The Expansion of Bitcoin-Based Services

Finding its way through several ups and downs since its inception in 2009, bitcoin (BTC) has managed to retain its position as the largest cryptocurrency by market capitalization despite the growing competition. 

Yet, unlike other networks like Ethereum, the Bitcoin network hasn’t experimented much in terms of expanding its native token’s use-cases. This limited use-case isn’t because of the Bitcoin network’s core architecture but mostly because the community has focused on maintaining the network’s core traits – security and liquidity.

As a result, even after securing dominance as far as its share of the aggregate crypto market capitalization despite its limited uses, BTC has held on to its narrative of being a store of value. 

Bitcoin’s development community has always been conservative when it comes to implementing new features to the network’s main chain. Past upgrades like the SegWit and Schnorr Signatures, and even the most-recent Taproot upgrade, took massive amounts of time (and discussion) to implement.

However, things are starting to change for the legacy network. Emerging sidechains, layer-2 scaling solutions, and smart contract protocols are spearheading efforts to expand the Bitcoin network’s scalability and use cases without compromising its core features. 

While there have been several attempts to bring more programmability and scalability to the Bitcoin network since 2012, a new wave of Bitcoin-based solutions has taken center stage since 2018. In the last couple of years, Bitcoin-based projects like the Lightning Network, RSK, and Stacks have successfully unlocked many new use cases for the Bitcoin network and its native token.

According to a recent report by The Block Research, “A few short years since their mainnet deployments, Lightning Network, RSK, and Stacks have begun to incubate their own respective ecosystems. Major ecosystem participants building on or partnering with these networks.”

Let’s take a closer look at how these projects are helping in the rapid expansion of Bitcoin-based services.

Unlocking New Opportunities And Diverse Use-Cases

From DeFi to NFTs, asset issuance to payment protocols, scaling solutions to general-purpose networks, these new breeds of projects are witnessing massive growth, with major ecosystem players building atop or partnering with them.

For instance, Lightning Network – the layer-2 scaling solution and payment channel network for the Bitcoin ecosystem, solves the legacy network’s problems related to transaction settlement speed and abrupt surges in gas costs. By taking execution off Bitcoin’s main layer and recording each transaction off-chain, Lightning Network delivers higher scalability while driving down the average cost of each transaction.

The platform leverages its smart contract functionality alongside the Bitcoin network’s multi-

signature wallets and timelock transactions feature to power micropayments at a nominal fee (paying for a cup of coffee, etc.) – something that isn’t feasible on Bitcoin’s base layer. Since it uses a mix of on-chain and off-chain transactions, users don’t have to worry about Bitcoin’s 10-minute block confirmation time.

The Lightning Network serves a diverse range of use cases and is being increasingly used by merchant stores, individuals, and organizations that are willing to accept crypto. In fact, the Lightning Network is offering several payment solutions across El Salvador, Mexico, and many other countries. Some well-known brands employing the Lightning Network’s services include Kraken, Bitrefill, Cash App, Bottlepay, Bluewallet, Fold, Open Node, Chivo, Strike, and River Financial, among others. Further expanding into new use-cases, Lightning Labs unveiled its asset issuance plans for the Lightning Network and a BTC-collateralized stablecoin. 

Then there is RSK (Rootstock), a promising smart contract sidechain solution for the Bitcoin network leveraging Bitcoin’s core layer’s security to enable BTC users to partake in the flourishing OpenFi, DeFi, and NFT ecosystems. The platform also offers native-level support for Solidity smart contracts, further enabling cross-chain solutions on the Bitcoin network. 

The total value locked (TVL) on the RSK network currently stands at $67.25 million, with its stablecoin-based project MoneyOnChain (MoC) contributing 46% of the total. In terms of non-custodial and permissionless smart contract-based systems for BTC lending, borrowing, and margin trading, the RSK-based platform Sovryn is setting new standards. RSK’s infrastructure is currently home to an array of projects, such as Defiant, Chainbeat, Oracle Money on Chain (oMoC), GetBlock, Math Wallet, Beexo, Decent, and many more. 

RSK is also helping the Bitcoin network expand into the NFT arena. It recently partnered with Nifty Labs to develop a NFT marketplace for (and on) the Bitcoin blockchain. The platform recently launched the Carnaval NFT platform, built using RSK’s plug-and-play solution for building on the Bitcoin network, RIF Marketplace Engine. On top of that, the RSK team has also developed an NFT bridge that connects RSK-standard NFTs to Ethereum’s ERC-721 NFTs. 

Finally, there’s Stacks, the smart contract protocol for the Bitcoin network. Through its unique Proof-of-Transfer (PoX) consensus algorithm, Stacks is extending the capabilities of Bitcoin’s underlying infrastructure. The Stacks platform is unlike layer-2 scaling solutions and sidechains for the Bitcoin network, given it provides a consensus algorithm between two independent blockchains. As a result, it seamlessly merges smart contract functionality with Bitcoin’s security, stability, and liquidity, thereby delivering faster settlement and ultra-low transaction costs.

Essentially, Stacks unlocks DeFi and NFT primitives on the Bitcoin blockchain, without making any changes to Bitcoin’s core protocol. Launched hardly a year ago, Stacks currently has around $13.19 million TVL. The number of projects building atop Stacks is growing exponentially. 

Multiple projects, including digital wallet services like GoSats, Hiro Wallet, Ryder, and Xverse, DeFi protocols like Alex, Arkadiko, LNSwap, Stackswap, and Zest Protocol, token services like CityCoins, and stacking pools like PlanBetter, are currently leveraging the Stacks’ blockchain infrastructure to unlock even newer use-cases for the Bitcoin network. In addition, Stacks has also positioned itself as the go-to space for Bitcoin NFTs. Platforms like Boom, Byzantion, Gamma, and Superfandom are among the top-grossing NFT ecosystems built atop Stacks.

Moreover, both RSK and Stacks have also unlocked novel revenue streams for BTC miners. RSK’s merge-mining and Stacks’ PoX consensus mechanism allows BTC miners to put their idle BTC to work and generate decent returns in exchange.

Besides these advances, other positive indicators are underlining the momentum to expand the Bitcoin network into newer frontiers. Among the initiatives underway, Trust Machines’ recent $150 million fundraising round to build the infrastructure needed for applications to thrive and onboard users to Bitcoin alongside Block’s (formerly Square) efforts to build a Bitcoin-focused decentralized exchange underscore the ongoing commitment to the network.

Together, these platforms and the projects built atop them are changing the dynamics of the Bitcoin network without compromising any of its core characteristics. As these platforms and projects develop their infrastructures further, several new use-cases for Bitcoin will be unlocked sooner than expected – something that can change BTC’s narrative from a value store to a yield-bearing asset.