Bitcoin could have been much more useful, but this was prevented by developers
BitMEX’s cryptocurrency exchange research department published an interesting report the previous day. In it, analysts looked at the reasons why Bitcoin lags so far behind Etherium in the number of decentralized applications, i.e. it is used for a much smaller list of potential uses. In addition to the obvious technical differences in the projects’ features, the experts also noted some traits in the culture of Bitcoin developers before the launch of Etherium, which has significantly narrowed the scope of the main cryptocurrency’s applications. We talk about the experts’ views in more detail.
Note that Bitcoin’s capabilities are indeed limited. In fact, the purpose of the first cryptocurrency is limited to transferring value only, i.e. a network user can either send a BTC transfer or accept it.
Based on the Bitcoin network, there is an additional add-on in the form of Lightning Network, which allows for instant and cheap transfers. However, this requires the opening of communication channels, and the options for using the cryptocurrency thanks to the LN are not getting any bigger.
Changes in Bitcoin exchange rates
At the same time, Etherium, Solana, Avalanche and other newer blockchain projects are designed for more use cases. For example, there is a separate decentralised finance ecosystem based on these networks, NFT tokens, cheaper and faster value transfers, and more.
As experts are now making clear, the first cryptocurrency could have been more diverse. However, its developers did not support such an idea.
Minuses of Bitcoin
The report pays particular attention to the online discussions regarding BTC applications, which were present among Bitcoin Core developers in March 2014. The discussions began with the launch of the Counterparty protocol earlier that year, a second-tier solution for creating and trading new tokens.
Counterparty uses the OP_Return transaction output type, which serves as proof that no double spending is possible. Here’s a relevant rejoinder from the experts on this.
The function can be used to burn Bitcoin or store arbitrary data on the blockchain.
Bitcoin Counterparty
This type of transaction is supposed to help scale Bitcoin, as the cryptocurrency network’s lightweight nodes may then not store information about the entire blockchain. This makes the operation of a network node less costly for the average person, helping Bitcoin maintain its decentralisation.
As a reminder, nodes in the Bitcoin network are divided into so-called full nodes and light nodes. The former are those nodes in the network that validate all transactions and blocks, and keep a complete history of all transactions within the blockchain. At the same time, light nodes are not a complete copy of all events in the network, but rely on synchronisation with full nodes. Their task is solely to validate transactions through a simplified verification procedure.
According to CryptoPotato sources, on 20 March 2014 Bitcoin developer Jeff Garzik began actively criticising CounterParty’s actions on the Bitcointalk forum. He argued that storing arbitrary data on the blockchain could have “negative” or “unintended consequences”. He also noted that there are already better solutions for scaling – sidechains.
As a reminder, a sidechain is a separate blockchain that operates separately from the underlying network, such as Etherium. They are connected by a two-way bridge or bridge, with the results of the interaction in the sidechain being written into the main chain.
During the lengthy debate about how Counterparty works, most developers sided with Garzik. A little later, the project was accused of imposing the storage of “unnecessary” information on different nodes of the Bitcoin network, again promoting the need to use sidechains as an alternative solution.
Bitcoin developer Jeff Garzik
However, sidechains never gained the critical community support to become an important tool in the Bitcoin ecosystem. One reason is the difficulty of creating Bitcoin-based sidechains, because in this case, developers would have to create them practically from scratch, focusing on the decentralisation and security of Bitcoin itself. Some of the sidechains that have survived to this day are Rootstock and Liquid, but their popularity is next to nil compared to the success of Ethereum.
In other words, Bitcoin as a project could have had many more uses if the maximalism of its developers had not played a cruel trick on the cryptocurrency.
We don't think there is much of a problem in principle with Bitcoin's limited capabilities. Much more damage to reputation of the first cryptocurrency is done by so-called BTC-maximalists, who not only deny the sense of existence of other coins, but openly call them frauds. Obviously, it's easy to miss all the innovation that other new blockchain projects are opening up because of such statements. As well as missing out on opportunities to make money.
What do you think about this? Share your opinion in our Millionaire Crypto Chat. There we will discuss other important developments in the world of decentralized assets.
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