How Bitcoin strengthens a competitive ecosystem of dApps

Bitcoin’s narrative as the groundbreaking cryptocurrency has largely revolved around it being a value store and a very secure ecosystem thanks to its economic incentive model. While second and third generation layer-1 blockchains have been aggressively involved in expanding the network’s use cases, the Bitcoin network has not evolved at the same pace.

For example, Ethereum’s smart contract functionality paved the way for new applications and applications such as decentralized finance (DeFi), non-fungible tokens (NFT), play-to-earn (P2E) games and much more. Similarly, other layer-1 blockchains, most of which have improved Ethereum’s shortcomings, have also expanded the use of their networks to showcase new dimensions.

The Bitcoin network, on the other hand, has forever distanced itself from aggressive experimentation on the main network (base layer). In fact, the Bitcoin development community has repeatedly emphasized that the network’s limited use cases are intentional, since the community has always been “extra careful” in implementing any changes to the network’s base layer.

As a result of this conservatism, the Bitcoin network has been able to maintain its core values ​​of decentralization, security and stability, unlike other layer-1 platforms that implement changes to the base layer to achieve greater functionality.

That said, the argument that the Bitcoin network’s core functions and BTC’s liquidity can serve as a solid basis for facilitating a much broader range of decentralized economic activity. As a result, since 2012, continuous attempts have been made to add scalability and programmability to Bitcoin’s main team.

For example, Omni (formerly known as Mastercoin) – a protocol team built on top of Bitcoin for asset issuance – was launched in mid-2013. Prior to this, the concept of colored coins floated around the Bitcoin community in December 2012. Both cases marked the first attempts on expanding the Bitcoin network to the payments and issuance market.

However, things started to change after the technical upgrade of Taproot on the Bitcoin network. This long-awaited upgrade increased Bitcoin’s core transaction privacy and efficiency, while unlocking the doors of new projects aimed at merging Bitcoin’s core features with innovative technologies to overcome past barriers.

Since 2018, the Bitcoin network has witnessed an increase in side chains and layer 2 scaling solutions that unlock advanced smart contract features in the old chain. An increasing number of decentralized applications and protocols on the Bitcoin network are the result.

The Bitcoin-based Smart Contract Protocol

Bitcoin-based smart contract protocol, Stacks, has built the necessary infrastructure that allows developers to implement a variety of smart contracts on the Bitcoin blockchain without compromising on the core features.

Unlike other existing Bitcoin-based projects such as side chains and layer-2 solutions, Stacks Proof-of-Transfer (PoX) uses the consensus protocol between two independent chains (Stacks and Bitcoin in this case).

Stack’s infrastructure consists of its own nodes, tokens, miners and networks, while it uses Bitcoin’s core layer to record the transactions compiled in the chain. Through this architecture, Stacks delivers smart contract functionality and higher throughput along with the Bitcoin network’s proven security, stability and liquidity.

Compared to processing transactions via Bitcoin’s main network, Stacks uses various “microblocks” that enable faster transaction settlement and lower transaction costs while utilizing Bitcoin’s security. In addition, stacks infrastructure is built to support DeFi apps and protocols, full-fledged NFT marketplaces, decentralized wallets, social networks, and just about anything else that requires smart contract functionality.

Stacks have enabled the Bitcoin network to expand the use cases of the fast-growing Defi and NFT sectors without making any changes to the base layer or forcing a hard fork. As a result, the ecosystem now hosts a number of decentralized applications secured by the Bitcoin blockchain. The existing diaspora of decentralized applications built on Stacks includes DeFi protocols, NFT marketplaces, stack coins, decentralized social networks, wallets, stable pools, DAOs and blockchain games.

Smart contracts were first launched on Stacks’ main network in January 2021. Within a year, the total value locked in (TVL) over the Stacks-Bitcoin DeFi ecosystem was around $ 20 million. In addition, compared to most existing solutions connected to the Bitcoin network, Stacks naturally connects to the Bitcoin blockchain. This ensures greater scalability, security and faster settlement at ultra-low costs.

When it comes to stimulating developers and attracting relatively scarce blockchain development talent, Stacks helps pave the way for more innovation and development efforts across the Bitcoin ecosystem. With this newfound functionality on top of the base layer, Bitcoin can increasingly live up to the value narrative while attracting all kinds of development talents to compete with rival ecosystems.