Bitcoin\'s Expanding Use Cases: A Deep Dive into Layer 2 Networks, Bridgeless Networks, Ordinals, and Runes

Bitcoin'sevolving ecosystem has grown significantly over the past two years. Initially, most of the activity on the Bitcoin blockchain was limited to transactions. However, with the advent of Layer2 scaling solutions such as the Lightning Network, permissionless communication layers like Solana's Zeus Network, and the much-hyped Ordinal NFTs and Runes protocol, Bitcoin's on-chain activity has witnessed a significant uptick.

Bitcoin's ecosystem has seen a surge in innovation over the past two years, expanding the network's use cases beyond its primary function as a decentralized monetary system. This evolution is largely driven by the introduction of Layer 2 scaling solutions, bridgeless networks, and on-chain data storage protocols like Ordinals and Runes. These innovations are collectively enhancing Bitcoin's utility and value proposition. In this article, we'll delve into these key areas of innovation and highlight how they're reshaping a new era of Bitcoin's use case expansion.

Bitcoin Layer 2 Networks

Similar to Ethereum's Layer 2 chains, Bitcoin L2's were introduced to solve the issue of scalability. Today, the market capitalization of Bitcoin Layer 2 coins is a whopping $2.4 billion; Stack's native token STX leads the pack with $2.2 billion, having recently surpassed over 122K monthly active users. So, how are L2's transforming Bitcoin's utility?

For starters, Bitcoin Layer 2 networks such as the Lightning Network have enabled instant Bitcoin settlements. This is possible through the network's payment channels infrastructure, which is designed to support off-chain micropayment transactions, ultimately reducing the workload on Bitcoin's main blockchain. On the other hand, the Stacks Layer 2 chain has made it possible for smart contract DApps to be built on the Bitcoin blockchain, thanks to the novel Proof of Transfer (PoX) consensus. According to DeFiLlama, there is over $115 billion locked in the Stacks protocol; these funds are from different DApps, including the likes of UwuProtocol (CDP) and VelarProtocol (Dexes).

Bridgeless Networks

Bridgeless networks designed to connect other blockchains with Bitcoin are another area of innovation that is fueling Bitcoin's use case expansion. Before the debut of bridging solutions like Wrapped Bitcoin (WBTC), which enabled the use of native BTC on Ethereum DApps, BTC stored on the Bitcoin blockchain was limited to a single blockchain environment. That's no longer the case. In fact, Bitcoin's integration ecosystem has grown beyond WBTC to now feature more advanced chain-agnostic solutions. A good example of a project that is introducing a bridgeless solution for Bitcoin is ZeusNetwork; this permissionless communication layer is built on the Solana Virtual Machine (SVM). Technically, ZeusNetwork is designed to make the transfer of Bitcoin to Solana's growing DeFi ecosystem as seamless as possible. To enable this integration, ZeusNetwork has pioneered a pluggable and programmable library dubbed ZPL. This library features a modular and extensible architecture that allows developers to transfer Bitcoin-related assets, including BTC, Ordinals, and Runes in the form of ZPL-Assets. Notably, Zeus' first DApp APOLLO attracted over 40,000 users within the first four days of its testnet launch.

Ordinals

Bitcoin ordinals were the talk of the crypto townhall in Q1 and Q2 2023. As of press time, the total number of Bitcoin ordinal inscriptions since their inception is well over 67 million. But what exactly are ordinals, and how are they enhancing Bitcoin's value proposition as a blockchain that is capable of storing data?

The concept of ordinals is built upon the ordinal theory–the ordering system which assigns a unique number to each satoshi in circulation. Every Bitcoin comprises 100 million satoshis, which are capable of storing arbitrary data (images, text, or other forms of data). This property is what has facilitated the rise of ordinal NFTs, as it is now possible to assign unique arbitrary data to a specific satoshi and track it on the Bitcoin blockchain. Of course, like any new innovation, ordinals have some shortcomings. They have become notorious for causing huge spikes in Bitcoin on-chain fees as was the case in April 2023 and more recently in December. Some Bitcoiners are also arguing they are unwarranted given the blockchain space they are taking up. That said, it would be ignorant to overlook the fact that ordinals are using Bitcoin's native blockchain to support a more intriguing area of development (Bitcoin NFTs), which could be huge given the interest in digital collectibles since the DeFi summer of 2021.

Runes

As mentioned in the introduction, Runes-related transactions are currently driving most of the activity on the Bitcoin blockchain. This Bitcoin protocol was launched as a more advanced alternative to the BRC20 token standard. At the core, the Runes protocol allows developers to issue fungible tokens on the Bitcoin blockchain. What particularly stands out is the protocol's use of Bitcoin's Unspent Transaction Output (UTXO) model, enabling the creation and issuance of tokens using a significantly smaller space compared to the BRC20 protocol. To date, over 2,500 BTC has been collected as fees related to Rune mints.

The above is the detailed content of Bitcoin\'s Expanding Use Cases: A Deep Dive into Layer 2 Networks, Bridgeless Networks, Ordinals, and Runes. For more information, please follow other related articles on the PHP Chinese website!