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In 2009, Bitcoin sparked the emergence of a new decentralized paradigm, opening a world of opportunities, business models and community involvement. In the years since, the nascent technology drove the creation of a $3T+ industry, and through it all, Bitcoin has remained the dominant blockchain ecosystem.
Bitcoin is an effective store of value in part because of its limited functionality (making it more secure), but we are only scratching the surface of how Bitcoin could change the world. Bitcoin can be much more than just a store of value and peer-to-peer transaction system, and innovators all over the world are tackling that exact challenge.
Bitcoin can be much more than just a store of value and peer-to-peer transaction system.
Different projects have made headway on various approaches to unlocking Bitcoin’s potential, whether by scaling Bitcoin payments, introducing smart contract functionality, or enabling new assets on Bitcoin. In this post we will take a look at a few of the high-profile Bitcoin projects that are all collectively working toward unlocking more opportunities for entrepreneurs and developers to utilize the untapped capital in Bitcoin.
Disclaimer: Hiro builds devtools for the Stacks ecosystem, one of the projects discussed below. Do your own research.
Bitcoin Projects: What Is the End Game?
At its simplest, BTC is a form of decentralized money, and it’s very good at being that—Bitcoin didn’t get the nickname “digital gold” for nothing. However, the end game for Bitcoin builders is to turn Bitcoin into more than just a digital currency. Projects building on Bitcoin hope to make it a foundation for all kinds of applications while simultaneously making the network scalable for hundreds of millions, and one day even billions, of users.
Today, Bitcoin is a $1.5 trillion network but not much of that capital has been deployed for use in DeFi, DAOs, and other Web3 applications. The advent of ordinals and BRC-20 in 2023 started to change that. Despite those recent innovations, most users still simply “hodl” their Bitcoin. In fact, only about $7.3B is locked in the largest projects building on Bitcoin:
These early ecosystems are growing (more on them below) and in just a few years have shown impressive traction. However, $7.3B+ is still only a fraction of Bitcoin’s $1.5T+ market cap (less than 0.5%).
Compare this to Ethereum’s $398B+ market cap, of which $61B is locked in DeFi alone (that’s over 15%). Other ecosystems put significantly more of their capital to work in various use cases, and the same cannot be said for Bitcoin today. It’s worth noting that over $12B BTC is bridged on Ethereum via Wrapped Bitcoin (WBTC). That’s around 1% of the total Bitcoin in circulation, indicating a clear pent-up user demand to do things with their Bitcoin that the Bitcoin ecosystem cannot provide today.
By empowering developers and entrepreneurs to build on Bitcoin, we can let users put their Bitcoin to work in a more native and secure Bitcoin environment. And today, there are a number of different projects on Bitcoin making that happen.
These projects range from Bitcoin layers to improvements and innovations on the Bitcoin blockchain directly. At a high level, we can group these projects into the following categories:
Note: Bitcoin bridges are a huge part of Bitcoin’s growth, but we will not be covering blockchain bridges in this post. Some of the most popular/interesting Bitcoin bridges are WBTC, cbBTC, Threshold, sBTC, SolvBTC, and Nomic. Check out these projects directly to learn more.
As you can see in the chart above, there’s a lot of projects building on Bitcoin, and while these broad 4 categories are helpful, each individual project offers nuance and different design tradeoffs. Let’s take a closer look at these projects individually.
Bitcoin Projects on Mainnet
The following projects are live today, and developers and users alike can start building and interacting with these projects. These projects are loosely organized by size/community/developer activity.
Stacks
Stacks is a Bitcoin layer that enables developers to create Bitcoin smart contracts and applications. Today, Stacks is home to dozens of different apps, and the blockchain is the largest application layer in the Bitcoin ecosystem, with $998M in TVL and 150 monthly active developers.
The Stacks blockchain has its own gas token (STX) that ensures efficient use of network resources and prevents spam. Without a token, a Bitcoin layer cannot operate as an open, permissionless network. As part of Stacks’ open membership network, the network also has its own miners and consensus mechanism.
Stacks is the largest application layer on Bitcoin.
