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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When the halving occurs this weekend, it will be the most expensive ever. Bitcoin’s price has sextupled since the last halving and is up nearly 100X since the prior halving in 2016. The mining reward is widely anticipated to spike to all-time highs courtesy of the on-chain Runes launch as well as a new ‘Epic Sat’ worth at least seven figures USD.

On every metric imaginable, the event will be rich. Large parties are planned globally, warm-up destination parties charging more than $800 for a ticket have already sold out, and Bitcoiners are trading impromptu ‘futures’ for a payout from the first post-halving block. Social media personalities have already scheduled multiple, competing livestreams on YouTube and X.

Bitcoin’s halving occurs every four years and, as the name suggests, halves the coinbase reward of each new block appended to Bitcoin’s blockchain. On Saturday, the coinbase reward will halve from 6.25 to 3.125 bitcoin per block in guaranteed miner income. The halving doesn’t alter optional transaction fees, which users always voluntarily add to transactions.

Whereas the halving is bad news for miner revenue, it’s good news for Bitcoin’s investor-oriented stock-to-flow. Stock-to-flow, a common financial metric for investors analyzing commodities like oil or gold, is the ratio of existing supply (stock) to incremental additions to supply (flow).

Read more: Halving excitement pumps ‘worthless’ bitcoin testnet

Bitcoin halving: Improved stock-to-flow plus numismatics

This particular halving event is the most expensive ever, not only because of bitcoin’s price or the cost of the upcoming celebrations but because it will simultaneously reward both the stock-to-flow metric and miners’ short-term revenue.

To explain, prior halvings have never had noteworthy financial speculation on numismatics. Numismatics is the additional value of currency above its face value — for example, a limited edition and mint condition silver dollar is worth more than one dollar because of its numismatics.

This year, however, Saturday’s post-halving block will have multi-million dollar bids from numismatic bidders.

Over the past year, a group of Bitcoiners led by Casey Rodarmor have created a multi-billion dollar marketplace for rare and inscribed satoshis — the 1/100 millionth denomination of 1 bitcoin. This community, which uses Rodarmor’s Ordinal theory and associated software like Inscriptions, has created a robust bid for numismatic value.

So this year, unlike prior halving years, wealthy traders are willing to pay millions of dollars to buy individual satoshis immediately after the halving occurs. In particular, traders are willing to pay for Runes, Rodarmor’s new fungible token protocol, Runes-associated protocol mints, and the staggeringly valuable Epic Satoshi which already has speculators eyeing seven figures.

Let the celebrations begin

Numismatics are bringing collectors and speculators to this weekend’s halving party. Unlike any prior time in Bitcoin’s history, they have more money than ever to spend.

This year is an especially rich halving for Bitcoin and not only because the difficulty adjustment and coinbase reward will alter simultaneously. It’s also the most expensive, public, and important halving — and it has landed on a perfect day: Saturday, 04/20/24.

Collectors of Ordinals, Runes, BRC-20, and rare satoshis are joining a Bitcoin community this year that is richer than ever. Tens of millions of new people have bought bitcoin since the last halving, and the price is already up 6X. This halving will be the most expensive ever, by far, across every category — and Bitcoiners have plenty of money to celebrate this moment.

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Blockchains nearly always rely on testnets, kept separate from the ‘mainnet,’ to ensure changes to client software can be introduced safely. Bitcoin has a testnet and this testnet has its own currency, tBTC

Of course, tBTC and the entire Bitcoin testnet are supposed to be worthless. However, crypto’s embracing of degeneracy has transformed tBTC into a real, $25 million-and-growing asset backed by approximately one-third the hash rate of Litecoin.

Litecoin, a proof-of-work blockchain operating since October 2011, has a hash rate of approximately 1 petahashes per second. Testnet bitcoin has a hash rate around 0.36 petahashes per second.

For context, real Bitcoin has a hashrate of 678 exahashes per second. That is 678,000 times more mining security than Litecoin. So neither of these networks have anywhere close to the security of Bitcoin.

Note that Litecoin miners use Scrypt-based hashing which is distinct from Bitcoin miners’ SHA-256 hashing, so the comparison between hashrates is somewhat apples-to-oranges.

Nevertheless, Litecoin has a market capitalization of $5.7 billion while testnet bitcoin, which is also a proof-of-work blockchain, has a mere $25 million market capitalization.

Yes, real Bitcoin miners mine tBTC — with real electricity, for a real profit motive. Although tBTC is not listed on major secondary markets like crypto exchanges, over-the-counter dealers sell tBTC for as much as $1.26 apiece.

Runes and bitcoin testnet airdrop farmers

Many market observers attribute the growth of testnet bitcoin usage to so-called Layer 2s, which are separate blockchains related to a conventional blockchain like Bitcoin. Typically, layer 2s increase speed and throughput while reducing decentralization.

With the upcoming launch of Casey Rodarmor’s Ordinals successor Runes scheduled for Bitcoin’s halvening around April 19, many Bitcoin layer 2s are incentivizing testnet usage. Certain projects are promising airdrops or other incentives to ‘early adopters’ who use pre-release versions of software on testnet. Bitcoin users are creating testnet wallets and airdrop farming while practicing using Runes and other Runes-based meme coins, DeFi platforms, and NFTs.

Read more: Ordinals founder Casey Rodarmor to launch Runes at Bitcoin halving

It all adds up to a considerable amount of real value for an ostensibly worthless sandbox. With the price of tBTC increasing a few pennies seemingly by the day, the halvening date this week should mark an important milestone in the history of Bitcoin’s curiously valuable testnet.

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