What is Building on Bitcoin?
Building on Bitcoin refers to the development of applications, technologies, and infrastructure that expand the overall functionality and utility of the Bitcoin network.
Right now, there is a fundamental shift surrounding Bitcoin’s narrative. Since its inception, Bitcoin has been widely perceived as a store of value.
This has primarily been due to the protocol’s simplicity compared to other blockchains. Currently, the Bitcoin network lacks the infrastructure to process millions of daily transactions efficiently. Similarly, Bitcoin does not have the same capabilities as Ethereum regarding deploying smart contracts and creating applications.
However, innovative developments are pushing towards a future where Bitcoin can adopt programmability and thrive as a productive asset on-chain.
Through implementing Bitcoin layers, developers can access never-before-seen scalability and functionality. This will significantly expand the use cases for Bitcoin and make the network a fundamental platform for all Web3 users.
Why Build on Bitcoin?
The main advantage of Bitcoin is that it boasts a solid foundation that prioritizes security and stability.
While the limitations of Bitcoin’s base layer (or mainchain) can seem like a disadvantage, they are actually the protocol’s greatest strength. Its simplicity provides the optimal platform for more complex economic activity, while Bitcoin acts as a final settlement layer.
While Ethereum and other blockchains have rapidly modified their networks, Bitcoin has remained relatively constant. Preserving the core of Bitcoin has always been the highest priority for the community. This includes defining features such as Bitcoin’s proof-of-work consensus mechanism, a finite supply, and UTXO-based data structure.
Let’s dive deeper into what properties make Bitcoin an ideal blockchain for Web3 infrastructure.
Bitcoin’s Decentralized Nature
Bitcoin delivers on its promises of censorship resistance, inclusiveness, and transparency. No central entity or authority controls the Bitcoin protocol, currency, or data. Instead, everything is maintained by an open network of computers.
With over 15,000 active nodes, Bitcoin’s global mining infrastructure has grown to over 95 countries. This is almost three times larger than Ethereum’s active node network.
Bitcoin’s Stability
Since the inception of the first block in 2009, Bitcoin has continuously proven its durability and resilience. Bitcoin has a 99.98% uptime, with zero interruptions in nearly a decade. This puts it higher than tech giants like Amazon, Google, and Facebook.
Security on Bitcoin
Bitcoin’s robust security has stood the test of time. 256-bit SHA hash functions protect its proof-of-work system and transaction verification process. These hash functions also ensure Bitcoin’s immutability of every preceding block. Therefore, every transaction has absolute finality, and lives on a distributed ledger that is publicly accessible.
Moreover, the sheer magnitude of Bitcoin makes it extremely difficult to influence the network. Today, it would be nearly impossible for hackers to attempt a 51% attack.
Bitcoin’s Economic Potential
It’s impossible to deny that Bitcoin is the foundation of cryptocurrency. With its market dominance and mainstream presence, Bitcoin will persist far into the future. This will only become more true as the ecosystem expands the use cases of the Bitcoin blockchain and bitcoin (BTC) as a currency.
How Is Building on Bitcoin Possible?
Building on Bitcoin is slightly different from other ecosystems. In contrast to Ethereum or Solana, Bitcoin was not originally designed for developing applications directly on its base layer.
On its own, Bitcoin is ill-equipped to host decentralized applications (dApps). Furthermore, the Bitcoin protocol was designed to only handle about 3-7 transactions per second, and it takes about 10 minutes for transaction settlement. Running applications on the Bitcoin base layer would make them slow, expensive, and unusable.
Similarly, Bitcoin's scripting language does not support loops or complex flows, which makes the
development of smart contracts on the mainchain nearly impossible.
However Satoshi, the anonymous founder of Bitcoin, was supportive of an application layer from bitcoin talk forums in early 2010.
Bitcoin Layers and Smart Contracts
Layered solutions are the key to unlocking further Bitcoin programmability. Through Bitcoin layers, transactions can be scaled to a new level and reprogrammed to fit many different use cases.
Here are some of the Bitcoin layers that make building on Bitcoin possible:
Lightning Network
Lightning Network is a layer-2 scaling solution that enables fast and efficient payment processing on Bitcoin. The Bitcoin blockchain’s limited throughput is a major constraint for scaling to millions of users, and protocols like Lightning directly solve this issue. By opening up a channel, two parties can exchange Bitcoin without having to settle on the Bitcoin base. Lightning dramatically increases the speed and economic viability of transactions without compromising security.
Stacks
Stacks is a programming layer that introduces fully expressive smart contracts to Bitcoin. Stacks is an entirely separate blockchain from Bitcoin, with its own network, miners, and native asset (STX). Through its consensus mechanism, proof-of-transfer (PoX), every Stacks block transaction and state history are interconnected with Bitcoin. With Stacks, BTC always stays on the Bitcoin network, while smart contract logic occurs on Stacks and eventually settles back on Bitcoin. Stacks gives developers the necessary tools to construct all kinds of Web3 applications, such as wallets, dApps, NFT marketplaces, and more.
