20.12.2024
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Decentralized applications (dapps) are an essential element of a distributed, shared digital economy built on blockchain technology. With Bitcoin as the base infrastructure to secure decentralized applications, a more robust and sustainable dapp ecosystem can be built.
In this guide, we will focus on Bitcoin dapps and why it makes sense to build them.
Decentralized applications, or dapps, are software applications built on blockchains. Powered by smart contracts—code that automatically executes predefined conditions—a dapp can be thought of as a collection of smart contracts stacked together to perform specific functions.
From a user's perspective, dapps are similar to traditional Web2 applications. However, they look dissimilar at the point of access. Instead of submitting an email address and password during sign-in like you would with a traditional app, dapps require connecting a crypto wallet.
Another difference is that traditional apps run on a single server while dapps operate on a more decentralized network. This makes dapps superior to traditional apps in better control of your data and digital assets, reducing your dependence on a central authority or intermediary. Additionally, every transaction you perform on a dapp is recorded on-chain, making it as immutable, decentralized, and secure as the underlying blockchain.
Like traditional apps, decentralized applications give users access to different products and services. For instance, the Web3 space currently offers trading, lending, and gaming dapps. These applications are built directly on Layer 1 or Layer 2 networks and can be accessed using crypto wallets on web browsers like Google Chrome and Firefox.
While blockchain technology has popularized decentralized applications, they are not new. Several applications like Tor, BitTorrent, and Napster existed before Bitcoin was launched in 2009. Although the term “dapp” wasn’t used then, they can theoretically be considered decentralized applications because they operated on peer-to-peer (P2P) networks.
Building dapps directly on the Bitcoin blockchain is difficult because of its limited smart-contract functionality. Dapps need expressive, complex smart contracts to operate, which Bitcoin Layer 1 doesn’t support.
The Bitcoin blockchain only supports simple smart contracts due to the limited programmability of its scripting language. This limitation allows Bitcoin to reduce programming errors and reduce the risk of denial of service (DoS) attacks.
Besides limited programmability, building complex Bitcoin-native dapps is hindered by slow transaction speeds and high fees. For a dapp to attract users, it needs to offer a smooth and enjoyable experience, which cannot be achieved on Layer 1 due to slow transaction speeds, network congestion, and costly fees during high-traffic hours. Therefore, building decentralized applications on Bitcoin off-chain protocols is more practical since users can enjoy better transaction throughputs and lower fees.
An off-chain protocol is a scaling solution built on top of the Bitcoin blockchain. It relies on Bitcoin for security and transaction finality. Developers build these protocols to enhance a Layer 1 blockchain’s transaction speeds and smart-contract capabilities. These networks are commonly referred to as Bitcoin layers.
Bitcoin dapps are applications that run on smart-contract-focused Bitcoin layers while profiting from the base layer’s security, decentralization, and immutability.
Bitcoin smart-contract layers are off-chain protocols that enhance Bitcoin’s smart-contract functionality through an intricate programming language or Ethereum Virtual Machine (EVM)-compatibility. BitcoinOS, Stacks, and RGB are examples of smart-contract layers built on Bitcoin.
Let’s take a look at examples of popular dapps built on Bitcoin.
Sovryn is a permissionless and non-custodial decentralized finance (DeFi) dapp built on Rootstock and secured by Bitcoin.
It offers various financial products like trading, lending, borrowing, and staking. For instance, you can carry out spot and margin trading on Sovryn’s automated market maker (AMM) exchange or earn SOV rewards and transaction fees by depositing digital assets in AMM pools.
Runes, BTC, Rootstock assets, and SOV are examples of digital assets you can trade on Sovryn. In addition to trading, you can lend assets to earn interest, borrow USD-pegged stablecoins, and earn rewards through staking SOV. SOV operates on Rootstock, an EVM-compatible sidechain that operates parallel to Bitcoin and links to it via a two-way peg system, and it is available as a bridged ERC-20 token on Ethereum.
SOV holders acquire governance rights when they stake the token on the Sovryn dapp. That means SOV stakers get the right to participate in Sovryn’s Bitocracy, the decision-making process of the platform, where Sovryn Improvement Proposals (SIPs) are discussed and voted on.
LNSwap is a dapp built on Stacks that enables users to carry out atomic swaps across Bitcoin and Stacks.
For example, you can swap BTC for STX or STX for BTC straight from your wallet. You can also perform such swaps near-instantly and at a low cost because LNSwap supports the Lightning Network. STX is the native token of the Stacks network.
As an atomic swap, LNSwap leverages hashed timelock contracts (HTLCs) to enable swaps between Bitcoin L1 and Layer 2 Stacks. An HTLC is a type of Bitcoin smart contract that holds the funds of two parties until they fulfill predetermined conditions. It also sets a deadline for a transaction to be completed.
Gamma is a non-fungible token (NFT) marketplace built on Stacks that allows users to buy and sell Bitcoin Ordinals and NFTs issued on the Stacks network directly from their wallets.
Gamma also permits users to mint Stacks NFTs and inscribe Ordinal inscriptions.
Bitcoin ordinal inscriptions are Bitcoin-native non-fungible tokens referred to as digital artifacts. Unlike regular NFTs that store some of their metadata off-chain, Ordinal inscriptions store all their data on-chain, making them decentralized, immutable, and censorship-resistant.
While projects can build dapps on smart-contract blockchains like Ethereum and Solana (SOL), building them on Bitcoin layers arguably makes much more sense.
Dapps on Bitcoin off-chain protocols are secured by Bitcoin, meaning they benefit from Bitcoin’s unparalleled security.
Bitcoin is more secure than any other blockchain today, thanks to miners, node operators, and Satoshi Nakamoto's design decisions that protect robust security. These decisions include adopting a simple programming language and limiting the number of opcodes (instructions that tell the blockchain to perform certain actions) to reduce the risk of DoS attacks.
As a result, the Bitcoin network hasn’t been compromised. It has stood the test of time to become the most secure and stable blockchain in existence today. On the contrary, Ethereum briefly stopped finalizing blocks in 2023, while Solana has repeatedly experienced outages, with the last one registered in February 2024.
BitcoinOS is a Bitcoin-secured smart-contract layer with dapp interoperability.
BitcoinOS consists of multiple interoperable and composable rollups that collectively create a superchain. That means any dapps built on these rollups will also be interoperable, enabling a shared economy among different applications. Rollups are scaling solutions that process multiple transactions off-chain and compress them into a single batch before submitting them to the base layer.
BitcoinOS is scheduled to go live on mainnet in Q4 2024, and Sovryn will be among the first dapps available to users.
Buy SOV to participate in Sovryn’s Bitocracy and have your say in the new era of Bitcoin.
Yes, there are many dapps built on Bitcoin layers and secured by the Bitcoin blockchain. These decentralized applications are built on smart-contract layers like Rootstock, Stacks, and BitcoinOS. Sovryn is an example of a dapp on Rootstock. It enables users to swap tokens, lend, borrow, and earn rewards.
Building dapps directly on the Bitcoin blockchain is difficult because of its limited smart-contract functionality and slow transaction speeds. As a result, developers build Bitcoin-secured applications by using off-chain protocols like BitcoinOS, Stacks, and Rootstock. These layers typically feature better smart contract functionality than Bitcoin, achieved through a complex programming language or compatibility with the Ethereum Virtual Machine (EVM).
