Bitcoin's Multichain Transformation: Opportunities and Challenges
Discover how Bitcoin is adapting to a multichain world, enabling interoperability, scalability, and new opportunities for users and developers alike. Learn about Layer 2 solutions, EVM compatibility, and the community's response to this transformative shift.
Since the first successful implementation of blockchain in 2009, remarkable transformations have followed this niche/mainstream sector. What started with a single chain for peer-to-peer transactions has expanded into a multichain world, with hundreds of blockchains each with its own set of rules and use cases.
This leaves us with a question: Where does the first blockchain fit in this transformation, and what role does it play?
Join us in this article as we take you through the multichain narrative and see how Bitcoin finds its way in this narrative.
Understanding a Multichain Approach
As we know or might have heard, each blockchain has its distinct features, such as the consensus mechanism, scalability solutions, and fee structures. As a result, each blockchain ends up siloed with its own set of rules that don’t often connect with those of the other.
It is like having different roads each suited only for particular types of cars. The result of this is a major problem of inefficiency and obstacles hindering innovation in this space.
Simply put, the siloed nature of blockchains limits users’ freedom over how to use their digital assets.
Therefore, for blockchain to ensure users have the freedom to put their digital assets in use across different platforms, interoperability between these chains is a must!
The term 'multichain' refers to the coexistence and interaction of different blockchain networks..
The multichain approach creates a sort of internet of blockchains that allows users to transact across multiple chains without having to move their assets from one network to the other.
Think of it as a highway made up of several lanes where each lane represents a particular blockchain with the capability to accommodate several ‘cars’ in this case transactions or applications. While these lanes remain independent in terms of their functionality, they can still communicate and connect different ‘cars’ with each other when needed.
But how is this achieved? 🤔 Let's see in the next section...
How is the Multichain Approach Achieved?
To achieve multichain, the underlying blockchain is split into different layers: the consensus layer and the application layer. The consensus layer forms the underlying security infrastructure for all the different blockchains within the multichain system.
Hans
On its side, the application layer lies on top of the consensus layer and is programmable. This way, different blockchains can communicate with one another even though they exist as individual ecosystems.
While the splitting approach seems similar to that of Layer 1 and 2, there is a key difference where in the multichain approach, the application layers are more independent and can have their own consensus rules, while L2s are more tightly coupled to their L1 and must ultimately settle there.
Bitcoin in a Multichain World
As a traditional blockchain, Bitcoin was developed as a single-chain network - meaning it operates in an isolated way. This would imply that it can’t often connect with other networks.
But we know and have seen the narrative change for Bitcoin. For instance, nobody ever thought we would have NFTs on Bitcoin until Casey Rodarmor came with the Ordinals protocol and changed this narrative.
Daniel M
With a similar assumption, many would have removed Bitcoin from the multichain equation, but it has yet again proved many wrong. As being discussed a few years ago already...
How is Multichain Achieved in Bitcoin?
In a multichain world, Bitcoin serves as the consensus or base layer around which other blockchain networks operate. One way to this is through Layer 2 solutions which, as we know, are blockchain networks operating or built on the Bitcoin base layer.
Hans
Different approaches are taken when developing Layer 2s, therefore they come under different categories, each with its unique functionality. The common ones include sidechains, roll-ups (either optimistic or zero-knowledge), state, and payment channels. Although they might differ, what remains is that they intend to offer a multichain approach to Bitcoin.
Fred
Fred
For instance, we are aware that the Ethereum Virtual Machine (EVM) serves as the engine that powers the Ethereum worldcomputer, as it manages all operations and transactions which make it possible to host smart contracts and dApps in many different ways.
Hans
Through the Bitfinity EVM, we can host dApps designed for Ethereum on Bitcoin without developers having to change the code or start from scratch, unlocking new opportunities for DeFi on Bitcoin.
The final approach is through the issuance of new asset classes which come as tokenized Bitcoins that can be used on different chains. Think about Wrapped Bitcoin (WBTC), but more importantly, Chain-key Bitcoin (ckBTC), which is native to the Internet Computer and can be used in our ecosystem.
