Galaxy Digital Issues Warning on Bitcoin’s Layer-2

Galaxy Digital is warning that Bitcoin layer-2 solutions might face significant financial challenges due to increased transaction fees.

In a recent research update, the firm highlighted that Bitcoin’s blocks—where data is stored and encrypted—are becoming overcrowded due to high demand.

Galaxy Digital forecasts that layer-2 projects, known as rollups, will likely encounter higher costs for block inclusion as competition intensifies. This could push transaction fees to levels that may become prohibitively expensive for some users, particularly rollups.

The firm’s analysis suggests that Bitcoin layer-2 projects could end up spending millions annually to secure blockspace. Their model assumes that a rollup’s zk-proof and state changes amount to 400KB per 730 blocks (about a month). If transaction fees rise to 50 sats per byte, the monthly cost for a rollup would reach $2.3 million, translating to roughly $27.6 million per year.

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Currently, Bitcoin transactions are averaging about 2 sats per byte, according to Mesmerdata. Galaxy Digital warns that rollups failing to manage these costs effectively might deplete their funds and face bankruptcy.

The report concludes that while the high costs may not eliminate all rollups, they will likely limit the market to only a few survivors. Projects unable to justify the expense of posting to Bitcoin risk exhausting their resources.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.