Bitcoin's layer-2 scaling networks, particularly rollups, might not be sustainable long-term. That's the word from Galaxy Research in a new report. Despite their popularity as a method to keep Bitcoin payments cheap, fast, and decentralized, these networks face significant challenges.
Gabe Parker, a Galaxy analyst, highlighted the cost of posting data as a key issue. He explained this in the report published on Friday. Bitcoin rollups use the blockchain as a "data availability layer". They post enough data for any Bitcoin node to reconstruct the rollup network's state.
But here's the rub: Bitcoin blocks have a 4 megabyte (MB) storage limit. Each data posting transaction can use up to 0.4MB. That's a whopping 10% of a block. With multiple rollups expected to post data frequently, base-layer fees could skyrocket.
To survive, rollups need to generate substantial revenue from their own network fees. This revenue must come from users willing to pay for layer-2 transactions. It's a dog-eat-dog world out there. Rollups must outdo each other in fee generation to secure block space priority.
Galaxy Research crunched the numbers. In a low-fee environment, rollups could face monthly expenses of $460,000 to maintain Bitcoin's security. In high-fee scenarios, this could balloon to $2.3 million per month. Yikes!
Rollups work by compressing many transactions into a single batch. They then post a summary back to the main blockchain. It's clever, but is it sustainable?
Alexei Zamayatin, co-founder of "Build on Bitcoin" (BOB), chimed in on Twitter. He believes Bitcoin rollups can be as cost-effective as Ethereum rollups. However, he argues against using Bitcoin's main chain for data availability.
Instead, Zamayatin suggests using Celestia or a merge-mined Bitcoin sidechain. It's cheaper, but there's a catch. This approach sacrifices some of Bitcoin's complete decentralization and security. Talk about being stuck between a rock and a hard place.
"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," Zamayatin tweeted. Bold claim, mate.
The future of Bitcoin rollups hangs in the balance. It'll depend on continued innovation in data compression and scalability. The race is on, and only time will tell who'll come out on top. One thing's for sure: it's gonna be one hell of a ride.