For its security, Stacks relies on an innovative consensus model — Proof of Transfer (PoX), that enables the Stacks blockchain to settle on Bitcoin, so that Stacks transactions have 100% Bitcoin finality. The Stacks chain cannot fork on its own, and it reorgs alongside every Bitcoin reorg.
Stacks’ relationship with Bitcoin doesn’t end there. Clarity, the smart contract programming language used in Stacks, can read and react to changes in Bitcoin’s global state, and the STX token itself generates BTC yield for users who choose to lock up their STX to secure the network. And coming later in 2024, Stacks will launch sBTC, a decentralized 1:1 Bitcoin-backed asset.
Stacks enables apps and businesses to be built in the Bitcoin ecosystem while maintaining and protecting the core ethos of Bitcoin: decentralization and open access to everyone.
Lightning Network
Lightning Network is a payments layer designed to scale Bitcoin payments by reducing transaction times and costs when you pay for goods and services with Bitcoin. Lightning Network was first proposed in 2018, and its beta version went live on Bitcoin mainnet in 2018.
The Lightning Network enables users to create payment channels, within which they can make an unlimited number of near-instant transactions at a fraction of what it would cost directly on Bitcoin. Lightning is able to reduce transaction costs because BTC transactions on Lightning do not trigger transactions on the Bitcoin chain until the Lightning channel closes, and all BTC transactions are processed at once.
Lightning scales Bitcoin payments, bringing us closer to global adoption.
Importantly, Lightning is not a blockchain, and there is no global state or ledger of transactions that occur on a Lightning channel. The protocol does not support smart contracts and focuses on delivering scalable payments infrastructure. In 2022, Lightning also proposed Taproot Assets, which enables other assets (fungible and non-fungible) to be represented on the Bitcoin blockchain as well as enable two types of transfers (swaps and sends) for those assets. As of July 2024, Taproot Assets are live on mainnet.
The Lightning Network is making it easier to use Bitcoin for everyday transactions, and there are currently about 5,000 BTC being used for transactions within ~47,000 different payment channels on the Lightning Network.
Ordinals
Ordinals enable users to inscribe data on Bitcoin, effectively creating Bitcoin-native NFTs. Ordinals were launched on Bitcoin mainnet on January 21, 2023, and since then, they’ve taken Bitcoin by storm. To date, users have paid $460M+ to inscribe 70M+ ordinals.
Ordinals enable users to inscribe data on Bitcoin, effectively creating Bitcoin-native NFTs.
Ordinals are based on ordinal theory, a convention to individually number every single satoshi (1/100M of a Bitcoin, the smallest transferable unit of Bitcoin), and the ability to inscribe arbitrary data on a particular satoshi. The ordinal theory convention (which sat corresponds to which number) is only valuable to the degree that people accept the convention. So far, the convention has seen a lot of acceptance, and people have been able to inscribe all types of data on Bitcoin.
Since launch, users have inscribed everything from art (Bitcoin-native NFTs) to websites (ordinals can reference and build off other ordinals) to the entire video game DOOM. The protocol is still young, and devs are figuring out how best to build with it. One metaprotocol that is gaining traction on top of ordinals is BRC-20, a standard to create fungible tokens on Bitcoin, and Runes an alternative to BRC-20.
Ordinals are a way to put more data on Bitcoin, making the blockchain a richer database with more possibilities for devs to innovate and build on.
Rootstock
Rootstock is working towards its mission of enabling a global economy built on Bitcoin. Rootstock is an Ethereum Virtual Machine (EVM)-compatible sidechain to Bitcoin. Being EVM-compatible means that developers can port over the code from other EVM-chains for use on Rootstock and can write new smart contracts for Rootstock using Solidity (Ethereum’s smart contract programming language).
Rootstock derives its security from Bitcoin’s security through a merge-mining consensus mechanism that enables miners to concurrently mine both Bitcoin and Rootstock blocks. Rootstock launched as a private federation in 2018 and has since evolved its federated design to a “PowPeg”, a multisig system, comprised of 12 leading companies that maintain the RBTC peg.
