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NFT's and DeFi Fueling The Rise of the Bitcoin Economy
Due to various innovations, a truly decentralized and digital economy is starting to emerge around Bitcoin. In this article, we take a look at the most important growth sectors of the Bitcoin economy
The world has seen its fair share of economic crises, and with each one, people start looking for new ways to protect their personal wealth. In recent years, cryptocurrencies and Bitcoin in particular have become an increasingly viable alternative.
The decentralized digital currency has been the subject of much debate and controversy, but its popularity continues to soar. The ongoing banking crisis has only served to highlight the potential benefits of Bitcoin. After all, it was created precisely for this purpose – to hedge against economic uncertainties and offer a secure, decentralized alternative to the traditional financial system. Bitcoin’s properties also make it largely resilient to crackdowns from governments, such as the recent antagonism from US regulators.
Today, we'll delve into the growing digital economy built around Bitcoin. Due to various key innovations and applications, Bitcoin’s use case is rapidly extending way beyond just money!
A Peek into the Leading Digital currency
Bitcoin was created in the aftermath of the 2008 financial crisis, which exposed many flaws in traditional banking systems. The crisis led to widespread distrust of traditional financial institutions and sparked a search for alternative ways to store and transfer wealth.
Bitcoin and its underlying protocol and network offer a decentralized, secure, and transparent way to store/transfer value without the need for intermediaries like banks or governments. Its finite supply means that it is not subject to arbitrary inflation, as is the case with traditional currencies — making it a unique alternative to store your wealth.
However, unlike other popular cryptocurrencies like Ethereum, Bitcoin has limited programmability. Because it wasn't designed to support smart contracts or other advanced programming functions, it hasn't been suitable for certain applications, such as DeFi or NFTs. But lately, exciting things have been happening in the Bitcoin ecosystem, with the potential of making it significantly more valuable.
A Change in Bitcoin Ecosystem
In the current world, where financial uncertainty and rapidly changing economic landscapes are the norm, Bitcoin provides a hedge against situations like a banking crisis or deglobalization, where trust in and among banks and between nations is deteriorating.
In 2023, Bitcoin's value proposition has gone beyond a store of value, thanks to two major developments: Taproot and the Lightning Network.
Lightning Network (LN) is a second-layer protocol that operates on top of the Bitcoin blockchain and enables faster, cheaper and more scalable transactions. With the LN, users can transact with one another without having to broadcast every transaction to the entire network. This enables new use cases for Bitcoin, such as micropayments and instant payments.
Taproot was a major upgrade to the Bitcoin protocol that went live in November 2021. It introduced a new scripting language that enables adding more complex features to the protocol and improves the privacy of transactions.
The development of Taproot and the Lightning Network have been significant milestones in the evolution of the Bitcoin network, making way for new applications and innovations.
DeFi projects and NFT's Built on Bitcoin
While Bitcoin was not originally designed for DeFi and NFTs, developers have found innovative ways to build new applications and financial products on top of it.
Let's take a look at some of the leading projects in the Bitcoin ecosystem:
Strike is a crypto payment firm that has gained a lot of attention for its innovative approach to payment processing. The company was founded by Jack Mallers and enables users to quickly and easily make and receive payments over Bitcoin's Lightning Network. What makes Strike stand out is its ability to convert automatic fiat payments from users' bank accounts into Bitcoin, without any fees. This feature, called "Pay Me in Bitcoin," provides users with a convenient way to save their money and grow their wealth in Bitcoin.
Mallers' vision for Strike has is to make it easier for people to transact with digital assets. His success with Strike and Zap, the parent company of Strike, has not gone unnoticed, and he has been named to Forbes magazine's list of 30 under 30 in Finance in 2021. Additionally, Strike has partnered with some of the world's largest payment providers, including NCR, Blackhawk Network, and Shopify, to enable Bitcoin payments at stores. Strike's partnership with El Salvador has also played a role in the country's adoption of Bitcoin as legal tender, further solidifying the company's impact on the world of crypto payments. With its recent $80 million Series B funding round, Strike is poised to continue leading the sector of crypto payments.
