BITCOIN SMART CONTRACTS: A NEW ERA FOR BTC?

In May 2023, developers managed to build UniSwap smart contracts directly into the Bitcoin blockchain. 

Thanks to a series of updates to the Bitcoin system, experimental BRC20 tokens can now be deployed directly onto the chain like never before. 

Could we be seeing the rise of true Bitcoin smart contracts? Could Bitcoin carve out its own DeFi space?

We’ll be covering all of this and more throughout the article, so let’s jump right in!

The History of Bitcoin Smart Contracts

Some of the more technically-minded readers might already be asking themselves, “But wait, didn’t BTC already have smart contracts?” 

Sort of, but not really.

Bitcoin, being the first of the major blockchains, has long been dogged by certain limitations in its software. This is why chains that came about later, like Ethereum or BNB, seem so cutting-edge as they addressed many of these shortcomings.

However, it’s sort of a misconception that Bitcoin doesn’t have smart contracts. It does, but they lack some of the capacity and utility that we now commonly associate with smart contracts thanks to Ethereum and others.

First, there are layer 2 solutions like the Lightning Network that graft some smart contract functionality onto the Bitcoin system. Then you have smart contract systems like Pay-to-Public-Key-Hash (P2PKH) or Time-Locked Bitcoin Transactions, which, while simple in function, are essentially smart contracts.

A New Era of BTC Smart Contracts?

Very slowly, over the years, the Bitcoin team has been upgrading the chain, increasing efficiency, stability, and power. Therefore, the scope of possibilities for the blockchain has drastically increased.

Since upgrades like SegWit, Taproot, and Ordinals, the power of the BTC chain has increased dramatically.

And therefore, the potential for smart contracts, as we generally know them, has started to become a possibility.

So how do BTC Smart Contracts Work?

Specifically, the recent Ordinal upgrade has allowed for data packets to be directly inscribed onto the SATs of each individual bitcoin, which can be used for smart contracts.

Interestingly, this outcome is sort of unintended, as it is the by-product of two prior upgrades, the TapRoot and SegWit upgrades.

Both of these upgrades increased the data capacity and efficiency of each block and even created space for text or images to be placed in the chain. Now that there is extra space, developers are starting to see all kinds of opportunities.

A world of DeFi, NFT, and dApp possibilities can now be brought into the BTC chain, which could see a new surge in Bitcoin use.

Recently a group called, Trustless Market, opened up their own DEX platform using what one of its creators, @punk3700, calls “smart BRC20 tokens.”

What could DeFi do for Bitcoin?

Things like parachains and wrapped tokenized cryptos helped keep BTC in a key role even in the DeFi space, which it wasn’t necessarily suited for.

Bitcoin is still by far the biggest player on the crypto scene, and even when it couldn’t match other more technically sophisticated chains like ETH or BNB, it still maintained its importance. 

But via new markets like the Trustless Market, Ordinals, and true BTC smart contracts, we could see Bitcoin develop its own DeFi and dApp ecosystem that has all the perks of other DeFi spaces but via crypto’s top dog. 

Could this be the start of a best-of-both-worlds scenario? Only time will tell.

Bitcoin DeFi: Where is it headed?

While the world of DeFi has historically been dominated by ETH, bitcoin could see itself rising in prominence in the space thanks to the smart BRC20 token.

However, it is still very early days in this space, and as of yet, the vast majority of tokens being used via Bitcoin’s DeFi are still meme coins. “It’s still super early,” said @punk3700.

Undoubtedly, when it comes to new spaces and markets like this that are still small, there are likely tons of issues to iron out before they really take off.

Though this hasn’t stopped some people from getting hyped about the possibilities, with  Trustless Market already starting to generate steady traffic, with nearly 2,000 users and a daily volume of $500,000.

The CW Card: Making Crypto Spending Easy

Who knows what the future might bring when we could see real BTC DeFi on the horizon, But one thing for sure is that whatever crypto you might have, being able to spend it when you need it most is always going to be key.

That’s why you should check out CryptoWallet.com’s CW Card. 

The CW Card allows you to spend crypto easily in virtually any store, either online or in person. Just tap, scan, or swipe your card and instantly convert any of the 800+ cryptos stored into fiat directly at the point of service. 

It really makes crypto easy.

So if you are interested in unleashing your crypto’s full potential, why not check out our whitelist here.