The Runes protocol has highlighted the urgent need for Bitcoin layer-2 (L2) solutions. Runes are a new token standard on the Bitcoin blockchain that allows users to create fungible tokens. However, the popularity of Runes has led to extremely high transaction fees and network congestion. According to a Dune Analytics dashboard, Runes transactions account for 68% of all Bitcoin transactions since the protocol launched. The introduction of Runes has also resulted in a significant increase in Bitcoin fees, reflecting the demand for L2 scaling solutions.
Rena Shah, VP of Products and Operations at Trust Machines, believes that a “Bitcoin L2 summer” is underway, which will bring more scaling solutions to the network. She compares it to the Ethereum community embracing L2s when transaction fees became unaffordable for daily use.
Several Bitcoin L2 solutions are currently being developed to address these needs. Rootstock is one such solution that combines the security of Bitcoin with the programmability of Ethereum. It allows developers to port Ethereum contracts on top of Bitcoin. The Stacks network is another well-known Bitcoin L2 that uses a proof-of-transfer consensus mechanism parallel to Bitcoin’s proof-of-work. It will soon receive a major upgrade that will make it a usable Bitcoin L2 with faster block times and improved security.
Alexei Zamyatin, co-founder of Build on Bitcoin (BOB), estimates that at least 40 Bitcoin L2 solutions have recently been announced. BOB, a hybrid L2 solution, will launch its mainnet on May 1, combining Bitcoin features with Ethereum’s innovation capabilities.
These Bitcoin L2 solutions not only enhance the Bitcoin network but also have the potential to improve the functionality of Runes. They can extend the use cases of Runes and make them more composable with other Bitcoin data. Additionally, Coinweb is about to activate its unifying L2 computation layer on top of Bitcoin, allowing users to run smart contracts on Bitcoin using their existing wallets. This, combined with settlement in native Bitcoin, will be a game changer.
It’s important to note that while many Bitcoin L2 solutions are being developed, some may be purely for hype. Rootstock believes that for a blockchain to be considered a Bitcoin L2, it must use BTC as its native asset, use Bitcoin as a settlement mechanism, and demonstrate a functional dependence on Bitcoin. Anything else is just affinity marketing.