Rootstock brings EVM-compatibility to Bitcoin DeFi.
Since Rootstock is a sidechain, it has a “SmartBitcoin” (RBTC) token that is pegged 1:1 to BTC. RBTC enables users to lock up their Bitcoins on the Bitcoin chain to mint an equivalent amount of RBTC for transactions on the Rootstock sidechain. Today, there are currently 2,700 RBTC in circulation, and users can put their RBTC to work in a number of different apps on Rootstock.
Liquid Network
Liquid Network is a sidechain that focuses on building financial infrastructure for the Bitcoin ecosystem, ranging from security tokens to stablecoins. While Liquid facilitates the issuance and settlement of various financial assets, it does not facilitate general-purpose applications.
To secure its network, Liquid uses a federated consensus mechanism that is managed by 15 functionaries, who are responsible for validating blocks and adding transactions to the ledger.
Liquid is a sidechain enabling the issuance and settlement of financial assets on Bitcoin.
Similar to Rootstock, the Liquid Network also has a token that is pegged 1:1 to Bitcoin (called Liquid Bitcoin L-BTC) – and there are about 3,800 L-BTC in circulation. L-BTC allows users to access faster transaction times and higher transaction throughput on Liquid’s sidechain relative to the transaction speed and throughput on the main Bitcoin network.
Babylon
Babylon is a self-custodial staking protocol that enables users to lock their BTC in exchange for staking power and yield rewards from other proof-of-stake blockchains. Babylon is Bitcoin-native—users don’t interact with bridges or custodians—instead, Babylon has built a limited smart contract on Bitcoin that can a) lock users’ BTC b) slash funds from misbehaving validators and c) allow unilateral exit for depositors.
Babylon is a self-custodial staking protocol that enables users to deposit BTC and earn yield by securing other PoS chains.
Note: Babylon is in phase 1 of their mainnet launch, which means that right now users can only deposit/withdraw BTC into the protocol; the protocol itself does not yet secure any other proof-of-stake networks and generate any yield. In the future, Babylon plans to launch their own Babylon chain, which will be the cornerstone of the protocol’s integration with other PoS blockchains. The advanced functionality of the Babylon protocol is handled via a Babylon node that leverages Cosmos software, such as CometBFT and IBC.
However, despite that limited utility, since launching on mainnet in August, Babylon already has more BTC deposited in it than any other Bitcoin project (excluding Ethereum’s custodial wrapped Bitcoin asset) and has a total of almost 24,000 BTC deposited in the protocol, which amounts to roughly $2.1B.
Babylon is not available in the US, Canada, Australia, or mainland China.
Bsquared
Bsquared Network is an EVM-compatible rollup that posts zk-knowledge proofs to the Bitcoin blockchain via Taproot. However, these proofs cannot be verified on the Bitcoin chain itself. Instead, Bsquared relies on a two-chain setup, the parent Bsquared chain and a rollup chain that posts proofs back to the parent chain (and the parent chain posts those same proofs to Bitcoin, and in theory observers can validate those proofs on Bitcoin).
Bsquared is a two-chain Bitcoin layer that hopes to synthesize the best of Ethereum and rollups on Bitcoin.
In practice, the Bsquared ecosystem is highly centralized. The rollup chain is run by a single sequencer and the parent chain is operated by a federated set of validators. Further, the zk-knowledge proof that is posted on Bitcoin through Taproot cannot be validated on Bitcoin itself.
As of November 11th, Bsquared has a TVL of $915M and is one of the largest Bitcoin layers on mainnet, with dozens of apps in its ecosystem.
Bitlayer
Bitlayer is a federated sidechain that is EVM-compatible and uses BTC as its native gas token. The ecosystem relies on a federation to process deposits and withdrawals and to produce new blocks in the network, though anyone can run an open source Bitlayer node to verify the network.
Bitlayer is an EVM sidechain that plans to evolve into a Bitcoin rollup.
