Bitcoin Ordinals
The Bitcoin halving is here, and with it, a significant and exciting development in crypto.
To set the stage, let’s talk about Bitcoin Ordinals, also known as “inscriptions.” Although Bitcoin’s original use case (as stated by Satoshi Nakamoto) was to be a decentralized store of value, the crypto community has been attempting to add a second layer of DeFi on top of the Bitcoin Lightning Network. The first attempt at this was Bitcoin Ordinals, which are similar to NFT’s on Ethereum but without an image attached – picture-less NFTs. This attempt was successful, and Ordinals have since experienced a thriving and active marketplace.
However, building a DeFi layer on top of Bitcoin is controversial. It burdens the Bitcoin network (which is already over-worked as it is), and can lead to greater energy consumption which is a growing political and enviornmental hot button. Some naysayers believe that any attempt at a Layer 2 is almost blasphemous to the purity of Bitcoin, while others believe it is the way forward.
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Bitcoin Runes
This is where Runes come into the picture. To address these concerns, the creator of Bitcoin Ordinals, Casey Rodarmor, recently announced a NEW version of Ordinals, which he is calling Runes. Runes are similar to Ordinals in that they are pictureless tokens living on top of the Bitcoin network, but they are more energy efficient and better in a number of other ways. This is definitely one of the hottest narratives currently in crypto, so I will keep you posted on its developments!
Interestingly, there are a number of other crypto projects that are working to place a DeFi layer on top of Bitcoin. These projects would allow smart contracts similar to Ethereum, but are built using the Lightning Network that Bitcoin lives on. The three most notable projects doing this are Stacks (STX), Core (CORE), and Elastos (ELA). In crypto, we generally refer to this pursuit as a “Bitcoin Layer 2,” since it is a smart contract layer that uses Bitcoin as the foundation.
The future is bright for decentralized smart contracts, and their potential to change technology forever! But the question now is, will the winning smart contract paradigm eventually be built directly on Bitcoin itself, and how would Satoshi Nakamoto feel about this? Or will Ethereum remain “King of smart contracts” as it is currently crowned?
Pros and Cons
I will end with mention of one final pro and con of using the Bitcoin Lightning Network for smart contracts. First, the pro: Bitcoin is where the liquidity is. Bitcoin remains very solvent, even during bear markets. Bitcoin is also accessible in more places in the world than ANY other cryptocurrency. Now, the con: The Bitcoin network is expensive, and gas fees can be even MORE pricey during heavy use, which is created by not only normal Bitcoin payment transactions but also the added burden of Bitcoin DeFi.
So, what do you think? Will Bitcoin end up being the “chosen network” for smart contracts?