Afeez Oladimeji
Impact for Bitcoin Users
For Bitcoin users, the evolution into a multichain framework means more flexibility and opportunities. Users can benefit from faster transactions, reduced costs, and access to a broader range of decentralized applications, all while leveraging Bitcoin’s underlying security. This is where an end to the seemingly neverending scalability problem begins.
For the broader blockchain ecosystem, the dawn of interoperability is here. With Bitcoin in the multichain world, innovation and collaboration in blockchain has never been easier. Different blockchains can now join in and tap into the over trillion dollar Bitcoin liquidity in a more secure way.
In addition, Bitcoin being a recognized figure in the blockchain space, the shift to a multichain approach means an increase in institutional adoption for it and also other connected chains.
Bitfinity
What is the Community's Response to These Multichain Solutions?
Whenever a new approach or innovation comes to Bitcoin, the community sentiment must be examined. After all, what is decentralization if the community won’t have a say? And when it comes to the Bitcoin community, one group stands out: ‘the Bitcoin maxis’.
Fred
Bitcoin maxis are those individuals who hold only to the Bitcoin blockchain and currency. They believe that Bitcoin is the only currency that will be needed in the future. Therefore, this multichain approach to Bitcoin doesn’t sit well with them.
While they hold on to their idea of a single-chain utopia, the opposite group is in contrast with this. For instance, Ripple CEO Brad Garlinghouse once fired shots at maxis when he proclaimed the future would be multichain.
“I am very bullish about a whole bunch of different things going on in crypto. I certainly am active in trying to dissuade people from being maximalists about any particular crypto. It will be a multichain world-” Brad Garlinghouse.
While these different opinions exist among the community, the bigger part is now left to the projects facilitating this multichain approach in Bitcoin to act as the symbol of unity.
Bridging the Gap Between the Two Groups
In the recent Bitcoin Asia forum, a conversation was held where projects involved in the Bitcoin multichain approach were asked to elaborate on how they bridge the gap between the two Bitcoin community sides. The common answer from them was that they were building a variety of products to cater to different users.
For instance, the Bitfinity team notes that it has introduced non-custodial Bitcoin staking to allow risk-averse Bitcoin holders to earn a passive yield on their Bitcoin without taking on custody risk. Interested in our roadmap? Take a look at our road ahead.
Fred
For Bitcoin purists, this is totally fine as a stopping point. For those willing to embrace more risk, it has introduced bridges to other blockchain networks, allowing Bitcoin holders to convert their BTC into wrapped versions, access Bitcoin-backed stablecoins, and more adventurous applications like full Bitcoin DeFi participation.
Hans
Final Thoughts
In conclusion, the evolution of Bitcoin into a multichain world represents a significant shift in the blockchain landscape. By integrating with other networks through Layer 2 solutions, asset tokenization, and EVM compatibility, Bitcoin is breaking free from its single-chain limitations and embracing a future of increased interoperability.
However, the journey towards a multichain future is not without its challenges. The Bitcoin community remains divided, with maximalists holding steadfast to the idea of a single-chain utopia while others embrace the potential of a multichain world. Bridging this gap will require ongoing efforts from projects facilitating Bitcoin's multichain integration, as they strive to create solutions that cater to the diverse needs and preferences of the community.
Connect with Bitfinity Network
Bitfinity Wallet | Bitfinity Network | Twitter | Telegram | Discord | Github
*Important Disclaimer: The information provided on this website is for general informational purposes only and should not be considered financial or investment advice. While we strive for accuracy, Bitfinity makes no representations or warranties regarding the completeness, accuracy, or reliability of the content and is not responsible for any errors or omissions, or for any outcomes resulting from the use of this information. The content may include opinions and forward-looking statements that involve risks and uncertainties, and any reliance on this information is at your own risk.
External links are provided for convenience, and we recommend verifying information before taking any action. Bitfinity is not liable for any direct or indirect losses or damages arising from the use of this information.
Comments ()