Bitlayer launched on mainnet in April 2024 and has since grown to a TVL of $788M, making it one of the largest projects building on Bitcoin today. Bitlayer plans to continue to strengthen its Bitcoin connection over time. Its roadmap cites introducing a rollup-equivalent model in Q4 2024 that uses BitVM to implement L1 verification on Bitcoin, and then in Q2 2025 rolling out a fully trustless bridge with Bitcoin finality.
Developers have access to all Ethereum tooling in Bitlayer and can write contracts in Solidity, which means devs can easily port projects from other EVM chains to Bitlayer. Of note, 97% of the BTC in Bitlayer is WBTC, the most popular wrapped BTC asset that is provided by centralized custodians.
Merlin Chain
Merlin Chain is an EVM-compatible sidechain built with the Polygon CDK, and in the future, Merlin plans to become a Bitcoin rollup that posts zk proofs to the Bitcoin L1 for verification. Created by Bitmap.tech, Merlin launched on mainnet in February 2024. The chain rapidly reached a TVL of $3.5B, though since then its TVL has decreased to a more modest (but still impressive) $681M.
Merlin is an EVM sidechain that plans to evolve into a Bitcoin rollup.
While Merlin positions itself as a Bitcoin layer, today it is very much in the Ethereum ecosystem. To integrate with BTC assets, Merlin relies on a heavily centralized approach. It leverages Cobo as its institutional partner for asset custody, and asset withdrawals must be approved by Cobo before they are processed. The Merlin chain itself also uses a centralized sequencer to package blocks, but it plans to decentralize both over time.
To better connect to Bitcoin, Merlin has announced partnership with Bsquared and BitcoinOS, other Bitcoin projects.
Core
Core is an EVM sidechain that uses a unique consensus mechanism called Satoshi Plus, leveraging the strengths of both Proof of Work and Proof of Stake. In Satoshi Plus, Core gets security from delegated Proof of Work from Bitcoin mining pools and scalability and composability from delegated Proof of Stake from CORE token holders. Every day, a set of 23 validators with the most points (out of delegated CORE tokens and Bitcoin miners delegating hash power to a particular validator) are elected to produce new Core blocks for that period.
Core is an EVM sidechain with a federated BTC multisig governed by a DAO of CORE holders.
Users can bridge BTC to Core via a federated multisig, and as of today, over 6,600 BTC has been bridges to Core ($564M), making Core one of the largest Bitcoin layers. The sidechain uses its own CORE token for transaction fees, staking, and governance in Core DAO. Like the other EVM-compatible Bitcoin projects in this list, Core devs have all of Ethereum’s tooling available to them,
BOB
BOB is an optimistic rollup on Ethereum that plans to more tightly integrate with Bitcoin in stages. First, it plans to add Bitcoin PoW security to the network by enabling merge mining with Bitcoin miners, and next on the roadmap it plans to become an optimistic Bitcoin rollup via BitVM (they recently contributed to the BitVM2 paper). See the R&D section for more on BitVM.
BOB is an optimistic rollup on Ethereum that plans to evolve into a Bitcoin rollup via BitVM.
Note: today apart from its Bitcoin bridge, BOB is firmly rooted in the Ethereum ecosystem and has no ties to Bitcoin. Since its mainnet launch in May 2024, BOB has grown into an ecosystem with dozens of apps, with a total TVL of $131M.
Internet Computer
DFINITY’s Internet Computer (ICP) is an independent blockchain protocol created to facilitate the emergence of a decentralized internet. In April 2023, ICP launched its Bitcoin integration, enabling users to not only bridge their BTC to ICP but interact directly with the Bitcoin blockchain via running a Bitcoin lightnode fully on the ICP chain.
ICP leverages smart contracts and a network of transaction signers to bring ckBTC to the Internet Computer.
This integration works through “canisters” (smart contracts) that can communicate with the Bitcoin blockchain. These canisters replicate the Bitcoin chainstate on ICP and are able to generate Bitcoin addresses (so users can deposit BTC in the canister) and sign Bitcoin transactions (so users can withdraw BTC), with the secret key being held by a federation of nodes. These canisters then mint Chain-Key Bitcoin, or ckBTC, in a 1:1 peg with the deposited BTC.
