Developers are actively exploring how to use decentralized finance (DeFi) to create new programmable capabilities on top of the Bitcoin (BTC) network. However, after the launch of exchange-traded funds in the United States and the fourth halving, the community focused on the future of the ecosystem of the first cryptocurrency by capitalization, which is Bitcoin.
Bitcoin programmability is increasing
The developers’ focus is on the potential of DeFi . In their opinion, decentralized finance can transform Bitcoin from simple “digital gold” into a more dynamic and programmable platform. For example, Toby Lewis, co-founder of the OrdinalsBot project, believes in the huge potential of BTC-based DeFi .
According to DefiLlama , the total value locked (TVL) on the Bitcoin network is currently $1.216 billion. “It’s entirely possible that the DeFi ecosystem on the BTC blockchain could grow to trillions of dollars in market value over the next few years, and it looks set to be one of the major growth drivers for cryptocurrencies this cycle,” Lewis said. Traditionally, Bitcoin has been viewed as a store of value without much functionality. Especially compared to Ethereum (ETH), a network that supports a huge ecosystem of applications and smart contracts.
Now developers are trying to bridge this gap by coming up with various innovative solutions. One of these is the introduction of second-level (L2) networks, for example, Lightning Network . L2 networks are needed to increase the scalability and utility of the blockchain.
Bitcoin’s Evolving Script
In 2023, a significant milestone in the development of the BTC ecosystem was marked by the emergence of the Ordinals protocol , which allowed the creation of non-fungible tokens (NFTs) based on the Bitcoin blockchain . After this, tokens of the BRC-20 standard appeared in the network of the first cryptocurrency by capitalization , which inscribe satoshis (the smallest unit of bitcoin) with data.
Developers are also currently exploring other features that could simplify the process of programmability on the BTC network. For example, a potential update to the OP_CAT software. The upgrade is currently under consideration and has not yet received the necessary support from the community.
However, integrating programmability into the blockchain of a leading cryptocurrency is not without its challenges. Thus, the recent launch of the Runes protocol for creating altcoins based on BTC caused a huge surge in activity on the network. This has led to higher transaction fees. However, the excitement quickly subsided.
At its peak on April 23, the number of transactions with Runes exceeded 1 million. But as of May 20, the figure dropped to 52 thousand, according to Dune.
