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At its core, I believe Bitcoin is infrastructure for a new digital frontier. Bitcoin is the most secure blockchain in existence today. It is organically decentralized and has been battle-tested for over a decade. Bitcoin is the most sound money this world has ever seen.
As we build new global economies for the digital world, they need to be built on sound money. They need to be built on Bitcoin. In this post, I’ll share my thoughts on how Bitcoin has already created a thriving economy even with its limited capabilities. Then, I’ll explore how Stacks and other Bitcoin layers are expanding the Bitcoin ecosystem by bringing scalability and programmability to Bitcoin and unlocking a myriad of new use cases.
What Is the Bitcoin Ecosystem?
As a currency, Bitcoin has recorded massive growth and adoption in the last decade. From the first known use-case of someone buying a couple of pizzas for 10,000 BTC to the launch of the Bitcoin ETF in US markets in 2024, Bitcoin has cemented a position as natively digital money.
But Bitcoin is still just getting started. If you compare crypto adoption to the early days of the internet, you can see that we’re in the equivalent of the year 1998 of the internet. YouTube, Facebook, and many of the internet’s biggest apps hadn’t been founded yet. The same is true for Bitcoin.
Even though the industry is still quite early in its life cycle, Bitcoin already has a market cap of over $1.5 trillion. And this impressive figure barely scratches the surface of what constitutes the Bitcoin ecosystem.
The Bitcoin ecosystem encompasses the market cap of Bitcoin, yes, but an entire economy exists around Bitcoin to make one person sending Bitcoin to another possible, including the software developers who maintain Bitcoin’s code, miners mining new Bitcoin blocks, nodes running the network, exchanges allowing users to trade, wallets to hold Bitcoin, and more.
And that list doesn’t even begin to touch on the possibilities of Bitcoin applications enabled by Bitcoin layers like Stacks. I’ll get back to that later.
Unpacking the Components of the Bitcoin Ecosystem
There isn’t a single standard for defining the entire scope of the Bitcoin ecosystem, so let’s take a look at some of the different components to give you a sense of just how active the Bitcoin community is today and why you should be excited about building applications for Bitcoin.
Bitcoin Development
Bitcoin was originally built by software developers, and there is still an active development community today. At its heart, the Bitcoin protocol has a community of committed contributors, organizations, non-profits, and foundations that maintain the source code and support network upgrades. Organizations such as Brink and Chaincode Labs support the Bitcoin protocol and network with research and development, education, and funding for innovators building for Bitcoin.
Contributions to Bitcoin development are permissionless, and any individual or team can contribute to Bitcoin. According to Electric Capital’s Developer Report, there are 1,246+ individual open-source developers working on Bitcoin as of July 2024, and since 2017, more than 1,000 new developers have joined Bitcoin every year, which makes Bitcoin an educational launchpad for developers entering Web3 and crypto.
Bitcoin Infrastructure
The Bitcoin network processes about 600,000 transactions per day, and it relies on a network of miners who confirm transactions and mine new Bitcoin into circulation as well as a network of nodes that maintain the Bitcoin ledger.
Since the latest Bitcoin Halving in April 2024 (when mining rewards are cut in half), Bitcoin miners have still earned around $30M per day in block rewards and transaction fees for maintaining the Bitcoin network.
To support these miners, a whole subset of businesses are devoted to designing and manufacturing better mining hardware to maximize the chances of winning mining rewards, and the mining hardware market alone is estimated to be worth $2B and that market is projected to nearly double by 2030.
As for the output from that hardware? Bitcoin’s mining hashrate, a function of the computing power securing the network, is roughly 650M TH/s today. To put that into perspective, each terahash per second is the equivalent of 1 trillion guesses per second. And to produce that computation, the Bitcoin industry accounts for 0.2-0.9% of the global demand for electricity in 2023. That’s about the same as the electricity consumption in Greece (at 0.2%) or Australia (at 0.9%).
Bitcoin also requires a network of nodes that maintain the Bitcoin ledger and decentralize the network. Today, there are over 19,000 reachable Bitcoin nodes, a figure that continues to increase over time and is far and away the highest node count in Web3. To put those 19,000 nodes into perspective, Ethereum has just 6,000 nodes and Solana 4,500.
Bitcoin On-Ramp and Off-Ramp Solutions
We’ve touched on all of the players who make Bitcoin possible. Now let’s talk about where users fit in. How does an individual buy Bitcoin? They need on-ramp and off-ramp solutions that provide ways for users to buy and sell Bitcoin, enabling the conversion into fiat and vice versa, as appropriate. Today, there are more than 250 crypto exchanges, the majority of which enable Bitcoin trades. Those options range from centralized and regulated institutions like Coinbase to decentralized peer-to-peer networks like Bisq.
As if 250 exchanges for a global currency weren’t enough, there are more than 38,000 Bitcoin ATMs around the world where you can walk up and buy Bitcoin on the spot.
Bitcoin Wallets
In the Bitcoin ecosystem, wallets are fundamental to user identification and authentication when interacting with decentralized applications, and, of course, for hodling.
There is a long list of companies that offer different kinds of Bitcoin wallets, ranging from software wallets (including desktop wallets, mobile wallets, and browser extensions) to hardware wallets to facilitate cold storage of Bitcoin offline. Some of the major players include Electrum, Ledger, Exodus and Trezor, and with the recent new innovations on Bitcoin and Bitcoin layers that I cover further below, we’ve seen the introduction of a new generation of Bitcoin wallets rise in popularity, including Leather and Xverse.
All together, these wallets serve a lot of users.