There are some trust assumptions in this design, where users must rely on a federated node network to sign Bitcoin transactions and process BTC withdrawals. On top of transaction fees, users must also pay “know your transaction” fees upon both deposits and withdrawals to prevent tainted BTC (Bitcoin associated with criminal activity) from entering the network. Currently, 253 BTC are deposited in the ICP network.
Mintlayer
Mintlayer is a Bitcoin sidechain that enables native BTC cross-chain swaps (Atomic swaps), which enables Bitcoin DeFi, apps, and more. Mintlayer’s Script programming language also uses Bitcoin’s UTXO model. Mintlayer uses the same smart contract as Lightning called HTLC (hash time-locked contract), which allows users to exchange assets minted on Mintlayer with BTC on Bitcoin.
Mintlayer is designed to augment Bitcoin’s UTXO model and bring new programming capabilities to Bitcoin.
To secure its network, Mintlayer uses a Dynamic Slot Allotment (DSA) consensus protocol, a new Proof of Stake (PoS) consensus model that attempts to merge with Bitcoin’s Proof of Work (PoW). The consensus mechanism ensures that Mintlayer’s blocks are mined alongside Bitcoin blocks and anchored to the Bitcoin blockchain by using a checkpoint system to prevent long-range attacks and validating blocks through a randomized selection.
Importantly, Mintlayer lets developers choose to use Mintlayer’s native ML token or a different token altogether for gas fees for any given application. Mintlayer launched on mainnet in January 2024.
Bitcoin Projects on Testnet
These projects are in testing and will hit mainnet in the near future (fingers crossed). If you’re a builder, it’s not too late to get involved with these projects and start building. These projects are organized alphabetically.
Anduro
Anduro is a multi-sidechain platform being incubated by Marathon, a NASDAQ-listed Bitcoin miner. Anduro sidechains are merge-mined with Bitcoin, and the platform enables a wide range of sidechains across different use cases. Importantly, Anduro is designed with flexibility in mind, and different sidechains can leverage different tech stacks to meet developers where they are.
Anduro is a platform for launching Bitcoin sidechains across a wide variety of use cases.
Anduro launched with two permissionless chains:
- Coordinate: a UTXO chain designed to scale ordinals. This chain handles native asset insuance and is suited for certain DeFi use cases. This sidechain is in testnet.
- Alys: an EVM-compatible chain designed to handle and issue the tokenization of real world assets. In October 2024, Anduro announced the first asset for Alys, tokenized whisky barrels. Alys is currently on testnet.
Anduro plans to launch more chains in the future. One thing to note is that Anduro is governed by a permissioned federation called The Collective. This Collective is invite-only and handles BTC peg-ins and withdrawals to the various Anduro sidechains. Anduro does plan to phase out the Collective over time and replace it with more decentralized solutions when those solutions become available on the market. BitVM was listed as one possibility in their lite paper.
Citrea
Citrea is a Bitcoin rollup that is currently in testnet. The rollup inscribes zk proofs of state changes directly on Bitcoin, allowing anyone with a Bitcoin node to verify Citrea transactions and retrieve the entire rollup state using only Bitcoin, increasing the decentralization of the network.
An alternate design for bringing zk rollups to Bitcoin.
As a rollup, Citrea uses Bitcoin for data availability and doesn’t have a separate miner network or token, and Bitcoin nodes can verify Citrea’s light client proofs directly on chain. However, it does introduce some trust assumptions around who the validators are. Importantly, Citrea is EVM-compatible, and devs can use Ethereum tooling when building with Citrea, making it easy for builders to migrate to this upcoming layer.
Developed by Chainway Labs, Citrea leverages a BitVM implementation for its BTC bridge called Clementine and for its zero-knowledge proof verifier. Citrea’s bridge improves upon the trust requirements of bridges by requiring the trust of just a single bridge operator and verifier to act honestly to ensure liveness and safety.
Citrea’s testnet launched in September 2024, and in October, they announced a $14M Series A led by Founders Fund as they gear up for mainnet.
