Bitcoin remains the undisputed “king” of blockchains. Bitcoin’s dominance has increased significantly since the experimental times of 2017. Bitcoin has survived many attempted forks and “civil wars” and has established itself as the reserve cryptocurrency; people fall back to Bitcoin in bear markets. The production network has stood the test of time for over 10 years now.
However, the crypto industry has dismissed Bitcoin when it comes to smart contracts or Web 3.0. I believe this is going to change.
It’s true that Bitcoin cannot do everything. Bitcoin is secure because it has a limited scripting language. Bitcoin is reliable and durable because it doesn’t change. This does not mean that the developer ecosystem around Bitcoin cannot innovate and enable support for Web 3.0. As the crypto industry makes progress toward Web 3.0, we’ll come to realize that it’s hard to beat the security and network effects of Bitcoin.
Despite several initiatives by potential competitors, the hashrate of the Bitcoin network and the security offered by its proof-of-work (PoW) mining remain unparalleled to this day. For years, new cryptocurrencies have attempted to launch their own native PoW networks; none has approached Bitcoin’s success.
Bitcoin has network effects. Most people are introduced to cryptocurrencies through Bitcoin. If something can be done on top of Bitcoin, it will eventually get done on top of Bitcoin rather than a smaller ecosystem. Network effects make Bitcoin’s success self-reinforcing: Miners see that the network is established, that the community is strong and that the currency is the “hardest” money in the crypto space. Miners join or expand their commitment, increasing hashpower and network reliability; their entry inspires still more holders and businesses, increasing community support. The cycle goes on.
Smart Contracts on Bitcoin
Despite the success of Bitcoin, critics who question Bitcoin’s capacity for innovation have some valid points. There are aspects of Bitcoin that frustrate developers who wish to explore the world of smart contracts and decentralized apps. Many projects have created their own blockchains because they perceive Bitcoin’s scripting limitations as a dealbreaker. They cannot deny the original chain’s security, but they also wish they could write more expressive smart contracts. New blockchains find themselves struggling with poor, native PoW security, and often attempt jumps to proof of stake (PoS) or delegated PoS setups which may be less secure and tend toward centralization.
As a result, several crypto projects have concluded that they must pick their poison: They must either attempt to bootstrap a native PoW chain or else establish a PoS chain, with all of the tradeoffs that entails.
But these are not the only options. There is a different path available: Smart contract platforms can employ Bitcoin’s PoW security to safeguard new blockchains.
New protocols can anchor to the security of Bitcoin and extend Bitcoin’s utility. Transactions that settle on Bitcoin are harder to reorganize than they are on any other network. This is an under-explored design space but one which is beginning to change.
The Bitcoin blockchain already has security derived from its energy expenditure and this security may be passed on to the interconnected chain by using concepts like proof-of-transfer (PoX). It’s important to recognize that interconnected chains differ from traditional sidechains; interconnected chains create their own crypto assets, but they utilize the Bitcoin chain for broadcasting mining operations and consensus steps. An interconnected chain anchored to Bitcoin is a win-win proposition for all parties as the new blockchain benefits from the reliability, and longevity of Bitcoin while providing freedom and flexibility to developers working with the interconnected chain.
The Bitcoin blockchain can also reap benefits, acquiring new and powerful use cases. These can attract new miners and new network participants, further solidifying Bitcoin’s place as the reserve cryptocurrency.
Smart contract platforms, and I include my own project, Blockstack, in this, understand how powerful on-chain contracts can be. But just as you don’t need to build all new roads to drive new cars, there’s no need to reinvent PoW or PoS chains to employ robust smart contracts or to launch new blockchains. The solid foundation we need to realize our vision for Web 3.0 is already here; a future Web 3.0 can anchor on Bitcoin.
Image credit: William Krause on Unsplash
This is an op ed contribution by Muneeb Ali. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.