Fun

Galaxy Research warns of sustainability issues for Bitcoin layer-2 rollups

News Feed - 2024-08-04 10:08:54

Amaka Nwaokocha10 hours agoGalaxy Research warns of sustainability issues for Bitcoin layer-2 rollupsThe future of Bitcoin rollups will depend on continued innovation and optimization in data compression and scalability.23862 Total views29 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTCOINTELEGRAPH IN YOUR SOCIAL FEEDFollow ourSubscribe onA Galaxy Research report has suggested that most Bitcoin layer-2 scaling networks, particularly “rollups,” may not be sustainable in the long term despite their popularity as a promising method to keep Bitcoin payments cheap, fast and decentralized. 


In the report published on Friday, Aug. 2, Galaxy analyst Gabe Parker highlighted the cost of posting data as a fundamental challenge Bitcoin rollups face that post data to the base layer.Challenges facing Bitcoin rollups


Parker explained that for Bitcoin rollups to thrive, they must generate substantial revenue from transaction fees on their own networks. This revenue must come from many users willing to pay for transactions on the layer-2 networks.


Rollups work by taking a large number of transactions, compressing them into a single batch, and then posting a summary of this batch back to the main blockchain.Source: Alexei Zamyatin


Bitcoin rollups utilize the blockchain as a “data availability layer,” posting sufficient data to allow any ordinary Bitcoin node to reconstruct the most recent state of the rollup network at any time.


However, Bitcoin blocks have a storage capacity limit of 4 megabytes (MB), and posting data to Bitcoin demands significant data usage. Each data posting transaction can consume up to 400 kilobytes (0.4MB) of block space, effectively occupying 10% of an entire block.Survival of the fittest


With multiple rollups expected to post their data every six to eight blocks, base-layer fees could rise significantly, potentially pricing out smaller transactions. To survive, rollups must outdo one another in generating fee revenue, as this will determine their priority in the blocks.


Related:Everything Bitcoin: L2s see wave of adoption, but security needs to catch up


Galaxy Research estimated that in a low-fee environment, where ordinary transactions cost ten sat/VB (satoshis per vByte)- a unit of block space data), rollups would incur monthly expenses of $460,000 to maintain Bitcoin’s security. In high-fee environments of 50 sat/VB, monthly costs could soar to $2.3 million.


Alexei Zamayatin, co-founder of “Build on Bitcoin” (BOB), a hybrid rollup intended to connect Ethereum and Bitcoin, believes Bitcoin rollups can be as cost-effective as Ethereum rollups but argues against using Bitcoin’s main chain for data availability.


Instead, Zamayatin recommends using Celestia or a merge-mined Bitcoin sidechain, which, while cheaper, sacrifices some of Bitcoin’s complete decentralization and security.


Zamayatin responded to the Galaxy report on Twitter, stating, “No one will use Bitcoin L2s if they are 100x more expensive than Ethereum L2s, just because ‘it is on Bitcoin.’ Good news: They won’t be more expensive.”


Magazine:‘Elon Musk at Bitcoin 2024’ scam, Lazarus Group hacks, MOG phishing: Crypto-Sec# Bitcoin# Blockchain# Cryptocurrencies# Bitcoin Analysis# Tech Analysis# Web3# Layer2Add reaction

News Feed

Derek Andersen2 hours agoCoinbase takes equity stake in Circle as USDC Centre Consortium shuts downCircle will take on full operational and governance responsibility after five years, thanks to increased regulatory clari
Russia, Ukraine Shut Down Several Cryptocurrency Farms
Russia, Ukraine Shut Down Several Cryptocurrency Farms Authorities in Russia and Ukraine have closed down a number of illegal crypto mining facilities allegedly powered by stolen e
Turner Wright7 hours agoBinance says it ‘continues to serve’ Belgian users via Poland entityIn June, Belgium’s financial regulator ordered Binance to stop offering crypto exchange and custody wallet services, citin
Turner Wright6 hours agoFormer SEC chair says spot Bitcoin ETF approval is ‘inevitable’ despite delaysThe commission has another 45 days to approve, deny or delay spot Bitcoin exchange-traded fund applications from s
Binance Announces New Payments Partner Amid Fiat Deposit and Withdrawal Suspension in Brazil
Binance Announces New Payments Partner Amid Fiat Deposit and Withdrawal Suspension in Brazil Binance has chosen a new payments partner amid the suspension of direct fiat deposits a
Ethereum Reclaims Pivotal Level – Key Resistance Around $2,650
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
Hash Power Broker Nicehash Denies It Enables 51% Attacks on ETC Network
Hash Power Broker Nicehash Denies It Enables 51% Attacks on ETC NetworkHash power broker Nicehash denies that it enables bad actors to use its hash renting platform to launch 51% at
German gov’t transfers another $900M in Bitcoin, adding to BTC’s selling pressure
Nancy Lubale2 hours agoGerman gov’t transfers another $900M in Bitcoin, adding to BTC’s selling pressureRepeated Bitcoin transfers to centralized exchanges suggest the German government plans to sell the remaining $1
Aptos Labs, NBCUniversal partner for Web3 fan experiences, gaming
Derek Andersen2 hours agoAptos Labs, NBCUniversal partner for Web3 fan experiences, gamingMore fun is in store for filmgoers like Free Renfield The Game and the Excorcist 3: Believer premiums.288 Total viewsListen to art
Dogecoin Flashes Oversold Signal—Rebound Ahead?
Este artículo también está disponible en español. Dogecoin has once again dipped into oversold territory on its 4-hour chart on Tuesday, marking the most pronounced level
Ripple Sued by 13 Australian Banks for Trademark Infringement
Ripple Sued by 13 Australian Banks for Trademark InfringementRipple Labs Inc. is being sued in an Australian court for allegedly infringing a trademark belonging to several local ba
Bitcoin Rise in First Month of 2023 Moves Crypto Fear Index From ‘Extreme Fear’ to ‘Greed’
Bitcoin Rise in First Month of 2023 Moves Crypto Fear Index From "Extreme Fear" to "Greed" Last month, statistics showed that the Crypto Fear and Greed Index (CFGI) had a score of