Spiderchain
Spiderchain is a new design for bringing EVM-compatible sidechains to Bitcoin. The white paper was first published in March 2023 by Botanix Labs. The design uses a Proof of Stake-style system, meaning validators (also called orchestrators) stake funds in order to compete to verify transactions as opposed to depending on miners, merge-mining or other consensus mechanisms common in other Bitcoin sidechain designs.
This design has attracted the attention of technical Bitcoiners.
Spiderchain leverages the Bitcoin base layer in several ways. Besides the obvious—using Bitcoin as a settlement or base layer—spiderchain uses Bitcoin block hashes as inputs for the Variable Random Functions that select validators and multisig signers. This design has attracted the attention of technical Bitcoiners such as Jameson Lopp since it doesn’t require a soft fork. However the design’s security assumptions rely on a number of factors, making it hard to evaluate in theory. Botanix, the team behind spiderchain, has already released a testnet, and devs are stress testing the project to see how it holds up in a public environment.
Strata
Alpen Labs is developing a validity rollup on Bitcoin called Strata. Strata aims to verify ZK proofs directly on Bitcoin. In its initial form, Strata uses an EVM execution engine based on Reth. Contracts that can be deployed to Ethereum can be deployed to Strata with no changes. Strata uses a BitVM2-based bridge and leverages the Bitcoin chain for consensus and data availability.
Strata is building an EVM-compatible Bitcoin rollup and is in alpha testnet.
Strata is in alpha testnet and is inviting developers to help them test. You can also find their open-source code here. Note: in its initial release, Strata is running on a private Bitcoin signet network and will add support for full onchain data availability in the future. Its bridge is also a simple multisig bridge, and its BitVM2 integration is actively in development.
Bitcoin Projects in R&D
These projects are in the research phase. It’s unclear when they will arrive on the market, if ever, but they are worth monitoring and learning more about. Innovation on Bitcoin is a great thing, and these projects are pushing the boundaries of what’s possible with Bitcoin.
These projects are organized alphabetically.
Arch
Arch is building a bridgeless network that brings programmability and contract execution to Bitcoin. It does this by combining a novel FROST + ROAST multisig architecture on Bitcoin that enables a framework for conditional execution, removing the need for a birdge. Users can deposit BTC into these trust-minimized and programmable multisigs in order to access the Arch VM.
Arch combines trust-minimized multisigs and an off-chain contract network to bring apps to Bitcoin.
The Arch VM is an eBPF vm and runs on a decentralized proof of stake verifier network that exists off-chain. This VM handles state changes and off-chain computation for contract execution. Indeed the contracts themselves live in the validator nodes in a key-value database, and periodically the state changes are collated and the network submits a Bitcoin transaction, anchoring the Arch VM changes back to Bitcoin.
This network of validator nodes is open and permissionless. However, when using the Arch network, you are trusting these validators to behave honestly and you are trusting the “program authors” who create the off-chain smart contracts.
Ark
Ark is a layer 2 protocol that hopes to enable fast and scalable Bitcoin transactions off-chain without liquidity constraints. Unlike Lightning, there is no channel opening or closing process in Ark’s design, reducing the on-chain footprint and simplifying the onboarding process of users looking to receive payment.
Ark aims to enable fast transactions on Bitcoin without liquidity constraints.
To enable these payments, Ark uses a set of virtual UTXOs that exist off-chain that a) users can trade between each other and b) can be redeemed for on-chain UTXOs. Ark’s design also introduces Ark Service Providers, or ASPs, that work similarly to Lightning service providers and collect liquidity fees for bundling and processing Ark transactions.
Ark is designed to work with covenants (see below), but there are implementations without covenants. However, those implementations come with tradeoffs: they either require that all users (both senders and receivers) need to be online at the same time or the senders + ASP must co-sign all pre-signed transactions and the covenant must trust 1 of n signers to behave honestly.
Users can even unilaterally withdraw their BTC from the protocol, though a 6-month window must lapse in order for unilateral withdrawal to be possible (faster withdrawal is possible if collaborating with ASPs).
