Recent technological advances, including ordinals, inscriptions, BRC-20 tokens, and runes, have intensified discussions about Bitcoin scalability solutions. According to a novel report published by Binance Research, the average transaction fee for Bitcoin has increased from $1.50 in 2022 to $4.20 in 2023 and has reached $9.50 so far in 2024.
, with a market valuation of approximately $450 billion, boasts a total value locked (TVL) of approximately $45 billion across various Layer 2 (L2) solutions, representing 10% of Ethereum’s total value. In contrast, Bitcoin valued at $1.4 trillion has only about $2 billion in L2 TVL, which is just 0.13% of Bitcoin’s total value.
“Key factors in evaluating Bitcoin scalability solutions include how they solve the trustless two-way bridge problem, their relationship and alignment to the Bitcoin base layer, potential fork requirements, and the level of incentive alignment among users, developers, and newcomers to the cryptocurrency space ” – said Binance Research.
The development of core Bitcoin technologies at the infrastructure level, such as Taproot and BitVM, has expanded the range of protocols that can be built on top of Bitcoin. While many of these implementations are still in vogue, this has not discouraged projects from creating solutions to Bitcoin’s scaling challenges.
“Bitcoin-native projects such as Lightning Network and RGB aim to enhance Bitcoin’s peer-to-peer transaction capabilities and introduce smart contract functionality while maintaining Bitcoin’s core integrity,” Binance Research noted. The Lightning network has been relatively successful, while RGB is still in development.
Moreover, various other scaling solutions are emerging, including sidechains and Layer 1 EVMs, which apply bridged BTC as staked assets to secure their chains. Despite some exploitation of Bitcoin’s economic security, bridged versions of Bitcoin often contain centralized components and cannot truly claim to have inherited most of Bitcoin’s security.
Elsewhere, zero-knowledge rollups have recently entered the Bitcoin Layer 2 scene, leveraging BitVM technology to more securely validate bulk data compared to other scaling solutions that merely place a hash of their block data into Bitcoin blocks. These rollups are believed to inherit Bitcoin’s greatest security at this stage.
“The coming months promise to be an exciting period with significant events expected,” concluded Binance Research.
