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Title: Sustainability issues of Bitcoin layer-2 rollups Introduction: A recent report from Galaxy Research has raised alarms about the long-term viability of Bitcoin layer-2 scaling solutions, particularly “rollups”. Despite their current acclaim as a method to maintain Bitcoin transactions that are affordable, speedy, and decentralized, the report underscores significant sustainability challenges. Released on August 2, the analysis by Gabe Parker of Galaxy Research identifies the high cost of data posting to the Bitcoin base layer as a central issue for rollups. For these layer-2 networks to remain viable, they must generate significant revenue from transaction fees, relying on a large user base willing to pay for their transactions.
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2. Economic Viability and Alternatives To cover data posting costs on Bitcoin, Rollups need to facilitate substantial transaction fees. For example, if Bitcoin’s transaction fees are 10 sats/vByte, monthly expenses could reach $460k, rising to $2.3m if fees increase to 50 sats/vByte. Rollups that can’t cover these costs from their transaction fees might need to use their treasuries or pivot to more cost-effective data availability layers like Celestia, Near, or Syscoin. However, this would reduce their alignment with Bitcoin, potentially transforming them into Validium chains of alternative networks. Another approach could be restructuring Layer 3 solutions, posting state differences to existing Layer 2s or sidechains, thus reducing costs while maintaining a connection to Bitcoin. Despite the high costs, using Bitcoin for data availability leverages its unparalleled security and decentralization, but only a few Rollups might sustain this model due to economic pressures.
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