BitVM
BitVM is a method for verifying arbitrary computations on Bitcoin. In plain English, that means using simple logic gates and a challenge-response protocol in order to bring more expressive logic directly to the Bitcoin chain. The white paper was published in October 2023 from Robin Linus on the Zero Sync team (a project which is covered below). This paper caused a stir because it enables new smart contract functionality on the Bitcoin chain without requiring any changes to Bitcoin.
A new protocol with rollup potential causing a stir in the Bitcoin community.
In BitVM—which is live on mainnet and can be experimented with today—contracts and logic is executed off-chain, and only verification would happen on-chain via fraud proofs. However, there are considerable limitations to the project. For one, it is limited to two parties (the prover and verifier), and Bitcoin itself doesn’t verify anything; rather it serves as a data plane where these two parties can interact with each other.
For another, the design is very inefficient and would be extremely costly on chain, both in terms of data storage onchain and the corresponding fees paid by users. However, there is an active community of developers and researchers working on improvements to address these limitations, and as you can see above, many Bitcoin projects are banking on BitVM to build a true Bitcoin rollup.
Note: many of the design issues with BitVM are addressed in a new paper BitVM2, which makes BitVM less costly on chain, enables anyone to challenge proofs, and only requires trusting 1 of n verifiers to behave honestly.
Covenants
Covenants are a category of proposed changes to Bitcoin core, enabling Bitcoin Script programs that restrict how funds are allowed to be spent. Covenants on Bitcoin have been debated for over a decade, proving just how hard it is to make changes to Bitcoin’s core protocol. Covenants need new op_codes to function, which require a soft fork upgrade. The primary BIPs associated with covenants are BIP 118 and BIP 119, and most recently OP_CAT (BIP-420), which gained notoriety thanks in part to Taproot Wizards.
Covenants on Bitcoin have been debated for over a decade.
If approved, covenants could unlock major UX improvements for Bitcoin as well as many more use cases, including bringing smart contract functionality closer to the base layer and enabling Bitcoin L1 nodes to verify proofs from L2 rollups. However, the risks include adding more complexity to basic Bitcoin transactions, and therefore making the protocol more vulnerable to attacks. There is considerable support for covenants among Bitcoin’s technical community, but the risks and tradeoffs are still hotly debated.
Discreet Log Contracts (DLC)
Discreet Log Contracts (DLC) is another solution designed to enable the creation of Bitcoin smart contracts. DLCs were proposed in 2018 by Tadge Dryja under MIT’s Digital Currency Initiative. DLCs are designed to run on Bitcoin’s limited scripting capabilities and rely on information from independent oracles to determine the winner in precomputed potential outcomes. DLCs enable programmability by locking funds in a multisig wallet (effectively an escrow) with the participating users and the oracle.
DLCs can lock user funds and release them to “winners” in precomputed outcomes.
In 2020, the first live implementation of DLCs on Bitcoin was recorded in a bet between Nicolas Dorier of BTCPay Server and Chris Stewart of Suredbits, on the outcome of the U.S. presidential election. DLCs are still in development and its most recent updates include multi-signature setup, and multi-oracle support, among others.
This design would likely require some change to the Bitcoin blockchain in order to work.
Drivechains
Drivechains are part of BIP 300 & BIP 301, published by Paul Sztorc. Drivechains introduce a handful of new `op_return` codes to Bitcoin that would enable the creation and destruction of Bitcoin sidechains, as well as the ability for users to move BTC between the Bitcoin blockchain and the sidechain.
These various sidechains could have different configurations, enabling various apps and use cases. These drivechains would be secured through blind merge mining, meaning Bitcoin’s existing miners could secure these sidechains without running any new software.
A BIP that would enable the easy creation of Bitcoin sidechains.
However, to implement drivechains on mainnet, there would need to be a Bitcoin soft fork (and it is notoriously difficult to align the Bitcoin community around any change), and additionally, there is concern with how these drivechains would change miner incentives. There’s also some security risk with multiple drivechains each introducing their own version of Bitcoin, opening the door for scammers and unanticipated double spending bugs.
