Bitcoin halving has attracted billions in speculative TVL

In the rush to capitalize on the most anticipated Bitcoin halving in history, traders are depositing billions of dollars onto speculative, pre-launch layer 2s. Indeed, one non-operational Bitcoin layer 2 that is so new that it’s not even listed on popular blockchain trackers like DeFiLlama, now has more total value locked (TVL) than Ethereum’s Optimism, Arbitrum, Base, or Blast.

A layer 2 is a separate blockchain related to a conventional blockchain. Usually, a second layer is also called a ‘scaling’ or ‘roll-up’ layer because it increases transaction throughput and trust — scaling adoption — while reducing fees and decentralization. Ethereum has particularly encouraged roll-ups, so Ethereum today supports dozens of layer 2s.

The precise definition of a layer 2 is up for debate, and many blockchain projects define the term differently — usually to claim that they are a layer 2 even though they have a separate node network, security model, and proprietary token.

Nevertheless, most crypto participants use the term layer 2 not for legacy sidechains like Omni or Counterparty, but for modern sidechains like Ethereum’s Optimism, Arbitrum, Base, or Blast.

Bitcoin, in contrast to Ethereum, only permits rudimentary Turing-complete smart contracts. As a result, Bitcoin has historically not had large amounts of depositors on layer 2s. The most common metric for measuring the amount of layer 1 money (ETH) deposited onto a layer 2 (ETH-on-Arbitrum) is TVL.

By this TVL metric, a nascent Bitcoin layer 2 has attracted over $3 billion worth of BTC. That outranks the $2.5 billion on Ethereum’s Arbitrum, $1.5 billion on Ethereum’s Base, $838 million on Ethereum’s Optimism, or $1.4 billion on Ethereum’s Blast.

Read more: Ethereum’s Dencun causes ‘Blast’ layer 2 outage

Like many Bitcoin layer 2s, it started building tooling when Ordinals launched on Bitcoin. Although it supports some early assets like BRC-20 memecoins, it really picked up steam in the past few weeks. Although it found some initial traction supporting Ordinals, pre-halving speculators rushed into the platform because it promised to support Runes post-halving. Runes is the upcoming fungible token protocol, built by the popular founder of Bitcoin Ordinals.

Runes, epic numismatics, parties, and other confluences of events have made this Bitcoin halving particularly expensive. As layer 2 TVL figures demonstrate and seven-figure bids for a single block of transactions, Bitcoin’s halving could become the priciest day for speculators in the history of cryptocurrencies.

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