The Next Step for Bitcoin
The digital assets industry we know today can be thanked by the revolutionary breakthrough of Bitcoin, illustrating that a digital currency can operate in a decentralized environment. Although revolutionary, in some aspects, Bitcoin is falling behind in use cases and utility as it only allows sending and receiving Bitcoin while providing store-of-value as well.
However, over the past years, there has been an increase in projects building on top of Bitcoin. There are, of course, Bitcoin's Layer 2 solutions, such as the Lightning Network, providing cheaper and faster transactions, as well as Stacks and Rootstock, which enable developers to create DeFi instruments while leveraging Bitcoin's network. Currently, we see another trend: the creation of Bitcoin-native assets such as non-fungible tokens. In 2023, this trend gained momentum with the launch of Ordinals, allowing users to attach extra data to a sat, the smallest denomination of a Bitcoin, such as an image or text. This enabled users to create unique and even scarce assets while leveraging the security and decentralization of Bitcoin.
The trend of Bitcoin-native assets is on the rise with the recent launch of the Runes Protocol. This protocol enables users to create fungible tokens on the Bitcoin network, offering a more efficient standard compared to BRC-20, which often congests the Bitcoin network. With this enhanced efficiency, Runes may draw in more users to Bitcoin, thereby increasing miner revenue and fostering further innovation.
If we truly want Bitcoin to experience mass adoption, and perhaps even more importantly, purposeful adoption, Bitcoin needs to be applicable in a wider range of our lives. For this to happen, in our opinion, Bitcoin needs to continue innovating. While some market participants believe these projects go against what Bitcoin was originally intended for, we believe they attract more users and interest to both the asset and the sector. Whether these projects survive remains the question, but developers must continue to experiment to find unique utility for Bitcoin, which might drive further adoption.