Despite smart contract Layer-1s consistently taking the headlines, Bitcoin has retained its dominant position atop the crypto market capitalization charts.
Nonetheless, Bitcoin’s sustainability is worth a discussion. How will the falling block rewards (halved every four years) and relatively low transaction fees impact Bitcoin’s security model? While Bitcoin has held its lead till now, will this continue in the future without a Bitcoin-native smart contract market?
Ordinals and Inscriptions, which emerged at the start of 2023, might have some answers. With this latest innovation, not only are we witnessing the start of “Bitcoin NFTs”, we are seeing a resurgence in excitement and attention across the entire Bitcoin ecosystem.
Inscriptions have led to a noticeable impact on Bitcoin’s on-chain metrics, and transaction fees are on the rise. Perhaps most importantly, the pace of innovation is increasing and developers are shipping updates left, right and center.
With increased activity and the opening up of a plethora of new use cases for Bitcoin, the very natural question of scalability follows. How will Bitcoin handle the increased traffic? Enter Bitcoin Layer-2s.
While the Lightning Network continues to grow and remains specialized in its payment use-case, Stacks and Rootstock provide Bitcoin developers with access to layers for general-purpose smart-contract execution. Rootstock boasts EVM-compatibility, while Stacks’ upcoming sBTC solution might finally provide a highly trust-minimized way of moving BTC from Layer-1 to Layer-2. Rollkit’s take on a sovereign Bitcoin rollup is also interesting and worth following carefully.
A fully-fledged Bitcoin smart contract market, Bitcoin rollups, and the upcoming Bitcoin halving are some of the key themes that we conclude this report with.
A New Era for Bitcoin?
Binance Research (Shivam Sharma)
Apr 1st, 2023