A group of computer scientists known as cypherpunks who insist on privacy dreamed of creating assets unique to the Internet. After decades of research and experimentation, Bitcoin was created in 2008 by an anonymous person named Satoshi Nakamoto. The blockchain technology behind Bitcoin has solved a serious problem called the double payment problem. Basically, for the first time, the Bitcoin protocol allows two strangers to trust each other on the Internet without involving a third party.
After Bitcoin’s extraordinary success, people like Vitalik Buterin realized that Bitcoin’s functionality was inherently limited. Bitcoin, for example, has proven to be the best performing asset in 10 years. But scaling the Bitcoin network to say 1 billion users poses a challenge. Satoshi Nakamoto placed the highest priority on security and decentralization when designing protocols, and there was no room for major network changes to handle high-traffic or complex protocols. Despite the shortcomings, some developers have built innovative products on top of Bitcoin.
In this article, we’ll take a closer look at applications built using Bitcoin networks other than the major use cases as potential institutional assets.
Built on Bitcoin
Bitcoin has made progress in the scalability sector. Lightning Network, a Layer 2 blockchain protocol, was designed to offload transactions from the main Bitcoin network for faster transactions. Handle off-chain transactions cheaper and more efficiently. Bitcoin Layer 1 can handle 10 transactions per second, while Lightning Layer 2 can theoretically handle millions of transactions per second. It also consumes less energy than Bitcoin mining, which consumes a lot of energy.
Twitter uses Lightning Network to enable users to give hints to creators. El Salvador became the first country to make Bitcoin a legal tender. The government has created a wallet called Chivo that is compatible with Lightning and designed to enable seamless cross-border payments.
Stack and DeFi
The first successful Layer 1 blockchain built on Bitcoin was the stack. Stacks uses a consensus mechanism called Transfer Proof (PoX) to allow developers to build dapps on the Bitcoin network. STX is a token that strengthens the stack network and can be used to earn Bitcoin by temporarily locking STX tokens in the liquidity pool.
One of the first decentralized finance (DeFi) protocols built on the stack is Arkadiko. This is a non-custodial liquidity protocol that allows investors to deposit assets and earn stablecoins fixed in US dollars called USDA. Using the yield from PoX, the STX mortgage vault that mint USDA creates a self-paying loan.
The future of DeFi with Bitcoin
DeFi projects currently being built using Bitcoin network properties include Mintlayer (MLT), RSK Smart Bitcoin (RBTC) and Sovryn (SOV).
Mintlayer is a Bitcoin sidechain that provides smart contract solutions and also runs a decentralized exchange (DEX). RSK’s smart contracts are protected by Bitcoin hash power from merged mining. Currently, 49% of Bitcoin miners are also mining RSK. Sovryn is on the RSK blockchain and uses RBTC in its smart contract system. We offer an automated market maker (AMM) that allows you to take out a loan with only 2.86% APY and use the wrapped Bitcoin RBTC to enter harvest farming.
DeFi is synonymous with Ethereum these days, but layer 1 blockchains such as Stacks have changed the status quo by allowing developers to build dapps while leveraging the security features provided by the underlying Bitcoin network. I’m trying. Looking at the future of DeFi, Bitcoin could arguably be one of the most happening blockchains.
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Disclaimer: This article was created by Giottus CryptoExchange as part of a paid partnership with The News Minutes. Investing in crypto assets or cryptocurrencies is susceptible to market risks such as volatility and is not guaranteed to be profitable. Do your own research before investing and seek independent legal / financial advice if you are uncertain about your investment.
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