30.8.2024
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Building on Bitcoin has never been more exciting. Developers can now build on Bitcoin Layer 1 and Layer 2, opening up a range of possibilities for new use cases and applications.
Read on to learn more about building on Bitcoin, from what you can build to why an increasing number of developers are choosing to build on Bitcoin.
In 2009, Satoshi Nakamoto rolled out Bitcoin to introduce a peer-to-peer digital currency to facilitate trustless global payments. While this was a much-needed use case — and still is — Bitcoin’s utility has evolved over the last 10+ years to predominantly become a store of value. This perhaps unintended use case has earned Bitcoin the title of digital gold due to its similarities with the commodity.
While BTC, as a store of value, has become the leading use case, there was a phase when developers experimented with Bitcoin, creating projects like Colored Coins (2012) and Rare Pepes (2016) on Counterparty. However, these experimentation efforts faded into the background as development on Ethereum took center stage for use cases beyond digital money.
Although the momentum had shifted to smart-contract-focused blockchains, a few dedicated developers continued to build on Bitcoin, resulting in the emergence of Bitcoin Layer 2 protocols, such as Rootstock and Lightning, to address Bitcoin’s scalability issues and to increase its utility.
Then, 2023 became a massive year for developers looking to build on Bitcoin on-chain when Casey Rodarmor launched the Ordinals protocol and then followed that with the proposal of the Runes protocol. Enabled by the Taproot upgrade, the issuance of non-fungible and fungible tokens became possible on the Bitcoin blockchain, attracting a large user base from other blockchain ecosystems (back) to Bitcoin.
The excitement around building on Bitcoin can be felt again now that builders can issue assets on Bitcoin and build a suite of decentralized applications (dApps) on Bitcoin Layer 2 protocols.
Developers can build directly on Bitcoin Layer 1 or on Layer 2.
Building on-chain involves working directly on Bitcoin Layer 1 without making any changes to the protocol. While this is a difficult task due to Bitcoin’s limited programmability, developers have found innovative ways.
The Ordinals project introduced native asset issuance on Bitcoin, allowing users to create non-fungible tokens by simply inscribing (attaching) data to an individual satoshi. Other projects based on Ordinals, such as BRC-20, also use the same concept to generate fungible tokens on-chain.
These protocols leverage the improvements made by the SegWit and Taproot upgrades to make asset issuance directly on Bitcoin a reality.
Building on Bitcoin layers means developing applications on Layer 2 networks built on top of Bitcoin. These layers make building on Bitcoin easier because they have the programmability needed to support the development of decentralized applications (dApps).
For example, Bitcoin layers like Rootstock, Stacks, RGB, and the still-in-development BitcoinOS use complex smart contracts with more programmability than Bitcoin’s smart contracts. Therefore, developers can build a wide range of dApps, ranging from DeFi to gaming and more.
A wide range of products and services can be built on Bitcoin. Let’s take a look at some of the most exciting use cases.
Bitcoin Layer 2 networks are helping developers build a DeFi ecosystem on top of Bitcoin, enabling users to access a broad array of Internet-native financial products and services secured by Bitcoin.
Sovryn is an example of a DeFi protocol built on Bitcoin. Currently operating on the Rootstock (RSK) sidechain, Sovryn enables users to trade, borrow, and earn crypto in a decentralized manner by providing a suite of DeFi products, such as liquidity pools, lending, staking, and more. Sovryn is now developing BitcoinOS, which will enable a faster, cheaper, and better Bitcoin DeFi experience.
Non-fungible tokens (NFTs) are unique digital assets created directly on-chain or on Bitcoin layers. These tokens represent virtual or real-world assets on the blockchain.
On-chain NFTs, better known as Bitcoin Ordinals, are inscribed using the Ordinals protocol. NFTs are also minted on Layer 2 networks like Stacks, Liquid, and Counterparty but are ultimately recorded on the Bitcoin blockchain.
Decentralized applications (dApps) are applications for the Web3 space. They permit users to carry out different activities on the blockchain, like trading, messaging, lending, borrowing, earning, and betting.
dApps are built on Bitcoin using Layer 2 protocols like BitcoinOS. Once live, BitcoinOS’s expressive smart contracts will allow developers to build interoperable dApps with various uses.
Developers are creating games on Bitcoin using the Ordinals protocol and Bitcoin Layer 2s. The former option only supports lightweight games, while Bitcoin Layer 2s can host large gaming ecosystems, enabling players to play and earn while Bitcoin secures their in-game assets.