Fedimint
Fedimint is a modular protocol designed for community custody. Self-custody isn’t for everyone, and Fedimint aims to solve the problems with 3rd party custodians today: users sacrifice security and privacy when they use them.
A community-driven solution to custody.
Instead, Fedimint distributes that custodianship across communities called “Fedimint Federations.” In other words, Fediment lets the Bitcoin community onboard new users themselves—you can onboard your friend instead of referring them to a 3rd party custodian. This design protects user privacy and is interoperable with Lightning. However, this design comes with trust assumptions (you have to trust the federation), and Fediment itself is not a blockchain and so does not unlock any new use cases. This project is in active development.
RGB
RGB is a smart contract protocol for Bitcoin. First conceived in 2016 and later relaunched in 2019, RGB is a client side system that works in Bitcoin layers and keeps all data off the Bitcoin chain itself, including smart contract code and the schema used to define those contracts. The system uses “single-use seals” over Bitcoin UTXOs in order to define their uniqueness and prove ownership for the protocol.
Since data is stored off-chain, there is no global state for RGB apps. Notably, RGB is compatible with the Lightning network, which introduces more adoption possibilities.
RGB is a client-side smart contract protocol for Bitcoin that is in active development.
In terms of market readiness, RGB is still in development. You can make transfers using RGB on Bitcoin mainnet, but the team doesn’t recommend it as they are still releasing breaking changes, which would cause the loss of any assets. There are a number of projects building with RGB already however, including a Bitfinex team that released a Lightning node compatible with RGB assets and DIBA, the first RGB-powered NFT marketplace.
Spark
Spark is a Bitcoin L2 purpose-built for payments, offering native BTC transactions and Lightning compatibility out of the box. Designed by Lightspark, Spark is heavily inspired by statechains and was just announced in October 2024.
Spark is a new L2 purpose-built for payments.
Spark enables users to deposit BTC into a shared address between the user and a federated set of operators. The system does require you to trust those operators, though you only need to trust 1 of n operators to behave honestly. And after a transaction is completed, the set of operators can delete their key giving them access to a particular address, removing the trust requirement after the transfer. Spark also enables unilateral exit, and users can withdraw their Bitcoin at any time.
Other assets like stablecoins, BRC-20s, and Taproot Assets can be used on Spark. Spark is currently in alpha testing with more information to be announced soon.
ZeroSync
ZeroSync is a project in active development that is working on bringing zero-knowledge proofs to Bitcoin. ZeroSync has prototyped two types of initial proofs for Bitcoin, a proof that validates Bitcoin block headers, difficulty adjustments, and proof of work, as well as a proof that verifies all Bitcoin consensus rules except for transaction signatures.
ZeroSync is working to bring zero-knowledge proofs to Bitcoin.
ZeroSync is first working on the rollout of a zk-proof light client, which would enable users to run a full Bitcoin node on, say, a mobile phone. In the future, ZeroSync plans to launch a full L2, which would bring greater scalability, stablecoins, and more to the Bitcoin network. However, that work would require a Bitcoin soft fork. But even without that fork, ZeroSync’s design can still support useful features, such as paying Bitcoin transactions with stablecoins instead of BTC.
ZeroSync’s tech stack leverages StarkWare’s Cairo programming language. StarkWare is a company developing zero-knowledge tech in the Ethereum ecosystem, and ZeroSync is the first project to work with Cairo outside of the EVM-world.
More Bitcoin Projects = More Opportunities for Developers
Bitcoin grows stronger the more that developers choose to build and innovate on it. Developer adoption is still early across all of Web3, and Bitcoin, as the largest and strongest cryptocurrency, remains a solid bedrock for builders, entrepreneurs, and startups to build on.
Today, most of the buzz around dApps and Web3 innovation is occurring outside of Bitcoin. We expect to see that narrative shift. It’s still early days in Web3, and we believe that apps built on the most secure blockchain (Bitcoin) are apps designed to be around for the long term. We’ve yet to scratch the surface of what can be built on Bitcoin, and with each new project launched, the bull case for Bitcoin grows.
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