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BitcoinFi is coming? Overview of the new landscape of Bitcoin ecology

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In the Bitcoin ecosystem, are there other application ecosystems besides the value store of Bitcoin itself and the payment of the lightning network?

原文标题：《 BitcoinFi 要来了？一文概览比特币生态新格局》

Joyce, Blockchain in Vernacular

The bitcoin ecosystem seems to be on fire:

First came former Twitter founder Jack Dorsey's Damus social app, which went viral again with the Bitcoin Lightning network.

After that, the Ordinal protocol on Bitcoin ecology made NFT of Bitcoin system become a hot topic of speculation, especially caused the problem of bitcoin block congestion: NFT of one bitcoin block occupied 3.9MB capacity, while the highest bitcoin block capacity was only 4MB! Of course, in addition to the investment or speculative value of NFT on Bitcoin, there is also a wave of discussion about the security issues arising from the large-scale use of bitcoin block capacity.

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Bitcoin block 774628, block capacity is 3.96MB, data source: mempool

In addition, the Layer2 network Stack price on Bitcoin nearly doubled in a day, which makes insiders can't help but focus on: In the original Bitcoin ecosystem, in addition to the value storage of bitcoin itself and the payment of lightning network, there are other application ecosystems? Is BitcoinFi really coming?

01 Bitcoin Ecology at a glance

Compared with the prosperity of Ethereum and other ecosystems, there are not many commendable projects in the bitcoin ecosystem, which can be seen from TVL. At present, the TVL of the whole Ethereum ecosystem reaches about $30 billion in market value, but the market value of the whole bitcoin ecosystem is estimated at about $200 million, which is not a small gap.

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Ethereum ecology current TVL status, source: DeFiLlama

However, while other public chains or cross-chain Bridges are repeatedly hacked due to security issues, it is not surprising that Bitcoin, as the leading crypto industry and the most stable and secure blockchain network, is "targeted".

Muneeb Ali, CEO of Trust Machines, one of the biggest fundraising projects in the bitcoin ecosystem in recent years, said in February last year when he announced the fundraising:

"Ethereum's network is worth about $500 billion, but there are $500 billion of applications built on top of it. If you look at Bitcoin, it's a trillion-dollar network with very few applications built on it. In the long run, I don't think the world is going to stay like this. I think there's still a lot of value to be created."

So, what is the underlying infrastructure of the Bitcoin ecosystem? Let's take a look at the following chart. Since the launch of the main Bitcoin network in 2009, many underlying protocol projects have tried to expand the Bitcoin ecosystem:

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Data source: The Block Research

Of course, the first three projects have rarely been heard of. The RSK project launched by the main network in 2018, which was known as the first of the top ten King projects in the last bull market, should be the most prominent project in the Bitcoin ecology at that time. However, it seems to have little movement since its launch.

However, the Lightning network project, which was launched in 2019, showed a trend of clean development, leading the breakthrough of Bitcoin from the store of value to the means of payment. What is very realistic is that this breakthrough is not only in the crypto field, but also brings bitcoin into the real world.

Of course, in addition to the Lightning network, Stacks will come online in 2021. Layer2, DeFi, NFT, domain name... Almost all have something to do with Stack, and indeed, Stacks is one of the few bright spots in the bitcoin ecosystem right now.

02 Status quo of protocols in the Bitcoin ecosystem

Among the protocols in the Bitcoin ecosystem, Lightning Network, RSK, Liquid and Stacks are the four active protocols in the Bitcoin ecosystem at present. The differences are quite large and there is almost no comparison between them and other public chain ecosystem data.

However, after all, Bitcoin is the largest crypto asset in market value, and its network stability and security are beyond doubt. If DeFi, NFT or other ecosystems based on Bitcoin network can be further developed in the future, these ecological applications may be the foundation, and it is worth to have a good understanding of them.

Lightning network

For many, the Lightning Network may be the only project in the Bitcoin ecosystem with a memory point.

Lightning network was born in 2018 and is regarded as one of the most important innovations since the birth of Bitcoin. It mainly solves the problem of real-time transaction processing of Bitcoin offline and indeed realizes the high speed, high TPS and low cost transaction of Bitcoin.

The Lightning network has developed rapidly since its birth. Currently, the total amount of bitcoin locked in the Lightning network has reached more than 5400. Although there is still a big gap compared with the BTCS across the chain to ETH and other chains (such as 175,000 WBTCS and 9000 HBTCS at present), from the perspective of the number of users, It's really something to look forward to.

