the bitcoin 2022 conference brought together more than 25,000 attendees in miami last month to discuss the future of the world’s largest cryptocurrency. The event, which attendees described as “extravagant” and likened to a bacchanal, featured a now-notorious keynote address by Peter Thiel in which the venture capitalist rallied bitcoin supporters against a list of people he described like bitcoin haters including warren buffet and jamie dimon.
while thiel’s speech garnered most of the attention around the conference, many investors, developers, and founders of the bitcoin community gathered at the same event to discuss a threat that could prove far more pressing than the aforementioned personae non gratae: competition. .
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Despite the broader crypto market crashing this week, bitcoin remains the most valuable crypto asset in the world, with a market capitalization of around $589 billion as of May 9. its status is due, in part, to the advantage of having been the first cryptocurrency token on a public blockchain.
But as new blockchains continue to emerge, and after the “defi” summer of 2020 brought new traction to ethereum, bitcoin investors have had to start watching their backs. Now, blockchain backers are pouring capital into efforts to ensure it can maintain its dominance as a form of money and expand into other use cases through decentralized applications (dapps) to keep up with competitors like Ethereum and Solana.
the advantage of bitcoin payments
Bitcoin’s advantage has generally been described as its value as an asset to hedge against inflation, much like gold, due to its fixed supply. bitcoin supporters including thiel, ark invest’s cathie wood and microstrategy’s michael saylor spoke at bitcoin 2022 about its ability to act as a store of value when central banks loosen their policies and allow inflation to spike, as it has been the case in the United States. states during most of the covid-19 pandemic.
The reality has not been so simple, as bitcoin has often traded lower amid periods of rising inflation in the us. uu. But bitcoiners argue that its value is most clearly visible in developing nations, especially those experiencing hyperinflation or with sizable proportions of the unbanked. they see it as a relatively safe asset that can enable faster and more efficient payments both within and across borders.
The bitcoin network itself only supports about five transactions per second, according to crypto exchange binance. bitcoin has been integrated with a layer two protocol called the lightning network to increase its speed and efficiency while reducing transaction costs, a part of the infrastructure used by the nation of el salvador and major crypto exchanges like kraken.
Startup lightning labs, which raised a $70 million series b round last month, is at the forefront of developing bitcoin’s lightning network. is building an infrastructure for the bitcoin lightning network similar to the visa payments network, lightning labs CEO and co-founder elizabeth stark told techcrunch.
lightning network can execute hundreds of thousands of transactions per second by settling off-chain transactions in a separate ledger, thus freeing up space on the layer one bitcoin blockchain while still adhering to its underlying protocol , stark explained.
“people want to have access to bitcoin, the asset… when you look at the stability, security and use case of global payments, and the global transaction aspects, that’s where bitcoin and the lightning network will shine ,” stark said.
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lighting labs recently announced a proposal to build taro, a protocol that would allow people without bank accounts to send and receive money in the form of stablecoins representing their national fiat currency through mobile apps.
“if I had a visa, I would be scared, because there are many people who have mobile phones, but now they don’t need to access the traditional system, and then merchants don’t need to pay the 3% fee plus 30 cents [for a transaction] . you can have fees that are dramatically lower than the legacy system,” stark told techcrunch.
startup moon, in fact, partners with visa to allow users to purchase goods and services with bitcoin through the lightning network on any us-based e-commerce site. uu. using the visa rails.
As Lightning Labs focuses on optimizing global payments through the Lightning Network, trading platform Robinhood has found the network useful in keeping network fees low on its new cryptocurrency offering, which has launched to users last month, robinhood’s crypto cto, johann kerbrat, told techcrunch.
“We will support lightning in the [robinhood] app, so you can connect it to pay merchants directly with the lightning network,” said kerbrat. “It also means you’ll be able to create a channel between people who use robinhood outside of robinhood and you’ll be able to trade bitcoins for almost zero fees.”
more than just an asset
Bitcoin’s low fees, enabled primarily by the lightning network, and early widespread adoption mean that blockchain has become synonymous with payments. Its closest competitor by value, Ethereum, is known for its high network fees and is still worth less than half that of Bitcoin by market cap. Newer challengers like Solana offer lower transaction fees but are considered less secure.
But despite bitcoin’s dominance in payments, other blockchains are developing capabilities far beyond simple money transfers. As an open source blockchain, Ethereum allows developers to easily create decentralized applications, or “dapps,” enabling use cases such as minting nfts and offering defi lending products through which investors they can earn interest.
As a result, ethereum has been able to amass the largest ecosystem of tools, applications, and protocols in the crypto world, and even competitors like polkdadot, cosmos, and solana have more developers working on their blockchains than bitcoin, according to a developer report from 2021 from venture capital electric capital.
bitcoin, meanwhile, ranks fifth by number of developers, below cosmos and solana. its backers are trying to give bitcoin a boost and attract developers to work on new projects in the ecosystem.
“A lot of the [discourse] has been just about bitcoin as an asset, and not necessarily about bitcoin as a network. And now I think we’re starting to see that paradigm shift, where people see it more as infrastructure,” alex chizhik, head of listings at cryptocurrency exchange okcoin, told techcrunch.
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chizhik co-chairs bitcoin odyssey, an initiative launched in march by okcoin together with venture firms including digital currency group, gsr and white star capital, to commit $165 million to projects that will “drive bitcoin adoption”, depending on the group.
Indeed, $165 million is a lot of money, but it seems like a drop in the ocean for the world’s largest blockchain. Venture capitalists invested more than $30 billion in web3 last year, much of which flowed into on-chain projects that innately enable smart contracts, unlike bitcoin.
Stacks, formerly known as blockstacks, play a crucial role in expanding bitcoin’s use cases. its open source network enables the creation of custom smart contracts in bitcoin, allowing developers to use the bitcoin blockchain to create dapps. Dapps built on the stacked bitcoin network include citycoins, a token protocol through which local governments can raise money from investors, and nft exchanges like hey layer and gamma.io.
“ethereum is definitely leading the way in what can be done with things like defi and asset ownership, like nfts, but that’s probably in the last three years. I think bitcoin now has this opportunity to catch up, take some of the best lessons learned and really unlock the value and chain of the base layer,” brittany laughlin, executive director of the stacks foundation, told techcrunch.
The Stacks Foundation is a non-profit arm within Stacks that supports governance, education, and grantmaking to improve infrastructure within the Bitcoin network.
“Our role is really how do we support the growth of the network and make sure we can deliver on our promise, which is a user-owned internet powered by bitcoin,” laughlin said.
laughlin explained that without the taproot update rolled out to the bitcoin network late last year, which makes transaction verification easier and faster, the growth of bitcoin as an ecosystem would have been much more limited. He noted that the bitcoin community is generally hesitant to change anything about the protocol, and that even the major update was met with some internal resistance and conflict before it was finally implemented three years after it was first proposed. Still, he told her, taproot doesn’t solve all the challenges bitcoin faces, and more changes may be needed to continue building the network.
Ultimately, however, laughlin believes that bitcoin will prevail in the long run against other layer one blockchains due to its first-mover advantage.
“anyone who has $100 worth of bitcoin, from el salvador to new york city, if they want to take a loan against that [$100], or if they want to secure an asset with it, they could do it [with bitcoin dapps]” , he said laughing.
laughlin compared bitcoin’s race against other blockchains to apple’s competition with android, where apple often releases products significantly later than android but focuses more on user experience.
“bitcoin will be like apple and ensure brand recognition, compatibility and ease of use; all that comes to mind when I think of bitcoin.”
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