Ethereum has experienced exponential growth in previous years in connection to users, value, and the amount of data the blockchain network manages on average. Countless exchanges allow you to trade directly, such as Binance, and these services tell you all about its current price, which is tied to the Bitcoin price. There are concerns about Ethereum's capability limitations, and we might add there's fear that transactions might take a hit if the network reaches its maximum capacity. The Ethereum blockchain can process ten to twenty transactions per second, so the question now is: How can the scalability issue be fixed?

Bitcoin Will handle Data and Consensus Availability Activities

Layer 2 scaling solutions can boost the speed and efficiency of the Ethereum blockchain, particularly sovereign rollups. Developers have recently announced that Bitcoin has been integrated to facilitate data storage and retrieval, so Ethereum's Virtual Machine can be supported straight on Bitcoin's consensus mechanism. This, in turn, expands the prospects for rollups and makes it possible to initiate a block space market on Bitcoin, where miners are the producers, mining polls are the auctioneers, and users are the bidders. Rollups enable higher transaction output while considerably reducing user costs and enhancing usability, but the drawback is they don't rely on Ethereum for security.

Sovereign rollups don't rely on smart contracts nor use a settlement layer for validation, meaning they can fork independently of the data/consensus layer. Proof verification occurs on the peer-to-peer network, which distributes proofs among nodes. The new rollup solution proposed by developers empowers the retrieval and storage of data on the Bitcoin blockchain - more exactly, two functions of its codebase can be deployed to publish data to Bitcoin and recover it, making transactions smaller instead of blocks bigger. The Taproot implementation has made this feasible, which allows multiple parties to sign a single transaction using a Merkle tree.

The Change Was Inspired by Ordinals Protocol, Which Allows Users to Embed Data

The launch of the Ordinals protocol on the Bitcoin mainnet in January 2023 revived interest in its development. It represents a new approach to using the Taproot update to create a one-of-a-kind digital asset, an NFT that can be minted directly on the Bitcoin blockchain. If you have your wallet set up, all you have to do is run a node and inscribe an Ordinal yourself. As opposed to NFTs on the Ethereum blockchain, Ordinals write data on Satoshis, the smallest denominations of Bitcoin, and assign them non-fungible features. Rather than creating tokens, Ordinals track single Satoshis by assigning serial numbers, and publish image data on-chain.

NFTs on Bitcoin leverage transaction witnesses to carve out data migration, ensuring a slightly better payload-to-data ratio. This translates into the fact that posting data on Bitcoin is more affordable than on Ethereum, so it shouldn't come as a surprise that there are countless inscriptions on Bitcoin. Even if this solution might seem brilliant, not everyone is happy with it, needless to say. Creating an Ordinal is expensive because of the high transaction fees, not to mention that it's harder for operators to run full nodes; if costs increase, it could be detrimental in the future.

Is the Rollup on Bitcoin Just Another Layer 1 Solution?

Many experts argue that a sovereign rollup on Bitcoin is nothing more than a layer 1 solution that stores block data on Bitcoin, so it's not a genuine rollup. Layer 1 and Layer 2 solutions differ in their role and function on the blockchain. To be more precise, Layer 1 scaling solutions, also called on-chain networking, alter the base protocol, while Layer 2 scaling solutions rely on secondary networks that work in parallel or are independent of the main chain. The former is used for complex and time-sensitive transactions, while the latter is designed to handle high-volume and high-speed transactions.

At any rate, if the rollup solution is activated on Bitcoin, the network will be able to retain a small part of Ethereum's Layer 2 ecosystem, enhancing the speed and reducing the cost of transactions on the blockchain. As we all know, Bitcoin is a Layer 1 blockchain, so it can validate and finalize transactions without needing another network. Unfortunately, Bitcoin is limited by its transaction speed and is prone to congestion. The Lightning Node was proposed as a solution - transactions are faster, less costly, and more readily confirmed. But it's a mere scaling solution, and it's hoped that Bitcoin will have a Layer 2.

Why The Merge Hasn't Solved the Scalability Paradox

In case you didn't already know, the more decentralized a blockchain is, the less efficient and scalable it is. The Ethereum blockchain has an inherent issue, so it can't process more than thirty transactions per second; it does what Bitcoin does, plus a lot more, but harder. The Merge was supposed to make Ethereum more scalable, but it seems it has yet to overcome the scalability anomaly. The blockchain processes and stores data on numerous remotely linked computers, and reaching a consensus on each transaction is necessary, so performance is obviously slower. Perhaps future upgrades will improve the speed and scalability of the Ethereum network.

Closing Words

Sovereign rollups don't build themselves, so it's up to developers to make the blockchain faster and cheaper, publishing their blocks directly onto Bitcoin in an efficient manner. If you make your way and start experimenting with sovereign rollups, don't fail to prepare because success is attributable to due diligence. Bitcoin rollups could be the most vital performing sectors as the demand for Ethereum scaling solutions increases. Owing to sovereign rollups, it's possible to take advantage of a sovereign chain that takes over the data availability and consensus of a Layer 1 blockchain, such as Bitcoin. Needless to say, integration is an early research implementation.

By processing and submitting more transactions, sovereign rollups play a crucial role in improving the scalability of Ethereum, which is fundamental to its meaningful and mass adoption. Multiple solutions can help reduce the overall congestion on any part of the Ethereum network.