Welcome to Bitcoin’s “Epoch V”. Bitcoin’s fourth successful halving occurred on April 20, marking a programmatic reduction in the amount of new Bitcoin in circulation through mining. As celebrations continue around the world, attention is focused on what lies ahead.
Coinciding with the halving, Runes, a protocol to facilitate the creation of meme coins in Bitcoin, was launched. The launch introduced hundreds of tokens and generated over $80 million in fees for Bitcoin miners. According to TokenTerminal, this surge in trading activity has pushed Bitcoin transaction costs above $70 on average, a whopping 1,395.8% increase over the past 30-day average.
Some predict “Epoch V” leading to the next halving in 2028, a period in which Bitcoin Layer 2 solutions like the Lightning Network will gain traction. Bitcoin fees hit an all-time high of $128 on April 20, leaving many people seeking alternative solutions. “A high fee environment is going to make people look into it,” said Bitcoin Core developer Ava Chow, referring to Lightning and other layer 2 options.
A recent Messari report highlighted the need for layer 2 solutions for Bitcoin amidst increased on-chain activity, signaling Bitcoin’s transition from mere “digital gold” to a platform for innovation.
Last year’s launch of the Ordinals protocol, which enables new ways of storing data in Bitcoin’s smallest unit (satoshi), facilitated this change. BitVM allows off-chain computation, Babylon facilitates staking and monetization of BTC, and layer 2s like Stacks and Merlin host decentralized apps and meme coins.
After the halving, tokens related to Bitcoin Layer 2 outperformed BTC. For example, Elastos is up 11%, SatoshiVM is up 5%, and Stacks is up almost 20% to $2.87 thanks to the expected Nakamoto upgrade.
Market dynamics may drive action on Bitcoin’s second layer, but challenges persist. High BTC fees may result in users with insufficient balances being priced out of platforms like Lightning, which may require workarounds such as custodial services. There are concerns that managed Lightning solutions will compromise sovereignty and anonymity.
This environment reflects the legacy of the block size wars, where the decision to prioritize Layer 2 scaling over block size increases set Bitcoin’s current trajectory.
As Chow noted, the choice between block size and transaction sizing represents a fundamental divide in the Bitcoin scalability debate and has shaped Bitcoin’s evolution.
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