Stablecoins can be created through the Ordinals protocol and on Bitcoin layers. They are digital currencies whose value is tethered to a price-stable asset like fiat money or commodities. Stablecoins, such as DLLR, allow users to participate in Bitcoin DeFi without having to worry about price volatility.
Digital identities are human-readable usernames for the Web3 space. They are used in the place of wallet addresses to receive digital assets. Digital identities are being built on-chain and on Bitcoin layers. The Stacks-based Bitcoin Naming Service (BNS) and Ordinals-powered Sats Names are examples of creating Web3 usernames on Bitcoin.
Decentralized physical infrastructure networks (DePIN) refer to decentralized protocols that create and maintain physical infrastructures that typically reward participants with token incentives. Example use cases for DePIN include data storage, wireless networks, and energy grids.
Decentralized physical infrastructure, like bitcoin mining itself, bridges the gap between the physical and digital worlds.
Several factors make building on Bitcoin special. Here are some reasons why projects are developing on Bitcoin.
Unlike fiat currencies, Bitcoin isn’t controlled by a central authority. It is a decentralized network that distributes the power of verifying transactions and adding them to the chain of a large network of computers (nodes). Each node holds and maintains a copy of the updated blockchain. Additionally, nodes must agree through consensus that a transaction is valid before confirming it.
In a nutshell, no single entity has control over BTC or the blockchain’s transactional data. This decentralized nature of Bitcoin allows users to transact peer-to-peer without the need for intermediaries.
Bitcoin is the most secure blockchain in the world because it is the most decentralized and is powered by the Proof-of-Work consensus protocol that requires a distributed network of nodes to verify transactions and miners to dedicate computing power to process transactions.
The cost of the computational work required to mine bitcoin makes it virtually impossible for any entity to take control of more than 50% of the network’s hashing power and maintain this control. As a result, it’s essentially impossible to hack or tamper with Bitcoin, making it an incredibly robust infrastructure to build on.
Bitcoin is a stable network that hasn’t faced a single outage since 2010. That means Bitcoin has been running uninterrupted for over 14 years. This level of stability makes Bitcoin a blockchain that consumers and developers can rely on.
Bitcoin trumps all other blockchains with regard to stability—including Ethereum, which experienced two outages in 2023.
Bitcoin is a highly liquid digital asset, accessible 24/7 through both centralized and decentralized crypto exchanges. That means investors can find a buyer when they want to sell BTC or a seller when they want to purchase. This ease of trading is important in increasing investor confidence when it comes to putting money into the Bitcoin ecosystem.
As the first cryptocurrency to be created, Bitcoin has become the benchmark for many blockchain projects and the face of the crypto space as a whole. Its stability, security, decentralization, transparency, and ability to retain purchasing power for a long time have made the project into a strong and reliable brand.
BitcoinOS is a superchain of interoperable rollups built on Bitcoin featuring EVM-compatible smart contracts and near-trustless Bitcoin rails.
On BitcoinOS, developers can build scalable, interoperable, and composable dApps secured by Bitcoin. This is a major milestone since dApps on other Bitcoin layers are typically siloed with no way of communicating with each other.
BitcoinOS is designed to become a public good shared by all. That is why the Sovyrn community, which is taking a leading role in the development of BitcoinOS, is encouraging open-source developers to join them to create a larger community for building the future of Bitcoin.
Yes, you can build DeFi, NFTs, games, stablecoins, dApps, and digital identities on Bitcoin using Layer 2 networks that exist on top of Bitcoin. Additionally, protocols like Ordinals allow developers to build directly on Bitcoin to a certain degree. For example, you can issue non-fungible and fungible assets on the Bitcoin blockchain thanks to the Ordinals protocol.
The Layer 2 network, BitcoinOS, is a project worth noting as it will enable the development of interoperable, composable, and Bitcoin-secured dApps once it is live in Q4/2024.
Yes, you can build applications on Bitcoin using smart-contract-focused Layer 2 scaling solutions like BitcoinOS.
Many applications have been built on Bitcoin using existing Layer 2 networks, ranging from NFTs to DeFi and more. This helps expand Bitcoin’s utility beyond payments and investments. For example, Sovryn, built on Rootstock, is the top DeFi protocol on Bitcoin.
Bitcoin offers several attractive features that encourage developers to build on it. They include decentralization, reliable security, high liquidity, a strong brand, and a blockchain uptime of 100% for nearly 14 years.
These features are important to projects that wish to build decentralized and secure applications without worrying about outages and liquidity issues. Additionally, Bitcoin’s strong brand is also a plus because it can help projects attract a user base and funding for their applications.
