Bitcoin ecosystem has made exciting new developments. Which hot topics are worth paying attention to?

Explore the Latest Developments in the Bitcoin Ecosystem and Discover the Hottest Topics to Keep an Eye On

Recently, there has been a market frenzy in the crypto market, especially with Bitcoin. It has broken the months-long slump and reached new highs, surpassing $35,000. With the news of the impending Bitcoin ETF approval, its price has soared, with a year-to-date increase of over 110%, revitalizing the entire cryptocurrency market. The Bitcoin ecosystem has also lived up to expectations, starting with the release of the BitVM whitepaper last month, outlining a path for Bitcoin to become Turing complete and create a thriving ecosystem similar to Ethereum’s complex ecosystem. This was followed by the launch of Taproot Assets on the Lightning Network, which may truly mark the arrival of a new era for Bitcoin. It signifies the future possibility of issuing various assets on the Bitcoin mainnet and achieving fast and low-cost settlements through the Lightning Network. Furthermore, a series of new protocols, led by Ordinals’ Brc20 ecosystem, have been released, and there is a growing demand within the community for the development of the Bitcoin ecosystem: Is the Bitcoin ecosystem’s summer truly here? How has it developed so far?

Lightning Network and Taproot Assets Go Live

The launch of Taproot Assets on the Lightning Network has caused a stir within the industry. If the Bitcoin ecosystem truly flourishes in the future, the emergence of Taproot Assets could be a significant milestone event. Bitcoin, as the digital gold, has maintained the most stable consensus in its over a decade of existence. However, as Bitcoin’s supply dwindles, the income of the mining community – which ensures the security of the entire Bitcoin network system – is diminishing. If Bitcoin remains solely a isolated existence as digital gold without developing a stronger ecosystem to empower the mining community, the future security of the entire Bitcoin network may be compromised. Merely being digital gold, the transaction fees contributed by miners are unlikely to attract enough computing power to serve as the underlying security guarantee for Bitcoin. Therefore, the Bitcoin ecosystem has become a hot topic and exploration direction in recent years. In the first half of this year, the Brc20 protocol, led by Ordinals, brought a new wave of energy to the entire Bitcoin ecosystem. However, for Brc20 projects, the Bitcoin network merely passively records data. Once launched, the project has no possibility of implementing operations such as token withdrawal, destruction, or repurchase, lacking the empowerment and operation by a team, making it difficult for a project to truly grow. The release of the BitVM whitepaper brings new hope for realizing Bitcoin’s goal of Turing completeness. However, it is just a whitepaper with several unresolved issues in between. The release of Taproot Assets on the Lightning Network may signify that Bitcoin is truly beginning to move towards a multi-asset era like Ethereum. With Taproot Assets, developers can issue and destroy assets. Furthermore, the assets issued by Taproot Assets will directly integrate with the existing over 14,000 Lightning Network nodes worldwide, utilizing the global Lightning Network for fast and low-cost asset circulation. It boasts the security of the Bitcoin blockchain mainnet and the speed and low fees of the Lightning Network. If everything goes smoothly, it can indeed be considered a nearly perfect layer-two solution for Bitcoin.

• Ark’s CEO Cathie Wood Bitcoin Holds the Golden Ticket for the Next Decade, Not Gold!
• Bitcoin White Paper Day: Celebrating the Birth of a Financial Revolution
• Elon Musk Puts the Brakes on Crypto Tokens: A Shift in the Tech Landscape

Image: Current global lightning network nodes, channels, and locked BTC data

But is this really the case? Despite the sensational launch of Taproot Assets, the Bitcoin developer community is not unanimously applauding. Fiatiaf, the founder of the decentralized social network Nostr, which was popular in the first half of this year, stated, “The lightning network is a scam that has been deceiving Bitcoin users for 6 years, consuming their time, energy, and money.” Additionally, two lightning network developers recently announced their departure from the lightning network, and there have been reports of unresolved circular vulnerabilities, which seem to indicate that despite the successful launch of Taproot Assets, the development of a Bitcoin ecosystem based on multi-asset issuance using Taproot Assets still faces many obstacles.