Stacks is a leading layer-2 solution built on the Bitcoin blockchain that enables the development of smart contracts and a wide range of DeFi applications, such as lending and borrowing platforms, DEXs, and more.
Its innovative approach unlocks a new era of possibilities for the Bitcoin economy. By creating NFTs and dApps with Clarity Smart Contracts secured by Bitcoin, Stacks allows for the full potential of Bitcoin to be realized. If you’d like to learn more about this, click here.
Several projects have already been built on Bitcoin via Stacks:
ALEX - This platform builds DeFi primitives like lending/borrowing, DEXs, and yield farming. It also offers a Launchpad for projects built on Stacks to access community funding and ecosystem resources.
Arkadiko - This non-custodial liquidity protocol allows users to borrow USDA stablecoin against their STX tokens. By doing so, Arkadiko enables users to gain increased liquidity while maintaining their original asset exposure.
Gamma - It is an open marketplace for Bitcoin and Stacks NFTs that allows users to collect and mint trending NFTs. With Gamma, users can design, build, and manage a fully-featured NFT smart contract with complete ownership and control.
Neoswap AI - An AI-powered economic engine, Neoswap AI offers users a personalized, efficient, and accessible trading experience. It currently offers smart swaps, smart auctions, and AI-proposed trades and aims to offer an AI-powered smart marketplace and trade-finding assistant chatbot in the future.
Lydian- It is a treasury management protocol that offers features like protocol-owned liquidity, staking, and bonding. It gathers funds for the treasury by offering lucrative bonds in exchange for its native LDN tokens.
The potential for the Stacks platform to drive innovation and growth within the Bitcoin economy is truly exciting. By leveraging the power of smart contracts, NFTs, and Bitcoin's security benefits, Stacks is opening up new avenues for creating a robust, decentralized Bitcoin economy.
Another Bitcoin DeFi project is Sovryn, a non-custodial, permissionless smart contract-based system for Bitcoin lending, borrowing, and margin trading. With its feature-rich DeFi platform, Sovryn is widely regarded as one of the most advanced platforms for Bitcoin.
Users can benefit from a variety of services, including 0% interest loans on Bitcoin that issue a USD-pegged stablecoin, a low-cost and low-slippage spot exchange, a portfolio management facility, a margin trading service, a lending pool, and a yield farming service.
RSK Infrastructure Framework (RIF)
RIF enables users to send money globally with local currency on/off ramps, facilitates borrowing with uncollateralized community-supported loans, and even helps users pay utility bills and receive salaries in crypto.
Its open-source, decentralized tools and technologies help build accessible DeFi products, and its protocols and interfaces toolkit accelerates the launch of products and services that cater to the user's daily financial needs.
Atomic Finance is a relatively new protocol and enables users to earn returns on their Bitcoin while still maintaining custody. Atomic Finance aims to provide Bitcoin holders with access to a variety of DeFi applications, such as lending, borrowing, and trading, without the need to rely on centralized intermediaries or convert their Bitcoin into other cryptocurrencies. One key feature are Bitcoin-backed loans, which allow users to borrow stablecoins against their Bitcoin holdings without losing ownership of their assets. Additionally, Atomic Finance provides users with yield opportunities by facilitating access to various DeFi protocols and platforms.
Another exciting development in Bitcoin's NFT sphere is Ordinals, which are digital assets similar to NFTs. Ordinals, which can be inscribed into a Satoshi, embed the NFTs' image data directly into the blockchain.
Ordinals have been causing a frenzy in the Bitcoin community, with more than 1,000,000 Ordinals inscribed to date. This craze led to an explosion in Bitcoin fee rates, block size, and Taproot utilization. While some in the Bitcoin community opposed the project, many argued that an Ordinals-driven resurgence in various metrics could benefit its security budget.
