Bitcoin’s narrative as the seminal cryptocurrency has mostly revolved around it being a store of value and a highly secure ecosystem thanks to its economic incentivization model. While second and third-generation layer-1 blockchains have been aggressively involved in expanding their network’s use cases, the Bitcoin network hasn’t evolved at the same pace.
For instance, Ethereum’s smart contract functionality paved the way for new novel applications and use cases such as decentralized finance (DeFi), non-fungible tokens (NFTs), play-to-earn (P2E) games, and much more. Likewise, other layer-1 blockchains, most of which improved upon Ethereum’s shortcomings, have also expanded their networks’ use to showcase new dimensions.
The Bitcoin network, on the other hand, has forever distanced itself from aggressive experimentation on its mainnet (base layer). In fact, the Bitcoin development community has repeatedly stressed that the network’s limited use cases are intentional, as the community has always been “extra cautious” about implementing any changes to the network’s base layer.
As a result of this conservatism, the Bitcoin network has been able to successfully maintain its core values of decentralization, security, and stability, unlike other layer-1 platforms that implement changes on their base layer to achieve greater functionality.
That said, the argument that the Bitcoin network’s core features and BTC’s liquidity can serve as a sturdy foundation to facilitate a much broader range of decentralized economic activity is gaining traction. As a result, since 2012, continuous attempts have been made to add scalability and programmability to Bitcoin’s main layer.
For instance, Omni (previously known as Mastercoin) – a protocol layer built on top of Bitcoin for asset issuance – was launched mid-2013. Before this, the concept of Colored Coins was floated around the Bitcoin community in December 2012. Both instances marked the first attempts to extend the Bitcoin network into the payments and issuance market.
However, things started to change following the Taproot technical upgrade on the Bitcoin network. This long-awaited upgrade increased Bitcoin’s main layer’s transaction privacy and efficiency while at the same time unlocking the doors to new projects that aimed to merge Bitcoin’s core features with innovative technologies to overcome past barriers.
Since 2018, the Bitcoin network has witnessed an increase in sidechains and layer-2 scaling solutions that unlock advanced smart contract functionalities on the legacy chain. An advancing number of decentralized applications and protocols on the Bitcoin network is the result.
The Bitcoin-Based Smart Contract Protocol
Bitcoin-based smart contract protocol, Stacks, has built the required infrastructure that enables developers to implement a diverse range of smart contracts on the Bitcoin blockchain without compromising its core features.
Unlike other existing Bitcoin-based projects like sidechains and layer-2 solutions, Stacks uses the Proof-of-Transfer (PoX) consensus protocol between two independent chains (Stacks and Bitcoin in this case).
Stacks’ infrastructure consists of its own nodes, token, miners, and network, while it uses Bitcoin’s core layer to record the transactions compiled in its chain. Through this architecture, Stacks delivers smart contract functionality and higher throughput alongside the Bitcoin network’s proven security, stability, and liquidity.
Compared to processing transactions via Bitcoin’s mainnet, Stacks uses various “microblocks” that enable faster transaction settlements and lower transaction costs while leveraging Bitcoin’s security. In addition, stacks’ infrastructure is built to support DeFi apps and protocols, full-fledged NFT marketplaces, decentralized wallets, social networks, and almost everything else that requires smart contract functionality.
Stacks have enabled the Bitcoin network to expand its use cases into 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 numerous decentralized applications secured by the Bitcoin blockchain. The existing diaspora of decentralized applications built on Stacks includes DeFi protocols, NFT marketplaces, stablecoins, decentralized social networks, wallets, stacking pools, DAOs, and blockchain games.
Smart contracts were first launched on the Stacks mainnet in January 2021. Within a year, the total value locked (TVL) across the Stacks-Bitcoin DeFi ecosystem was hovering around the $20 million mark. Moreover, compared to most existing solutions bridged with the Bitcoin network, Stacks natively connects with the Bitcoin blockchain. This ensures greater scalability, security, and faster settlements at ultra-low costs.
Regarding incentivizing developers and attracting relatively scarce blockchain development talent, Stacks is helping pave the way for more innovation and development efforts across the Bitcoin ecosystem. With this newfound functionality atop its base layer, Bitcoin can increasingly live up to the store of value narrative while attracting all manner of development talent to compete with rival ecosystems.