Other Bitcoin Layer2s

• RGB Protocol

The RGB protocol is a highly experienced Layer2 in the Bitcoin ecosystem and was first proposed in 2016. RGB is a second-layer network built on the Bitcoin blockchain network, with its core data stored on the Bitcoin mainnet, aiming to leverage the security of the mainnet to achieve Bitcoin’s smart contract functionality. The concept of RGB is very promising. Besides benefiting from the unique security of the Bitcoin mainnet, it also provides enhanced privacy. Users can achieve absolute confidentiality through certain operations, making it more resistant to censorship. Moreover, because its smart contracts are stored off-chain, it brings very low transaction fees and reduces congestion in the Bitcoin blockchain. However, since its launch, RGB seems to have remained relatively unknown and has not made significant breakthroughs in the ecosystem. It wasn’t until April of this year when RGB released version 0.10 that many major breakthroughs were achieved, addressing various issues in previous versions such as limitations in smart contract development, integration with the lightning network, and wallet support. The release of this version has removed many barriers for developers in the RGB ecosystem, and the ecosystem has started to flourish. In the future, whether it is DeFi, NFT, GameFi, SocialFi, DAO, and more, all have the potential to be implemented on the Bitcoin mainnet using the RGB protocol. Moreover, through the seamless integration of RGB and the lightning network, high-speed and low-cost circulation of assets can be achieved, injecting new vitality into the development of the Bitcoin ecosystem. Currently, various ecological applications have also appeared on the RGB protocol, including wallets, derivatives, spot Dex, and other DeFi applications, NFT wallets and trading markets, browsers, etc. However, the development or testing phase is still ongoing for most of them. In conclusion, from the perspective of RGB’s design, it seems to be consistent to some extent with the aforementioned lightning network Taproot Assets. Both leverage the security of the Bitcoin mainnet to issue assets and utilize the existing lightning network to achieve high-speed and inexpensive asset transfer. However, it is still uncertain who will run faster, and both are strong competing solutions for Layer2 networks on the Bitcoin mainnet currently.

• Stacks

Since the concept of the Bitcoin ecosystem exploded, Stacks has always been a highly anticipated player. As the first Token issuance project ever approved by the SEC, Stacks is considered one of the hottest Bitcoin ecosystem protocols in terms of fundraising scale and Token price performance.Of course, unlike Taproot Assets and RGB protocols mentioned earlier, Stacks protocol does not issue assets on the Bitcoin blockchain. Therefore, as a sidechain of Bitcoin, its security is somewhat discounted. However, compared to traditional sidechains, Stacks still benefits from some of the security of the Bitcoin mainnet, considering that there are settlement transactions between its block data and the Bitcoin mainnet. As a star Layer2 project in the Bitcoin ecosystem, what we can currently look forward to is the launch of sBTC. In December last year, Stacks released a whitepaper, stating that it will launch “Stacks Bitcoin” (sBTC), introducing a trust-minimized, non-regulatory two-way peg system that allows users to “bridge” BTC from the Bitcoin mainnet to the Stacks layer, so that sBTC can be fully utilized in the Stacks ecosystem for DeFi, NFTs, GameFi, and more, finding new value for dormant Bitcoin assets. I believe that many friends, like myself, will have the initial reaction of comparing sBTC to RBTC and WBTC, which also aim to create more liquidity for Bitcoin held in wallets. However, the promising point of sBTC lies in its trust-minimized and non-regulatory nature, while both RBTC and WBTC have been criticized to some extent for not being completely decentralized.Currently, the total TVL of Stacks is not large, amounting to less than $20 million, with Alex, who claims to be the first all-in-one DeFi service platform on Bitcoin, contributing nearly 70%. Moreover, there are not many Dapps on the Stacks ecosystem at the moment, both in terms of quantity and variety. The launch of sBTC is expected to bring a wave of TVL growth.

