Originally published on: August 04, 2024
A recent report from Galaxy Research has raised concerns about the long-term sustainability of Bitcoin layer-2 scaling networks, particularly “rollups.” While these networks have gained popularity for their ability to facilitate cheap, fast, and decentralized Bitcoin transactions, the report suggests they may not be as sustainable as initially thought.
Published on Friday, Aug. 2, the report by Galaxy analyst Gabe Parker highlighted the challenges Bitcoin rollups face, specifically the high cost of posting data to the base layer. In order to thrive, rollups must generate significant revenue from transaction fees on their networks, a task that may prove difficult given the data-intensive nature of posting to the blockchain.
Rollups work by consolidating numerous transactions into a single batch, which is then posted back to the main blockchain as a summary. While this method allows for faster and more efficient transactions, it also requires a substantial amount of data to be posted to the Bitcoin blockchain, which can drive up fees and potentially exclude smaller transactions from being processed.
According to the report, the cost of maintaining security on Bitcoin rollups could range from $460,000 to $2.3 million per month, depending on the prevailing fee environment. To address these challenges, some experts, like Alexei Zamayatin, co-founder of “Build on Bitcoin,” suggest using alternative methods for data availability that are more cost-effective than posting directly to the Bitcoin blockchain.
Overall, the Galaxy Research report underscores the importance of addressing sustainability issues in Bitcoin layer-2 networks to ensure their long-term viability. While rollups hold great promise for the future of Bitcoin transactions, finding innovative solutions to their scalability challenges will be key to their success in the evolving crypto landscape.
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