Taproot Wizards is the leading Ordinal project. It’s a Bitcoin-centric NFT project headed by an independent developer and a long-time Bitcoin advocate Udi Werthimer. The project features 2,121 unique, wizard-themed Ordinals, which grew over time. By re-establishing the longstanding BTC ethos of rebellion, community building, and innovation,
Taproot Wizards hopes to inspire a new wave of interest and innovation on Bitcoin. One of the unique aspects of Taproot Wizards is its Wizard School, an online educational experience that teaches about bitcoin and wizardhood. By completing quests on the Wizard School website, the best students will have a chance to acquire a Taproot Wizard NFT.
Besides the emergence of various protocols in the Bitcoin economy that have greatly expanded its utility beyond just a store of value, cryptocurrency adoption is also growing globally.
El Salvador takes the lead here and many count it as the biggest Bitcoin supporter. It made history in September 2021 by becoming the first country in the world to adopt Bitcoin as a legal tender. To date, the country also owns about 2,300 BTC in its reserves.
While El Salvador's adoption of Bitcoin as a legal tender has undoubtedly sparked controversy, the government remains confident in the potential benefits. They argue that embracing Bitcoin will enhance financial inclusion, attract increased investment, and lower remittance transaction costs, ultimately promoting a more seamless and efficient economy.
Since El Salvador's adoption of Bitcoin as a legal tender, several other countries, such as Paraguay, the UAE, Panama, the Central African Republic, Brazil, and Tanzania, have expressed interest in adopting or exploring the use of cryptocurrencies.
While it remains to be seen whether other countries will follow suit, the move has succeeded in attracting the attention of governments and investors worldwide.
A brave new Future for Bitcoin
With Bitcoin adoption continuing and the technology continuously evolving, it is believed by Bitcoin enthusiasts that the network has the potential to morph into a kind of digital state with its own rules, governance, and economy.
This would involve the creation of DAOs that operate on the Bitcoin blockchain and are governed by their own community of users. These DAOs could potentially provide a range of services, such as insurance, lending, and investment management, without the need for intermediaries like banks.
Additionally, with many central banks worldwide exploring the possibility of creating their own digital currencies, CBDCs, Bitcoin can grow significantly. And since CBDCs most likely won't be based on the Bitcoin blockchain and would rather be centrally managed, privacy concerns could encourage the wider adoption of Bitcoin as a safer, more private alternative to CBDCs.
But this is not all.
As DeFi projects and NFTs gain traction on the Bitcoin network, it opens the door for broader applications in the expansive digital realm, particularly in gaming, where it can streamline in-game transactions and purchases.
Building on this potential, Bitcoin could become increasingly integrated into the gaming industry, playing a key role in establishing scarcity and value within virtual environments. In-game items or virtual real estate, for instance, might be tokenized and exchanged on the Bitcoin blockchain, fostering a digital asset marketplace that is more secure and transparent than current alternatives.
Overall, the potential developments related to Bitcoin are numerous and wide-ranging, and it will be interesting to see how the technology continues to evolve in the years to come.
The Bitcoin economy is just getting started
The remarkable rise of the Bitcoin economy in the realms of finance and technology cannot be overstated. With the world confronting brutal blows of economic uncertainties and the persistent challenges amid the growing traditional banking woes, Bitcoin is poised to play an increasingly significant role in the global economy.
Although Bitcoin has faced challenges and criticisms since its existence, it has demonstrated resilience and continued evolution. Today, it matured into an asset millions use globally, with novel use cases and applications regularly surfacing. This ongoing development suggests that Bitcoin's influence will only expand in the years to come.
The potential for Bitcoin's future development is vast and exciting, from the emergence of a network state to integrating Bitcoin into finance, gaming, and other industries. As we move forward, we can expect to see even more innovation and growth in the Bitcoin economy. In short, the Bitcoin economy is just getting started, and the future looks bright for this groundbreaking technology.
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