Stacks ecosystem TVL and related Dapps, data source: DeFiLlama

• RSK

RSK is also a sidechain of Bitcoin. As the superstar project in the bull market of 2017, its performance has been mediocre since its launch. The token price began to show some improvement after the concept of Bitcoin ecosystem gained popularity. However, compared to the sidechain Stacks, one major advantage of RSK is the compatibility of its virtual machine with the EVM, which means that the entry barrier for Ethereum developers to enter the RSK ecosystem is very low. Currently, RSK has the highest TVL among the protocols in the Bitcoin ecosystem, with a total TVL of nearly $90 million. MoneyOnChain, the leading lending platform, accounts for more than half of it, and the total TVL of the DeFi platform Sovryn is over $30 million, while other Dapp TVLs are not particularly outstanding. Relatively speaking, RSK is currently one of the more complete and mature ecosystems among the Bitcoin ecosystem protocols. The official website shows that there are a total of 47 protocols in the ecosystem, with 3,333 RBTC locked, and it was recently announced that the limit of 4,000 RBTC has been lifted, which means that all circulating BTC is eligible to be locked in RSK in exchange for RBTC. This milestone event is also worth looking forward to.

Currently, RSK has locked RBTC and other data. Source: RSK official website

Ordinals Inscription and Brc20 Derivative Protocol

In January of this year, Bitcoin developer Casey Rodarmor introduced the Ordinal protocol, which provided a unique numbering system for the satoshis. This sparked a craze for inscribed satoshis, and combined with the explosion of the BRC20 protocol in May, Bitcoin transaction fees skyrocketed, resulting in miners earning a lot of money.

Changes in the daily production of inscribed bitcoins and the total production so far. Data source: Dune

Currently, the total production of inscribed bitcoins has reached nearly 40 million. Although it went through a low period in the first two months, the recent trend shows a resurgence in the production of inscribed satoshis, making BRC20 tokens the hot topic. Of course, there are many criticisms of BRC20 tokens, especially because the complexity of their transfers can generate a large number of spam transactions on the Bitcoin network, which has led to dissent since its inception and low acceptance within the community. Currently, there are new protocols evolving similar to BRC20 within the Bitcoin ecosystem: for example, Atomical and ARC20. There is also another derivative protocol called Pipe, which allows the issuance of tokens based on data stored on the Bitcoin UTXO. Compared to BRC20, Arc20 greatly enhances decentralization and is more aligned with the Bitcoin community’s ideals. However, the entire protocol is still at an early stage and requires continuous improvement. Additionally, Casey, the founder of Ordinals, proposed a specific way to issue tokens through inscriptions called Rune, which led to the creation of the first usable protocol called Pipe by the founder of Trac, and quickly gained attention within the community. Of course, besides these examples, the Ordinals and BRC20 protocols themselves are also continuously evolving and worth keeping an eye on.

Summary

Bitcoin, as the absolute leader in the cryptocurrency market, accounts for over 50% of the total market capitalization. However, the majority of circulating bitcoins remain dormant in wallets. Once these dormant bitcoins are activated, they will undoubtedly bring enormous liquidity and vitality to the market. This is one of the reasons why countless developers are continuously exploring the Bitcoin ecosystem. Although the total number of active developers in the Bitcoin ecosystem is still relatively small, with less than 1,000 developers in total, ranking it fourth after Ethereum, Polkadot, and Cosmos. However, looking at the change in developer data, despite experiencing a bear market, the decrease in the number of Bitcoin ecosystem developers is the lowest among all ecosystems, indicating that the Bitcoin ecosystem is more attractive to developers in the current bear market compared to other ecosystems. The continuously thriving Bitcoin ecosystem also confirms this point.

Top-tier ecosystem active developer count, source: developerreport

As for the future development of the Bitcoin ecosystem, whether it will truly usher in a blooming summer of Bitcoin ecosystem DeFi, NFT, GameFi, or it will be a short-lived speculation, more time is needed to brew and verify.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!