Why is it said that Bitcoin needs DApps?

What is the significance of claiming that Bitcoin requires DApps?

Author: Jack Inabinet, Source: Bankless; Translation: Song Xue, LianGuai

Bitcoin has a major problem: its security budget!

Miners who ensure the security of the Bitcoin network rely on block rewards from inflation and user transaction fees for income, but the mining rewards for Bitcoin decrease by half approximately every four years.

The next Bitcoin halving event is scheduled for April 2024, and the decrease in block rewards will make miners more dependent on transaction fees for income. The security budget for Bitcoin will decrease, while transaction fees will not increase accordingly.

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The shrinkage of Bitcoin’s security budget will result in the loss of miners, reducing the computational power protecting the network, and making attacks on the blockchain more economically feasible! Although it may not be an imminent problem, in the long run, addressing how Bitcoin bears the cost of security is the network’s most concerning issue.

Ethereum commentator Anthony Sassano recently joked about Bitcoin’s security issue on Twitter, listing alternative solutions to protect the Bitcoin network’s security in case transaction fees are not sufficient to compensate for the decrease in BTC issuance.

The proposed actions above could help Bitcoin avoid a brewing security crisis in the future. However, the conservative community of the network is unlikely to consider alternative solutions to the existing network, as implementing them would require compromising core principles.

In order to ensure its future and reduce reliance on block subsidies, the Bitcoin network must increase transaction fee revenue. But in order to do that, Bitcoin must first give people a reason to use it…

Undoubtedly, if Bitcoin supporters want to increase transaction revenue and avoid adopting more radical proposals, they will face a tough battle, but their actions are not without hope: in 2023, transaction revenue on the network doubled.

The surge in transaction activity can be attributed to the birth of useful primitives such as Ordinals and BRC-20, which are built using the Bitcoin Taproot upgrade, sparking the utilization of the Bitcoin network!

Unfortunately, as proven by the past 6 months where transaction fees accounted for less than 10% of Bitcoin block rewards, the usage of these applications is highly inconsistent and entirely dependent on speculative activity.

Fortunately, ongoing experiments are bringing alternative forms of life to Bitcoin, which could result in more consistent transaction activity.

Botanix is introducing the EVM to Bitcoin through L2 technology, and their testnet has just gone live. Support for the EVM allows developers on Botanix to write and deploy applications using the popular coding language Solidity and be compatible with existing Ethereum infrastructure such as the MetaMask wallet.

BitVM is another solution aimed at making Bitcoin programmable by enabling Turing-complete Bitcoin contracts at Layer 1.

While BitVM does not require a hard fork and does not add additional complexity to the Bitcoin network, it has significant limitations due to its two-party design, meaning that BitVM cannot support large-scale decentralized applications with multiple parties.

Bitcoin Improvement Proposal 300 aims to bring programmability to Bitcoin through sidechains. However, this proposal adds complexity to Bitcoin and must be implemented through a soft fork. Given Bitcoin’s conservative history, this upgrade is unlikely to happen.

Summary

While copying JPEGs and mimicking meme coins may not be the ultimate example of innovation, the rise of emerging use cases that generate crazy transaction fee revenue suggests that Bitcoin has the potential to be self-sustaining without block rewards.

What Bitcoin needs now is a real-world use case that encourages people to transact repeatedly on Bitcoin. The easiest way to achieve this goal is by creating an environment where people can develop useful applications!

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