RSK
RSK (Rootstock) is a sidechain smart contract platform for Bitcoin. Having new blocks created approximately every 30 seconds, RSK rapidly speeds up Bitcoin’s transaction settlement process. As an EVM (Ethereum Virtual Machine) compatible network, developers can seamlessly port over their Ethereum applications to RSK. RSK uses its own native currency, smartBTC (RBTC), which is pegged 1:1 to BTC and is used to cover all transaction fees. When BTC is bridged to RSK, it becomes RBTC, allowing Bitcoin smart contract functionality. RBTC can be transferred back to the Bitcoin blockchain at any time for an equivalent amount of BTC.
Liquid Network
Liquid Network is a sidechain protocol for Bitcoin that enables fast settlements, asset issuance, and private transactions. Today, the Liquid Network operates as a federated network under the Liquid Federation, composed of 15 “functionaries” who serve as validators for the network. To transact on Liquid, BTC must be exchanged for an equivalent amount of Liquid Bitcoin (LBTC). Liquid Network decreases settlement time for Bitcoin to about 2 minutes, all while reducing fees and providing more confidentiality to transactions. Moving BTC to Liquid also exposes users to more digital assets like stablecoins through peer-to-peer Atomic Swaps.
Discreet Log Contracts
Discreet Log Contracts (DLCs) are a unique Bitcoin development that utilizes smart contracts based on oracles. An oracle is essentially an entity that connects real-world data to a blockchain. These smart contracts are then dependent on this outside data, which later decides the result of the transaction. Funds are locked into a multi-signature address and only redistributed once the oracle is released at a specified time. DLCs are often compared to “bets'' between two parties and rely on future outcomes of events such as a sports match, the weather, or the price of an asset.
What Can Be Built on Bitcoin?
Bitcoin layers unlock the full potential for a vast, booming crypto ecosystem. Some of the use cases that Bitcoin users can access with the introduction of layers and smart contracts include:
- Bitcoin DeFi (Decentralized Finance)
- Lending protocols, decentralized exchanges, wallets, and more
- Bitcoin NFTs (Non-Fungible Tokens)
- Bitcoin DAOs (Decentralized Autonomous Organizations)
- Bitcoin tokenized assets
- Bitcoin digital identity
- Bitcoin atomic swaps
- Bitcoin bridges
The Future of Bitcoin
With so many developments in motion, Bitcoin adoption is growing faster than ever.
Without centralization, Web3 applications must be built on blockchains that best embody trust. There is no doubt that Bitcoin is the most trustworthy.
Bitcoin was the original breakthrough in enabling trust through a protocol rather than a central entity. It has since withstood the test of time and proven that it is by far the most secure, decentralized, and economically powerful blockchain. Given its trustworthiness and innovations, Bitcoin is the best on-chain final settlement for building high-value applications.
With this massive opportunity ahead, Trust Machines is on a mission to build out the Bitcoin ecosystem by developing applications, technologies, and other infrastructure that enhances the Bitcoin network.
Building on Bitcoin FAQs
1. Why is building on Bitcoin new?
Within the last couple years, major blockchain technology strides have helped expand Bitcoin's functionality and scalability. Over time, there have been attempts to increase Bitcoin’s utilization and productivity. However, most have failed until recently.
Another reason why Bitcoin’s ecosystem is finally emerging is the inherent, slower nature of Bitcoin. Compared to other layer-1 blockchains, Bitcoin tends to take longer to evolve. This is purposeful, as the Bitcoin community takes a more conservative approach to updates and ensuring the integrity of Bitcoin’s protocol.
2. Why can’t Bitcoin just increase its block size?
Increasing Bitcoin’s block size would significantly affect the network’s mining, security, and decentralization. Furthermore, block size would not be the sole solution to fixing the Bitcoin problem. Adding layers on top of Bitcoin is the most suitable solution for scaling Bitcoin.
3. Are there applications already being built on Bitcoin?
Many decentralized applications are running on Bitcoin layers like Stacks and RSK.
Trust Machines is helping to develop a suite of products for Bitcoin, including Console and LNSwap. Plans for more Bitcoin dApps are underway and will be announced in the future.
4. How is Trust Machines building on Bitcoin differently than others?
Trust Machines is on a mission to research and develop innovative solutions to bring the best decentralized apps to Bitcoin. We believe in the power and security of Bitcoin. Our approach to creating applications is to use the minimal needed technology that empowers those applications without disrupting Bitcoin itself.
Additionally, we believe that the model we’re pursuing at Trust Machines is a proactive, entrepreneur-first approach that allows for value to accrue both in the Bitcoin base layer and innovation built on top of Bitcoin. We believe that those who enable new use cases for Bitcoin can benefit from novel business models of Web3.
5. How can I find a career in building on Bitcoin?
Those interested in helping grow the Bitcoin economy can visit the Trust Machines Careers Page to learn more about current open positions.
