The launch of the Runes protocol has highlighted the need for Bitcoin layer-2 (L2) solutions. Runes are a new Bitcoin token standard that allows users to create fungible tokens on the Bitcoin blockchain. However, the popularity of Runes has led to high transaction fees and network congestion. According to a report by Spartan Group, the introduction of Runes has resulted in a significant increase in Bitcoin fees. This increased activity on the Bitcoin network has underscored the demand for L2 scaling solutions.
Rena Shah, VP of Products and Operations at Trust Machines, believes that a “Bitcoin L2 summer” is underway and that there will be a surge of scaling solutions. She draws a parallel to the Ethereum network, where the community quickly embraced L2 solutions when transaction fees became too high.
Several Bitcoin L2 solutions are currently in development to address these needs. Rootstock is a Bitcoin L2 solution that combines the security of Bitcoin with the programmability of Ethereum. It allows developers to port Ethereum contracts on top of Bitcoin. Another well-known Bitcoin L2 is the Stacks network, which uses a proof-of-transfer consensus mechanism parallel to Bitcoin’s proof-of-work consensus.
Other Bitcoin L2 solutions, such as Build on Bitcoin (BOB), are also in the works. BOB combines Bitcoin features with Ethereum’s innovation capabilities, like EVM and smart contracts.
These L2 solutions not only improve the scalability of the Bitcoin network but also have implications for Runes. They can extend the functionality of Runes and make them more useful by adding mechanisms such as collateralization and incentive mechanisms. Additionally, Coinweb is about to activate its L2 computation layer on top of Bitcoin, allowing users to run smart contracts on Bitcoin using their existing wallets.
However, it is important to note that not all Bitcoin L2 solutions being developed may be practical. According to Daniel Fogg, CEO of Rootstock Labs, a true Bitcoin L2 should use BTC as its native asset, use Bitcoin as a settlement mechanism, and demonstrate a functional dependence on Bitcoin.
Overall, the launch of the Runes protocol has highlighted the need for Bitcoin L2 solutions, and several solutions are currently in development to address this demand. These solutions have the potential to improve the scalability and functionality of the Bitcoin network, as well as enhance the utility of tokens like Runes.