According to Arcane Research, more than 80 million people will be using Lightning on installed apps such as Cash by March 2022.

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The number of Bitcoins in the Lightning network channel changes, source: bitcoin visuals

At present, the ecology of the entire lightning network is indeed booming. The following chart shows the ecological development of the Lightning network as of April 2022.

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Source: Arcane Research, April 2022

Today, the Lightning network ecosystem is already rich, including Lightning network node and mobility services, wallet payment applications, as well as games, social networks, retail scenarios, and more.

In addition to these, there are a number of DeFi applications and protocols currently under development on the Lightning network, including asset publishing platform, smart contract protocol, Dex, derivatives platform, etc., but it is still in the early stages and nothing very bright is coming out.

Liquid Network ecology

Liquid Network is a bitcoin side chain developed by Blockstream. The Blockstream team has a strong background, including core digital bitcoin developers. It is fair to say that it is an all-star development team within the circle.

Not only can it be used for fast transfers and privacy, but it can also be used to issue crypto assets. For example, in November 2011, El Salvador planned to issue $1 billion of bonds on the Liquid Network. However, So far the plan has not taken off.

As for the specific project above Liquid Ecology, there is not much data available from the open channels at the moment, and progress seems to be much slower than for the other side chains or Layer2.

RSK protocol and ecology

RSK is a side chain of bitcoin, which can be expanded through additional functions such as smart contracts without changing the underlying code of bitcoin. Moreover, RSK also has good compatibility with Ethereum in EVM and other aspects.

So even though TPS was only 11-15, RSK met expectations as a superstar project when it debuted in 2007. However, with the decline of the market and the development of the project has not been as expected, the voice gradually became less and less, and became ignored.

At present, the total TVL of RSK agreement is less than 80 million dollars, of which the loan agreement MoneyOnChain accounts for nearly half, DeFi platform Sovryn20 million dollars, and other projects are almost negligible.

Stacks Protocol and Ecology

Stacks is the first token issue approved by the SEC, and stacks is the most popular Bitcoin protocol. From the financing process since its inception, Stacks is also the most preferred Bitcoin Layer2 protocol.

Stacks' total TVL is relatively small, however. It currently totals less than $20 million, making it the first complete one-stop shop in Bitcoin. DeFi service platform Alex contributes nearly 90%.

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Stacks Eco-TVL and related programs from: DeFiLlama

In addition, the.btc domain name built on the Stacks protocol is also very popular due to the small bull market of domain names recently. As the first domain name project in the Bitcoin ecosystem, especially the suffix btc, it naturally reminds people of the ENS domain name of.eth. If the bitcoin ecosystem develops further, The.btc domain is certainly worth looking forward to.

03 Current situation of financing of various protocols or projects in the Bitcoin ecosystem

Compared to the nearly $30 billion raised by the crypto industry as a whole in 2022, the bitcoin ecosystem's hundreds of millions of dollars in funding is really nothing. However, it is easy to see the heat and trends in the various sectors of the bitcoin ecosystem by cross-cutting comparison. After all, institutional investors are relatively sensitive to smell.

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Bitcoin Eco Protocol Funding, source: Crunchbase, Company blogs, The block Research

From the financing data of various sectors of the Bitcoin ecosystem, it is easy to find that Blockstream and Stacks are the most favored Bitcoin ecological teams by organizations. Blockstream has several core Bitcoin developers. Although there is no obvious outbreak of the protocol ecosystem at present, organizations still recognize the star teams.

As for Stacks, the financing data from 2017 to 2022 is highly visible in the entire Bitcoin ecosystem. Trust Machines, an ecosystem based on Stacks, raised $150 million in February 2022, This volume financing is also outstanding in the crypto industry as a whole. Stacks is now the star protocol in the bitcoin ecosystem in terms of the amount of money raised and the protocol ecosystem.

04 Summary

After more than ten years of development, Bitcoin has been running on the road of value storage, and its market value has increased by thousands of times in the past ten years. As the most stable and secure blockchain network, does it have greater development value besides value storage? Can the Bitcoin ecosystem grow like the Ethereum ecosystem?

From the perspective of the current development of the Bitcoin ecosystem, everything is still a trial run. As for the future, it will take a longer and more patient exploration. After all, Ethereum's ecological development didn't happen overnight, and early adopters always had to go through hibernation before taking off.