Bitcoin pioneered the cryptocurrency journey in 2009 to achieve decentralized finance. Its goal was to facilitate the peer-to-peer online transfer of funds without being monitored by a centralized financial institution. Crypto Lists looks into whether Bitcoin can compete in the Ethereum-dominated smart contract space, especially after talk of ‘the flippening’.
The Bitcoin currency (BTC) received gradual success and then burst into the mainstream as a cultural earthquake. Later, it was joined by the highly competitive Ethereum network and accompanying Ether (ETH) crypto in 2015 that provided more use cases, including smart contracts.
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Differences between Bitcoin and Ethereum
Ethereum’s entry offered a wider scope to Bitcoin’s focus as it also enables dApps and smart contracts with recognizable differences in speed, sustainability, and accessibility. All these features are down to the consensus mechanism that their ecosystem use.
Bitcoin uses the Proof of Work (PoW) consensus mechanism to validate and record transactions while Ethereum (as of fall 2022) uses the Proof of Stake (PoS). The PoW method is often under criticism over the energy requirements during the mining process. Alternatively, the PoS model is widely preferred due to its environmental friendliness and speed of transactions.
Bitcoin Moving Into Smart Contracts and DeFi
The Ethereum blockchain has thrived as the front-runner in supporting smart contracts, DeFi, DAOs, and NFTs. Other blockchains such as Solana and Cardano are prominent for the same reason. What many are not aware of is that Bitcoin has had significant developments to enable smart contracts recently.
Bitcoin initially used the Script language to write various smart contracts, including Pay-to-Public-Key-Hash, Multisignature, and Time-Locked smart contracts. These contracts had limitations for Bitcoin to compete with the more established smart contracts. Transactions via Bitcoin were slow and hard to scale.
Bitcoin’s Taproot Update in 2021 increased Bitcoin’s flexibility and privacy but was not effective on its own. Layer 2 solutions built on the Bitcoin blockchain also partially solved transaction speed and scaling issues. The Lightning Network on layer 2 facilitates 1 million tps and makes micropayments viable as it operates off-chain. Other sidechain networks such as the Liquid Network, RSK labs, and the Mintlayer also applied to improve Bitcoin for smart contracts and DeFi but fell short in their application.
Its scalability efforts with the Lighting Network facilitate low-cost off-chain transactions. Bitcoin’s Lighting Network has already developed Block Cash App, RGB, LN Markets, Sphinx Chat, Zion, and Impervious. These projects fall short in their low routing fees and vulnerability to attacks. Bitcoin’s sidechains, including Liquid Network, RSK Labs, and Mintlayer have also promoted smart contracts via Bitcoin but do not feature the intrinsic security of Bitcoin.
The Stacks blockchain has assisted Bitcoin’s venture into smart contracts, DeFi, DAO, and NFTs by connecting to it through Proof of Transfer (PoX). It utilizes the Clarity language to create smart contracts on slacks which addresses syntax limitations on the Bitcoin blockchain. Stacks also provide micro blocks in mining that enables faster transactions. It also enables the creation of DeFi and NFT marketplaces while exploring the security and capital of Bitcoin. This provides an avenue to develop the largest ecosystems of Bitcoin applications.
Bitcoin to Compete with Other Smart Contract Blockchains
Bitcoin has positioned itself with its recent development on its scalability and transaction speed to compete in enabling various Web 3 innovations. These include DeFi, DAOs, and NFTs.
Stacks seem to strengthen Bitcoin to compete with other smart contract blockchains by executing them on its own blockchain and using Bitcoin for settlement. This resolves scalability. Stacks’ PoX ensures that the smart contract executed on its blockchain benefit from Bitcoin’s security. Stacks’ Clarity language is also much simpler for developers. The integration of Stacks into Bitcoin has propelled it into the largest Web 3 ecosystem on Bitcoin. It has achieved over 350 million monthly API requests and 2500 Clarity Smart contracts.
Despite these significant achievements, Bitcoin is still some way off the leading smart contract blockchain, Ethereum. Ethereum has over 4000 monthly active developers while Bitcoin has 400. Nonetheless, Stacks has developed several DeFi and Web 3 projects such as Alex, Arkadiko, and City Coins. NFT projects on Stacks include STX NFT, Superfandom, Layer, and Boom.
Bitcoin Facing the Flippening Discussion
Bitcoin’s feature in discussion on smart contracts is already a great achievement. It has implemented various solutions to catch up with established smart contracts, including Ethereum, Solana, and Cardano. It happens to find its feet. In crypto, things change fast. It certainly can compete in the smart contract space via stacks, the lighting network, and other features as it streamlines its path. It maintains its position as the leading cryptocurrency while expanding its appeal beyond a store of value and transfers.