Runes Protocol, which was launched simultaneously with the Bitcoin halving, has triggered a market frenzy and caused a surge in Bitcoin transaction fees. Ava Chow, a Bitcoin Core developer, believes that this will promote the development of Bitcoin Layer 2 projects.
On the 20th, Bitcoin experienced its fourth halving, and the homogenous token protocol Runes, which was launched in sync with it, has ignited a frenzy, driving up the cost of sending transactions on Bitcoin and contributing over $80 million in daily transaction fees to Bitcoin miners.
It is difficult to say whether this hot trading activity will stabilize, but some believe that in the period leading up to the next halving in 2028, the high Bitcoin transaction fees will finally popularize Bitcoin Layer 2 solutions like the Lightning Network.
Bitcoin Layer 2 solutions are gaining attention. Ava Chow, a Bitcoin Core developer, stated that anything that leads to a surge in fees could prompt people to seek other solutions. The Lightning Network is an option, as well as sidechains like Fedimint and Ark, and a range of Layer 2 solutions. The high fee environment will drive people to research and explore these alternatives.
A recent report by Messari also suggests that with the increase in on-chain activity, Bitcoin Layer 2 solutions are no longer just a luxury but a necessity. Bitcoin is no longer just digital gold but a platform that can be built upon.
The surge in Bitcoin transaction fees is not the only factor behind the rise of Ordinals. BitVM, which processes transactions off-chain, allows people to build Ethereum-like smart contracts on Bitcoin. Babylon is dedicated to creating ways to earn profits by staking BTC, and Layer 2 projects like Stacks and Merlin are becoming the core of many decentralized applications and meme coins.
What are the current challenges? After the halving, the skyrocketing transaction fees have made Layer 2 tokens perform better than BTC. However, despite the market’s desire to promote the development of Bitcoin Layer 2, this may not always be a good thing.
Ava Chow points out that users with lower Bitcoin balances may not be able to afford to use platforms like the Lightning Network due to high transaction fees. All Layer 2 solutions require on-chain transactions, and providing funds for Lightning Network payments requires establishing liquidity. Lightning Network users also have to pay for on-chain transactions, which is quite difficult in a high fee environment. However, there is a solution: custodial Lightning companies can subsidize transaction fees to encourage users to use their services.
Currently, BTC Layer 2 solutions can be roughly divided into sidechains, Rollups, and DA layers, among others. However, while exploring effective solutions, ensuring security, decentralization, and optimizing user experience remain major challenges for the future. Nevertheless, we are optimistic and look forward to the flourishing development of BTC Layer 2 technology, which has the potential to unleash more possibilities for the Bitcoin ecosystem.