To guarantee the safety of user funds, a watchtower/validator inscribes the state difference to bitcoin as a refundTx to safeguard user funds in case of liveness failure. This ensure the data availability of refund is guaranteed by the bitcoin blocks itself, ie. It uses bitcoin as a data availability layer to commit state difference transaction.
Some points to consider:
Inscription size of RefundTx is largely depended on number of accounts in the system = number of refund outputs.
Every refund output in the refundTx adds ~30vbytes
The size of the compressed refundTx can change based on ratio of compression.
The 4 byte identifier reduces the output size by 26 bytes per address.
Estimated fees in USD changes with BTC price and network fee rate. Calculations below assumes 36 sats/byte for the calculations. BTC/USD price and current fee rate in the network are variable parameters and will change fee in USD numbers.
This document assumes a bull case for Bitcoin. Assumptions may be different for a bear case.
What we don’t consider:
1. Consuming more than half the block space by other L2 projects will create fee pressure in the system, leading to much higher sats/byte
Number of refund Output
Inscription Size (vBytes)
Fee in Sats @
36 sats/byte
Fee in USD
@ BTC = ~$65,500
Inscription Size (bytes) with 4 byte identifier
Fee in Sats with 4 byte identifier @ 36 sats/byte
Fee in USD with 4 byte identifier @ BTC = ~$65,500
Fees in USD with 4 byte identifier @ BTC = $100,000 , 36 sats/byte
Fees in USD with 4 byte identifier @ BTC = $100,000, 50 sats/byte
For ~ 100 bitcoin blocks a day, we assume 100 inscriptions committing a state difference.
Per day cost of inscriptions for 100 inscriptions a day ~ $ 411 * 100 = $41,100
Per month cost if BTC/USD price remains the same = $41,100 *30 = $1,233,000
6 month estimate if price remains the same = $7,398,000
6 month estimate with BTC @ $100k and fee rate @ 36 sats/byte = $11,255,760
6 month estimate if fee rate rises to 50 sats/byte with BTC @100k = $15,633,000
