Bitcoin’s network went live in October 2008, but the first block was mined in January 2009, with Satoshi’s famous embedded message, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Fast forward to today, BTC ‘the asset’ has grown into a market capitalization of $1.2 trillion and is now accessible to some of the largest fund managers in the U.S. following the approval of the Bitcoin Spot ETF earlier this year. BlackRock, which recently surpassed a record AUM of $10 trillion, is among the institutions that have been aggressively investing in BTC after the SEC’s green light.
But amidst this success, one cannot help but notice that Bitcoin ‘the network’ has not thrived as much as BTC.
While Bitcoin’s Layer 1 has proven to be the most resilient with no downtime since its inception, it suffers largely from scalability issues. This shortcoming has contributed to Bitcoin lagging behind other Layer 1 networks such as Ethereum and Solana, which are designed to support decentralized applications (DApp) programmability and also address scalability to some extent.
For context, Bitcoin’s Layer 1 only enjoys a total value locked (TVL) of $690 million; this is a drop in the ocean compared to Ethereum, which has a TVL of $57.4 billion, or Solana, with $4.6 billion as of this writing.
Why Bitcoin’s Network is Yet to Witness Mainstream Adoption
Bitcoin’s whitepaper is titled ‘A Peer-to-Peer Electronic Cash System,’ an inspiration that was likely derived from the prevailing chaos that led up to the 2008 financial crisis. Satoshi intended to create a form of money that was free from central authorities; over half a decade later, Bitcoin can only process 3-7 transactions per second (TPS), which is merely a handful compared to Visa’s 1500-2000 TPS.
The slowness in Bitcoin’s transaction processing is one of the main reasons why this pioneering digital asset and network have yet to rise to the levels of payment multinationals. To add to it, transactions on the Bitcoin blockchain can cost more than traditional payment systems. This was the case recently with the Ordinals and Runes hype when the average transaction fee hit record highs of $37.
Would it make economic sense to transfer $100 using a network where almost half the amount goes to fee payments?
Lack of Smart Contracts
Another reason why Bitcoin’s network is struggling to unlock the over $1 trillion in idle BTC assets is because it does not support smart contracts or DApp development. Moreover, Bitcoin’s core architecture was designed based on the principles of security and decentralization, which means it lacks the third aspect of the blockchain trilemma; scalability. These two factors make the Bitcoin network unsuitable for building DApps or other types of applications that could attract more liquidity.
Cultural Alignment
Bitcoin’s community is famous for being the OGs of crypto, but despite this being a unifying factor, it has also led to some type of segregation. On one hand, there are some OGs who believe that the recent ‘Build on Bitcoin’ initiatives fueled by Ordinals and Inscriptions are a waste of the limited space on Bitcoin’s blockchain.
On the other hand, there are some stakeholders, including miners, who support developments on the Bitcoin network mainly because of the increased fees they generate. Others who fall within the ‘Build on Bitcoin’ pro group believe the recent activity could be key to unlocking Bitcoin’s potential in supporting a global trustless financial ecosystem that is accessible by everyone.
What Does the Future Hold?
The future is bright for Bitcoin, not just as a store of value (SoV) but as a network that will support the next era of financial innovations.
For starters, there has been notable activity over the past year, with more developers joining the network, thanks to the Ordinals and Runes momentum. But what’s more intriguing are DApp-oriented ecosystems such as the Zeus Network, which are solving the interoperability gap between Bitcoin and super active DeFi chains like Solana.
This chain-agnostic network aims to onboard the next billion users to Web3 and is already doing so through its first DApp, APOLLO. Technically, it is possible to transfer BTC to Solana through this DApp in the form of zBTC.
Bitcoin Layer 2 solutions are also forging a future where Bitcoin could rival the likes of Ethereum in smart contract development or payment processing. Good examples of L2 projects that are building on Bitcoin include Stacks and the Lightning Network.
The former was launched in 2017 with the main goal of bringing smart contracts to Bitcoin while leveraging the network’s unrivaled security. Today, there are over 10 DApps built on Stacks, totaling a TVL of $96 million.
As for the Lightning Network, it is perhaps one of the most notable innovations. This protocol uses smart contracts to introduce a faster payment solution for BTC transactions. It can handle up to 1 million TPS, which explains why user growth has surged by over 1000% within the past two years.
Conclusion
There have been multiple crypto projects that launched after Bitcoin, but what’s worth noting is that BTC is still king. The fundamentals laid out by Satoshi in the whitepaper are time-tested, unlike Ethereum, which underwent a fork, or Solana’s infamous network halts.
This being the case, it makes sense for more developers across the crypto realm to focus on making Bitcoin’s liquidity more active. This can only be done by solving the innate challenges, which include scalability, interoperability, and DApp support.
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