PART 1: Is Bitcoin the next Ethereum Killer?
There is a raging debate in the crypto industry about the future of Bitcoin. Given the rise of the alt-coin (which serves as a catch-all term for all forms of cryptocurrency other than Bitcoin), some industry actors seem to believe things aren't looking so great for Bitcoin, or that the king coin has somehow lost its relevance. But given some of these alt-coins’ discreditation amidst recent events–which have emboldened Bitcoin advocates--the nascent industry (and its ever-surprising plot-twists) debate between Bitcoin vs. Crypto rages on.
Massive technological advancements have made it simpler than ever for developers to build on Bitcoin, allowing them to take advantage of the network's censorship resistance, liquidity options, and massive network effects. In fact, thanks to a handful of exciting Bitcoin Layer 2, Layer 3 and Side Chain solutions, most any tech that used to only be buildable on smart contract-enabled blockchains and the like (think Ethereum, Avalanche, Solana, etc) are now possible on Bitcoin as well. Could the next so-called “Ethereume killer” actually be… Bitcoin?
In this guide, we take a look at the top five cutting-edge protocols being developed on the Bitcoin base layer (aka Layer 1). By the end of it, we hope to leave you with a better understanding of some of the most advanced Bitcoin protocols.
But before we dive into the meat of the matter, let’s dust off some of the basics.
1. What’s a Bitcoin Improvement Protocol?
Bitcoin Improvement Protocols (BIPs) are a way to propose new features or technologies that can be added to Bitcoin. The BIPs are submitted to the Bitcoin development mailing list, where they may be discussed, improved, and refined. If the community likes the idea, it becomes part of the Bitcoin protocol, following which a “pull request” then implements it.
1. Pull request system
The pull request (PR) system is central to the development of Bitcoin. Pull requests are just a shortened version of the patch-to-mainline process, which helps synchronize a developer's work with the wider community.
They are “a proposal for changes to be made that may or may not be accepted,” allowing for discussion and improvement by both developers and members of the community. This can have a positive effect on both the adoption rates of changes in the code and the diversity of thought about what should be included in the project.
2. Merging into the Bitcoin codebase
When a given change is recommended in the form of a “pull request” (PR), and once it is accepted, it gets merged into the Bitcoin codebase and becomes part of the protocol.
This is important for three very good reasons:
- It’s much easier for a developer/entrepreneur to propose changes to Bitcoin as compared to the older version of the protocol.
- The Bitcoin community will know about and review any new proposals (pull requests) for changes, which helps prevent undesirable surprises.
- The community actively reviews and makes suggestions on new PRs to improve them, which helps create a better-developed protocol (and a potentially sooner upgrade).
3. What are Bitcoin Layer 2 projects?
Bitcoin has a number of core features that make it different from other currencies, such as the fact that it is decentralized, meaning there is no central bank or government that controls it. Layer 2 projects thus move Bitcoin’s core usability and functionality further.
Bitcoin Layer 2 projects are the second layer of Bitcoin. They provide a platform for decentralized applications and are (often) designed to address some of Bitcoin’s scalability issues.
These projects work by creating two-way payment channels between two parties and then periodically settling these channels so that they can be included in the blockchain. Transactions occur more quickly, as they do not need to wait for confirmation from miners on the blockchain (i.e. Every 10 minutes or so—a long time to wait at a cash register for your Barista to confirm the coffee payment!) before being considered valid. They also allow the Bitcoin blockchain to handle more transactions per second and use less energy than before. The most popular bitcoin Layer 2 protocol is called The Lightning network, as its name suggests, payments are settled near instantly. (Quicker than a ‘tap’ payment and a fraction of the cost).
4. Are there smart contracts on Bitcoin?
There are actually smart contracts on Bitcoin. Bitcoin’s blockchain technology is a decentralized ledger that stores all transactions and allows for the creation of smart contracts. They are written using a programming language called Solidity. Smart contracts are basically self-executing pieces of code that cannot be modified once they have been deployed to the network.
Smart contracts on Bitcoin, Bitcoin layer 2 projects, and the Bitcoin Improvement Protocol together ensure improved efficiency, heightened security, or other technical aspects of the cryptocurrency. They fuel much of the technological advancements around Bitcoin’s blockchain.
5. What are the benefits of building on the Bitcoin blockchain?
The benefits of building on the Bitcoin blockchain are not just limited to the Bitcoin cryptocurrency. It can be used for any kind of decentralized application that needs a public ledger.
-Transparency: All transactions and data are completely transparent and open to anyone who wants to see them.
-Security: The blockchain is secured by cryptography, which means that it is almost impossible to hack.
-Redundancy: There is no central authority or third party, meaning there is no single point of failure.
-Immutability: Once a transaction has been confirmed by the network, it cannot be changed or reversed. This provides protection against fraud and hacking attempts.
-Low Fees: Bitcoin transactions have low fees as compared to other cryptocurrencies like Ethereum and Litecoin, which makes it an attractive option for developers who want to build their applications on top of the blockchain.
In 2023, virtually none of these benefits exist together on any single other blockchain. Onwards!
Disclaimer: This article is not intended to provide investment, legal, accounting, tax or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.