According to Bitinfo, there are 46M Bitcoin addresses holding more than $1 worth of Bitcoin. And it’s worth noting that more people own BTC than are included in this 46M. Retail exchanges hold assets in aggregate in cold storage, so many thousands (or millions) of different users likely have assets held by a single address among those 46M. And of those 46M, there have been roughly 13M monthly active Bitcoin addresses (sending or receiving BTC) in the past few months.
Bitcoin Institutional Interest
The Bitcoin ecosystem has also expanded beyond the blockchain and captured the eye of traditional institutions. As noted in the intro, Bitcoin ETFs were finally approved after 10 years of review. Today, there are 11 spot Bitcoin ETFs, with $82B assets under management, and the biggest players in TradFi are involved, including BlackRock, Fidelity, VanEck, Franklin Templeton, and more.
And it’s not just the financial world taking note. We’ve also seen corporations add Bitcoin to their balance sheets. Tesla famously bought $1.5B Bitcoin in 2021, and more recently the share price of Microstrategy, which holds 250K+ Bitcoin, has soared. Even Microsoft is now considering adding Bitcoin to their balance sheet.
Bitcoin’s game theory is in effect, and governments are getting involved too alongside corporations. Bhutan now holds $750M Bitcoin. El Salvador accepts Bitcoin as legal tender and holds roughly $400M Bitcoin. The state of Florida holds $800M of crypto, and the US government may well add Bitcoin to its federal reserve. With institutions onboard, Bitcoin has undoubtedly arrived at the party. The question is, where do we go from here?
Innovation on Bitcoin
All of the statistics and companies I mentioned above represent a snapshot of where Bitcoin is today. Let’s talk about where the Bitcoin ecosystem is going.
Metaprotocols on Bitcoin
In the past year and a half, we’ve seen a wave of innovation on Bitcoin, bringing back the spark of experimentation to Bitcoin culture. That innovation began with Bitcoin Ordinals, which launched in January 2023 and brought NFTs directly to Bitcoin. That innovation continued with BRC-20 tokens and more recently Bitcoin Runes, two metaprotocols that enable devs to launch fungible tokens directly on Bitcoin.
To date, these protocols have been used to create over 70M tokens on Bitcoin, which have sparked more trading activity on Bitcoin as well as the creation of a whole host of new applications, ranging from tools to create new tokens with these metaprotocols to the various marketplaces to trade them. We now have art and meme coins as part of the Bitcoin ecosystem.
And these metaprotocols (and new Bitcoin layers, which we get into in the next section below) are driving a new generation of Bitcoin wallets, including Leather and Xverse.
New Layers
I have conviction in the long term, sustainable value of Bitcoin. It’s a revolutionary innovation and a uniquely valuable asset. But on its own, Bitcoin is not programmable, and it’s not a productive asset. Its limited scripting language is by design and increases its security and decentralization. However, you need that programmability and scalability to onboard a billion people to Bitcoin. And that’s being delivered with Bitcoin layers.
In the past few years, the concept of Bitcoin layers has gained a lot of steam. Today, there are dozens of projects building on Bitcoin, whether they are side-chains, rollups, L2s, or anything else in between, that hope to either increase the functionality and/or the scalability of Bitcoin.
Among the most popular are Stacks, the leading Bitcoin L2 that brings smart contracts and apps to the Bitcoin ecosystem, the Lightning Network, which offers a fast and efficient payment system, Rootstock, which brings EVM-compatibility to Bitcoin, and Liquid, which offers settlement for Bitcoin-based assets.
So when you think about the size of the Bitcoin ecosystem, you also need to consider the size of each of these projects. Their developers, their TVL, their users, their infrastructure and partnerships, all of that is part of the Bitcoin ecosystem too. And that could ultimately be a large part of the crypto economy.
For example, today Bitcoin layers have a DeFi TVL of $3.4B, which amounts to just .2% of Bitcoin’s market cap. Ethereum, on the other hand, has a DeFi TVL of $46.6B, or 16.2% of Ethereum’s marketcap. Bitcoin DeFi alone is a $100B+ opportunity if Ethereum’s growth is any projection to go by. Bitcoin layer adoption has the most growth potential in the Bitcoin ecosystem, and this is a sector to watch.
Bitcoin Applications
Now that Bitcoin is programmable thanks to these Bitcoin layers, developers can unlock the final pieces of the Bitcoin ecosystem and build new applications that unlock the $1.3T of latent Bitcoin capital. And a new wave of developers are already building the Bitcoin applications of tomorrow on Stacks.
Since the launch of Stacks mainnet in January 2021, we’ve seen developers jumpstart amazing projects in DeFi. Velar and Bitflow built decentralized exchanges. Zest and Granite are building borrowing and lending markets for Bitcoin. .locker connects Web2 and Web3 domains for the first time. Gamma is a marketplace for trading ordinals and Stacks NFTs. Not to mention the bleeding-edge devs who are working on the frontier, like aibtc.dev who is working on bringing AI agents to Bitcoin.
And we’re just scratching the surface. I firmly believe that the newfound programmability that enables these innovative apps - as well as those yet to be seen - will be a critical driver of growth for the Bitcoin ecosystem for years to come.
Stacks Helps You Build for the Bitcoin Ecosystem
If you believe Bitcoin is sound money and can be a global reserve currency, you need decentralized on and offramps in order to trade in and out of it while maintaining the ethos of trustlessness that makes Bitcoin so powerful.
You need Bitcoin to become a productive asset. For that you need programmability. That’s where Stacks comes in.
Through Stacks, developers can build new applications for Bitcoin, a blockchain that has more capital than any other Web3 ecosystem, and one that is more likely than any other to stand the test of time. Bitcoin is a massive opportunity for builders, and Stacks provides the infrastructure for developers and entrepreneurs to leverage that opportunity.
Download our free guide to Bitcoin layers to learn more about recent innovations on Bitcoin:
