Bitcoin’s main chain to provide data availability. Instead, Zamayatin suggests using the modular blockchain project Celestia or merge-mined Bitcoin sidechains, which are less expensive but sacrifice some of Bitcoin’s fully decentralized features and security.
In response to the Galaxy report, Zamayatin said:
“If Bitcoin L2 costs 100 times more than Ethereum L2, no one will use it just because ‘it’s on the Bitcoin network.’ The good news is, they won’t be more expensive.”
Report on L1 data costs on Bitcoin from the perspective of L2s. My 2 cents (imho this is missing in the report).– No-one will post data on the L1. Use @CelestiaOrg or Bitcoin-native solutions like @babylonlabs_io @nubit_org , or a merge-mined DA sidechain.– Bitcoin L2s will… https://t.co/IU8pZ9us4s
— Alexei Zamyatin | Hiring (@alexeiZamyatin) August 2, 2024
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