One of the fastest growing and most exciting ecosystems in the cryptocurrency industry is web3. Taking the principle of decentralization all the way to its conclusion, web3 is rebuilding infrastructure and services in a completely trustless way. But why didn’t the crypto community start building web3 on Bitcoin? And is Bitcoin web3 beginning to emerge today? This quick guide will answer your questions.
What is Web3?
Web3 is a term that encompasses a large vision for the future of the internet. The goal of web3 (often referred to as Web 3.0) is to rebuild internet infrastructure, products, services, and dApps to be decentralized and user-centric from the ground up.
In the current web (usually called web2 or 2.0), power and control are concentrated in the hands of a few centralized entities. From data storage, to domain registrations, to centralized applications, many feel decentralized money alone cannot bring about true digital ownership without a corresponding decentralized internet.
Web3 aims to change the current internet dynamic by using blockchain technology and decentralized protocols. With a decentralized internet, users will have greater ownership of their data, digital assets, and online identities.
At its core, web3 introduces a more inclusive and open internet where individuals have complete control over their online experiences. Blockchain, the underlying technology powering web3, increases trust and transparency online with decentralized networks.
This shift from a centralized to a decentralized model promotes a more democratic and censorship-resistant internet. It also fosters innovation, privacy, and security. In essence, web3 prioritizes decentralization, interoperability, and empowerment of individuals in the digital realm.
Does Web3 Exclude Bitcoin?
Until recently, the term web3 has predominantly been associated with projects on blockchains like Ethereum and Solana. Most crypto enthusiasts didn’t think of Bitcoin when they thought of web3.
The exclusion of Bitcoin was largely due to architectural and technological differences among different blockchain networks. Ethereum was developed for smart contract capabilities, making it one of the pioneers for decentralized applications (DApps) and programmable blockchain functionality.
Programmability made blockchains like Ethereum and Solana natural choices for projects seeking to build decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and various other blockchain-based services within the Web3 framework.
Bitcoin was the first and remains the most well-known blockchain. But the grandfather blockchain also lacked certain features, like Turing-complete smart contracts, that were integral to the web3 ecosystem.
Building web3 projects on Bitcoin has historically been difficult because it was created as a peer-to-peer electronic cash system. This placed a high priority on simplicity, security, and decentralization. Unlike blockchains like Ethereum, Bitcoin's scripting language was intentionally limited to maintain a higher level of security and reduce the risk of potential vulnerabilities.
However, recent developments, including the Taproot upgrade, have expanded Bitcoin's capabilities. This enables more expressive smart contracts and expands capabilities for more functionality on Bitcoin. Today, conversations about web3 are starting to include Bitcoin.
What is Bitcoin Web3?
Recent years have brought big changes in the Bitcoin community. With Bitcoin technology upgrades and new innovations like L2s and Ordinals, Bitcoin has entered the web3 conversation. Bitcoin Web3 enables DeFi, NFTs, DAOs, and other decentralized infrastructure built on top of the Bitcoin blockchain.
The emergence of Bitcoin Web3 has created a shift in how the community thinks about web3. The oldest blockchain is beginning to recreate its image from being seen solely as a store of value to becoming a critical building block in the new internet.
Projects like Ordinals and Bitcoin Stamps exemplify this evolution, showcasing how developers are leveraging Bitcoin's unique features for new use cases. This increased usability signifies a maturation of Bitcoin's capabilities in the web3 space.
The flexibility to mint, trade, and interact with digital assets directly on the Bitcoin blockchain highlights the growing ecosystem of decentralized solutions being built on the world's largest and most secure blockchain.
What Exists in Bitcoin Web3?
So what are the possibilities for Bitcoin web3? Here’s just a sampling of what’s quickly emerging in the space.
DeFi
Decentralized finance (DeFi) is rapidly expanding onto the Bitcoin blockchain, offering lending, borrowing, and various types of yield farming. Platforms like Velar and ALEX are two of the star protocols offering DeFi products in the space. They allow fixed-rate borrowing and lending services, among other DeFi features. Bitcoin liquidity protocols utilize the unique security and stability of Bitcoin to give users capital-efficient market activities.
NFTs and Collectibles
NFTs are also exploding on Bitcoin with the emergence of Ordinals and other collectibles. NFTs sales on Bitcoin hit $13.17 million in just one week near the end of 2023. With so much excitement around NFTs and collectibles like rare sats, demand for products like wallets and L2s increases. That’s where Leather becomes a key player.
Leather wallet is fast becoming a central player in the Stacks NFT ecosystem, and is the preferred wallet for many on Bitcoin. As a go-to platform, Leather facilitates seamless interactions with NFTs, including Ordinals, BRC-20, and Stamps.
DAOs
Decentralized Autonomous Organizations (DAOs) are also finding a place in Bitcoin Web3. DAOs bring community-driven governance and decision-making, which is important for the growth of decentralized infrastructure.
Leveraging smart contracts on the Bitcoin blockchain, DAOs create transparent, democratic frameworks for managing decentralized projects. As Bitcoin Web3 evolves, the rise of DAOs empowering users to actively participate in shaping the direction of various initiatives within the ecosystem is anticipated.
Asset tokenization
Asset tokenization on Bitcoin is gaining traction as well, allowing the representation of real-world assets as digital tokens on the blockchain. This opens up possibilities for fractional ownership, efficient transferability, and increased liquidity for a wide range of assets. As Bitcoin Web3 continues to mature, asset tokenization has the potential to revolutionize traditional finance and create new avenues for investment and capital formation.
Conclusion
At the dawn of Web3, many developers leaned heavily on smart contract blockchains like Ethereum and Solana. And, oftentimes, Bitcoin was completely left out of the conversation. Despite pioneering a philosophy of decentralization in digital assets, Bitcoin had too many technological limitations to quickly become a power player in the construction of a decentralized internet.
Today, that is rapidly changing. Technology overall is known for moving fast, but crypto moves even faster. With blockchain upgrades and new ideas implemented on the original blockchain every day, Bitcoin Web3 is poised to mark its territory in the emerging world of Web3 and DeFi as more people discover all the ways that their BTC can be put to use.
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