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This article investigates the financial and operational obstacles faced by Bitcoinâs L2 scaling solutions, providing a comprehensive analysis of potential alternatives and strategies for sustainability.
Bitcoinâs fixed block space, limited to 4 MB per block, poses significant challenges for rollup solutions that aim to interface with Bitcoinâs secure Layer 1 (L1) network using zero-knowledge (ZK) proofs. Each data submission can be as large as 400 KB, consuming roughly 10% of a Bitcoin blockâs capacity. This limitation has been exacerbated by fully utilized Bitcoin blocks since January 2023, driving up transaction fees and making rollups financially burdensome.
Galaxy Research points out that rollups utilizing Bitcoin as a data availability (DA) layer need to cover sizable data submission costs through transaction fees. To illustrate, a rollup transmitting 400 KB of data every 6-8 blocks at an average fee rate of 10 sats/vByte might incur monthly expenses around $460,000, scaling up to approximately $5.5 million per year. If the fee rate spikes to 50 sats/vByte, these expenses could rise dramatically to $2.3 million monthly, or around $27.6 million yearly. In this scenario, user transaction fees could range from $0.05 to $0.23.
Facing these financial pressures, the report suggests several cost-effective alternatives for data availability such as Celestia, Near, or Syscoin. However, adopting these solutions could impact compatibility with Bitcoin, potentially transforming rollups into Validium Blockchains rather than authentic Bitcoin rollups. Another promising approach is to evolve rollups into Layer 3 solutions, which can transmit state differences to an existing Layer 2 or sidechain, thereby reducing data submission costs while retaining some connectivity to the Bitcoin network.
To effectively tackle these economic challenges, Bitcoin rollups should consider the following strategies:
The report concludes that Bitcoin rollupsâ future depends on their ability to manage the high costs of leveraging the Bitcoin networkâs secure infrastructure, attract users, and generate sufficient revenue. Sustainable strategies and innovative solutions are essential to overcoming these scalability obstacles.
Summarizing, Bitcoin rollups face substantial economic and operational hurdles due to block space limitations and high transaction fees. Exploring alternative data availability solutions and evolving into Layer 3 systems might offer viable paths forward. However, sustainable and innovative revenue strategies are crucial for navigating these challenges and securing their future viability in the Bitcoin network ecosystem.
The post Bitcoin Rollups Face Economic Hurdles Amid High Costs and Limited Block Space: Galaxy Research Report appeared first on COINOTAG NEWS.
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