A new report from Galaxy Research has raised questions about the long-term sustainability of Bitcoin’s second-layer (L2) network scaling solutions, especially Rollup technology, which has been widely embraced by the market for its ability to provide low-cost, high-speed, and decentralized transactions.
The report suggests that although Rollup technology has shown great potential in its early stages, it may face challenges such as economic issues due to the limitations of Bitcoin block space and rising costs.
These challenges may have a significant impact on the future of Rollup technology and deserve our in-depth attention and discussion.
High cost and tight block space
The Bitcoin network’s block space is limited to 4MB per block, which poses a significant challenge to Rollup technology that relies on the Bitcoin network as a data availability (DA) layer. In particular, Rollup, which uses zero-knowledge (ZK) proofs, plans to securely anchor its data in Bitcoin by publishing proof outputs (transaction results) and status differences (changes in the number of tokens) every 6 to 8 blocks. on the coin’s layer 1 (L1) blockchain.
However, the block data released by Rollup technology takes up to 400KB of space for a single transaction, which occupies about 10% of the space of the Bitcoin block. Therefore, since January 2023, the Bitcoin block data has been fully loaded, resulting in a surge in transaction fees due to space compression, which has also brought unsustainable economic pressure to Rollup users and other traders.
The report further emphasizes that Rollup, which relies on the Bitcoin network for data availability verification (DA), must generate enough revenue from transaction fees to cover the high cost of publishing block data. For example, at an average fee of 10 sats/vByte, Rollup needs to publish 400KB of data every 6 to 8 blocks, which is equivalent to a monthly consumption of up to $460,000 and an annual consumption of approximately $5.5 million. If the rate rises to 50 sats/vByte, the cost will surge to $2.3 million per month and $27.6 million per year.
Therefore, in order to achieve financial balance, Rollup needs to attract a large number of users who must be willing to pay transaction fees ranging from $0.05 to $0.23, depending on the fee environment. This economic model puts a great test on Rollup's user base and transaction volume, and also exposes its sustainability issues under the current conditions of the Bitcoin network.
Exploring alternatives and restructuring
Faced with rising financial costs, the report suggests that Rollup technology may need to consider alternatives to other data availability (DA) layers. For example, turning to platforms such as Celestia, Near, or Syscoin, which may provide more cost-effective solutions. However, this shift may weaken Rollup's close ties with the Bitcoin blockchain, causing them to shift from Bitcoin-based Rollup to an independent Validium chain.
In addition, the report also proposed another possible solution, which is to rebuild Rollup technology as a third-layer (Layer 3) solution. In this model, Rollup can publish state differences (changes in the number of tokens) to existing second-layer (L2) extensions or side chains. This approach can maintain connectivity to the Bitcoin network while reducing the cost of data publishing.
Ultimately, the report concludes that the future of Bitcoin Rollup technology depends on how they find a balance between two major challenges. One is how to deal with the high cost of network security infrastructure, and the other is how to attract users and generate revenue to cover these costs. In short, Rollup technology must achieve economic sustainability while ensuring network security and attracting users. #比特币 #Layer-2 #Rollup技术
Conclusion:
While Bitcoin's Layer-2 Rollup technology improves transaction efficiency, it also faces severe challenges in terms of cost and space limitations. These challenges require us to deeply reflect on the existing economic model and seek innovative solutions to ensure the long-term sustainability of the technology.
However, the continued advancement of technology requires extensive community participation and unremitting efforts from developers. By exploring new technical paths and economic model sustainability, Rollup technology is expected to achieve more robust and widespread applications in the Bitcoin ecosystem, aiming to contribute new strength to the development of blockchain technology.
