BITCOIN ECOSYSTE
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Friends, let’s start with a brief introduction. Take this post not as a boring theory about project technologies, but as a notification with prerequisites for the future trend on projects built on Bitcoin.
Many are familiar with such an update of BTC as halving, but not everyone has heard of Bitcoin Taproot. This update, which took place in November 2021, is aimed at introducing smart contracts that can be used to eliminate intermediaries from transactions and build DeFi projects.
But when the update was introduced, everything went slightly off plan. Since Taproot allowed users to bypass the 80-byte limit, they started uploading various digital junk, clogging up the base level. In addition, the Bitcoin network is quite slow, which has a strong impact on BTC projects and the development of the ecosystem.
In an attempt to solve this problem, the Lightning Network project was implemented.
Lightning Network is a second-layer solution for making faster and more scalable payments. The project uses a network of bidirectional payment channels for conducting microtransactions without settlements in the chain.
In simpler terms, this allows users to transact with each other without waiting for slow block confirmations.
The update itself contributed to the increase in network performance. Thanks to Taproot, the network can group multiple digital signatures and verify them simultaneously. As a result, less space is required on each block, allowing the Bitcoin to support DeFi application development.
Bitcoin DeFi
DeFi on Bitcoin is possible thanks to the wrapped token (wBTC), L1 blockchain (Stacks), and sidechain (Rootstock). A sidechain is a blockchain scaling technology that creates a parallel network with a link to the main one.
wBTC is an ERC20 token backed 1:1 with Bitcoin. With the wBTC token, users can interact with Ethereum DApps.
One of the key players in the BTC ecosystem is the Rootstock project. Rootstock is an L2 solution attached to BTC via a bilateral binding. You send BTC to Rootstock (through a special address where it will be locked) and it becomes a “smart bitcoin living in Rootstock.” As a result, the project “guarantees” faster payments and scaling up to 100 transactions per second.
Also, the Ordinals protocol played an important role in the development of DeFi and NFT on BTC.
In the new infographic you can see the Bitcoin ecosystem.
