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Bitcoin Developers Tout “Programmability” as Catalyst for Next Rally
(Bloomberg) — After the long-awaited launch of U.S. Bitcoin exchange-traded funds in January and the every-four-year software update called “halving” last month, the big question on many crypto investors’ minds On people’s minds, what will propel the largest cryptocurrency’s next rally?
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Many developers believe they have the answer: adding programmability to the Bitcoin blockchain. Today, many view Bitcoin as digital gold – a token you hold for appreciation, but with which you can’t do much else. Although you can use its biggest rival, Ether, to trade coins and earn yield on the Ethereum network, the Bitcoin blockchain lacks the ability to easily support applications through the so-called smart contract functionality that allows to store features such as self-executing agreements. on the blockchain.
For years, developers have attempted to fix this intentional design flaw in various ways. They have built “layer 2” Bitcoin networks, such as Lightning, designed to adapt Bitcoin for applications such as payments. Some have proven unreliable, and so-called bridges – software infrastructure for moving tokens between networks – have been prone to hacking, making many users hesitant to use them. And anyway, many Bitcoiners are not interested in using the tokens for payment and hold on to them betting that long-term prices will rise in what has come to be known as “hodling.” However, without a new catalyst to maintain investor enthusiasm for Bitcoin, the original cryptocurrency has retreated from its all-time high of nearly $74,000 set in March.
Things changed recently, however, once Bitcoin Ordinals – a way to create non-fungible tokens by embedding data on satoshis, as the smallest denomination of Bitcoin is called – began last year. Shortly after, an anonymous developer named Domo proposed BRC-20 tokens, which use the same registration mechanism to issue tokens on the Bitcoin blockchain. This in turn has led teams of developers to look for ways to enable even greater Bitcoin programmability. The Bitcoin community is considering proposals like OP_CAT, which would be a software upgrade to the network itself and make programmability easier to implement. Approaches under development include that of a team Domo is involved with, the Layer 1 Foundation. Another approach, that of the startup Arch, has just raised $7 million in a funding round led by Multicoin Capital.
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“This is a huge unlock for Bitcoin,” said Kyle Samani, co-founder of Multicoin. “It’s really good for users.”
Expected to open to all developers as early as this month, Arch runs an application platform on top of Bitcoin that uses software that will potentially allow applications from the Solana network to be ported to Bitcoin, Matt Mudano said. CEO of Arch. Already, about 20 teams of developers are building applications for functions such as borrowing and lending against ordinals, as well as decentralized exchanges and stablecoins, he said.
The Layer 1 Foundation, meanwhile, is building a programmable module for the so-called BRC-20 metaprotocol, which essentially consists of messages stored in code layered on top of the Bitcoin blockchain. An indexer can find these messages and run calculations in the same way as smart contracts on Ethereum. Since Bitcoin has much longer block confirmation times than Ethereum – 10 minutes compared to the current 12 seconds – which allows more time to do the calculations, “we can actually do more,” said Eril Ezerel, founder of Best in Slot, Ordinals aggregator and explorer.
“It’s like chapter two of cryptography,” Ezerel said. “It’s big. It makes us question how we build things. Although building with metaprotocols is simpler, it’s enough to support most financial applications, he said.
Not everyone in the Bitcoin programming community is convinced that it’s the future of cryptocurrency. Jeff Garzik, former Bitcoin lead developer and co-founder of crypto infrastructure and app builder Bloq, expects Layer 2s will eventually win out because using them for transactions will be less expensive than running applications on Bitcoin.
“Bitcoin’s programmability is increasing – thanks to these new Bitcoin L2s expanding the reach of Bitcoin,” said Garzik, who is working on a merger of Bitcoin and Ethereum Layer 2. “This simultaneously strengthens the Ethereum ecosystem and also competes the Ethereum ecosystem.
Still, new companies are betting that this new type of programmability could lead to an influx of decentralized financial applications on Bitcoin. Currently, the total value of tokens locked in the Bitcoin DeFi market is around $1.1 billion, compared to $52.7 billion for Ethereum, according to DeFi data tracker Llama.
“Bitcoin’s DeFi ecosystem could become the largest of all cryptocurrencies,” said Toby Lewis, founder of OrdinalsBot. “It’s possible that the Bitcoin DeFi ecosystem could reach billions of dollars in market cap over the next few years, and it appears to be one of the key growth drivers for crypto this cycle.”
And if demand materializes, perhaps this will be the next catalyst that Bitcoin investors seem to be waiting for.
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