Jun 15•6 min read
Unlocking the Potential: Exploring Scalability Solutions for Bitcoin's Future
If you have been around Bitcoin for a while, you understand that there is a raging debate on the true purpose of Bitcoin. Is it meant for peer-to-peer transactions as Satoshi Nakamoto envisioned in his white paper, or is it something more? Ordinals, Stamps, and BRC-20 protocols have shown that a large cohort of Bitcoiners believe Bitcoin can be used for more than layer 1 on-chain transactions.
I don’t think there is a right or wrong answer here; both sides have solid arguments to make for their position. The bottom line is experimentation is going to continue to happen on Bitcoin. Whether people like it or not, it’s up to the community to decide the solutions in the future.
The ordinal explosion highlighted that transaction fees tend to accelerate quite dramatically when a ton of new capital comes into Bitcoin. This is ultimately good for Bitcoin because there is more demand for limited block space. The miners earn more fees, which attracts more miners to the network and thus makes the network more robust.
The users trying to send small amounts of Bitcoin across the network don't benefit from higher transaction fees. It becomes cost prohibitive to send $10 of Bitcoin when fees are $20 per transaction. What happens to these transactions? Do they happen at all or move to Ethereum or some other chain? The goal should be to keep as much Bitcoin in the ecosystem as possible.
Lightning Network: The Current Solution To High Layer 1 Fees
The lightning network is a viable solution that has gained transactions over the last few years. Insanely low fees, instant final settlement, and the ability to send small amounts of Bitcoin make Lightning an attractive layer 2 that can be used during times of high transaction fees on L1 Bitcoin. Still, I struggle with this solution because of its lack of self-custody options and emerging trends of centralization in the lightning space. The emergence of Lightning Service Providers (LSPs) to help facilitate liquidity and manage channels shows how complicated Lightning can be on the back end.
Opening and closing channels, rebalancing channels, and the general effort it takes to maintain a lightning node will not appeal to the average non-technical user. I wouldn’t consider myself a beginner in Bitcoin tech, but managing a node isn’t super fun. Hence the emergence of business abstracting the pain points away for you. There is an obvious need for LSPs; otherwise, none would exist. Do LSPs and custodial lightning wallets have a place in the new Bitcoin economy? It would seem so; as this tech matures and more people are onboarded to Bitcoin, Lightning is poised to become a prime way to spend Bitcoin. Is it the best way? Time will tell.
ARK: A New Layer 2 Alternative To The Lightning Network?
ARK is a new layer 2 networks that has just emerged on the Bitcoin landscape. Self-taught Bitcoin engineer Burak Keceli created it. This new network aims to fix Lightning's inbound liquidy problems and helps users send cheap and private transactions. Admittedly I don’t know much about this protocol, but I am interested in how it can improve some of the shortfalls of the lightning network.
From what I’ve read about ARK, it is radically simpler to use than Lightning, which I believe is incredibly positive if the goal is to onboard the entire world to Bitcoin. The easier something is to use, and the more people will use it. Just take a look at the iPhone. It’s stupid simple to use. So easy a toddler can figure out how to use it. This is what we need for mass adoption.
Another benefit of Ark is that you can self-custody funds and convert it back to Bitcoin at will, which aligns with Satohsi's vision of peer-to-peer transacting. Lightning has too many intermediaries that could be vulnerable to attacks from malicious actors.
What I like most about this new protocol is that every transaction happens in a coinjoin round. This blurs the line between sender and receiver, thus enhancing privacy for users. ARK seems promising; time will tell if this will become a protocol that everyone uses in the future.
Here are a few resources to learn more about the ARK protocol:
https://www.techopedia.com/introducing-ark-a-layer-2-protocol
https://bitcoinmagazine.com/technical/bitcoin-developer-introduces-new-layer-2-protocol-ark
Stacks: Layer 2 Cheaper Transaction and Programmable Bitcoin?
Stacks is a layer 2 solution that Bitcoin users could utilize during high transaction fees on L1 Bitcoin.
Stacks is unique because it has its own token that allows you to use the decentralized application (dAPP) on the Stacks network to buy and sell NFTs, DeFi, and more. One of the most compelling features of the Stacks network is that it is 100 percent secured by Bitcoin. Every transaction on the Stacks network is settled on Bitcoin.
Bitcoin is the oldest and most secure blockchain on the planet, and having the security of Stacks tied to Bitcoin makes it that much more trustworthy.
I believe Stacks is something that Satoshi envisioned. In the Bitcointalk forum, he was talking about BitDNS in particular, but you can see that Stacks lines up neatly with this idea.
Stacks follow the exact 10 min block times as Bitcoin and use a novel proof of transfer consensus model. With new protocol upgrades on the way, transaction speeds will be cut down to mere seconds.
In addition to being secured by Bitcoin, Stacks also follows the halving schedule of Bitcoin as well. Stacks token issuance decreases every four years, thus increasing the value of STX over time.
Currently, to send a $5 transaction costs less than a penny to send. When Bitcoin begins to accelerate, having reliable and secure layer two solutions will be critical to the success of the Bitcoin economy.
I believe Stacks has a bright future ahead of it, and you should consider it a layer 2 transaction solution.
Bitcoin needs scaling solutions if hyperbitcoinization is going to happen in our lifetimes. These layer 2 options are very promising. I urge you to do your own research and use your best judgment.
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