• 26 May, 2024

Layer 2 Tokens Surge Following Bitcoin Halving; STX Up by Nearly 20%

Bitcoin Layer 2 tokens have demonstrated remarkable performance following the latest Bitcoin halving event, which took place early on Saturday. The halving, a scheduled reduction in the mining reward, decreased the number of Bitcoins generated per block from 6.25 BTC to 3.125 BTC.

Per data from CoinGecko, STX, the primary token of the Stacks network—a prominent Bitcoin Layer 2 solution—has seen a significant increase of nearly 20% to $2.87. This surge positions STX as one of the top performers among the leading 25 cryptocurrencies over the past 24 hours, according to Velo Data. Other tokens associated with Bitcoin’s Layer 2 solutions, including Elastos’ ELA and SatoshiVM’s SAVM, also posted gains of 11% and 5%, respectively. 

These projects are designed to enhance the scalability and speed of transactions on the Bitcoin blockchain by processing transactions off the main chain. In comparison to these layer 2 solutions, Bitcoin only saw a surge of just over 4.7% to a value of $66,300. 

The rise in Layer 2 token values coincides with a significant uptick in transaction fees on the Bitcoin blockchain. Data from Glassnode indicates that the average transaction fee escalated to approximately 0.0020 BTC post-halving, marking the highest point since early 2018. 

The hike in fees has been attributed to the introduction of a new protocol dubbed Runes, which permits users to “etch” and mint tokens directly on the Bitcoin blockchain. The launch of Runes has led to heightened transaction activity and increased costs, fuelled by a surge in the trading of meme coins and token minting. At the time of reporting, Ord.io data shows a total of 3,700 Runes inscriptions have been made on the Bitcoin blockchain.

Over recent months, various Layer 2 initiatives aimed at enriching not just performance but also Bitcoin’s decentralized framework (BTCfi) have emerged. Notable among these, in February 2024, the decentralized operating system TRON disclosed its plans to create a Bitcoin Layer 2 solution. This development seeks to merge TRON tokens with the Bitcoin network, enhancing its capabilities—particularly within the decentralized finance arena.

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