Investing in today’s Bitcoin network is comparable to acquiring Manhattan land in 1825. Bitcoin’s robust protocol serves as the granite foundation, enabling the creation of a world-class digital network. The key players in the current development landscape are the Lightning Network and Taproot.
Lightning Network Update
Despite challenges in measuring adoption accurately, recent estimates suggest 1,212% growth in Lightning Network transaction volume from August 2021 to August 2023. The network processed 6.6 million transactions in August 2023, with an average transaction size of approximately $11.84. Primary use cases driving growth were gaming, social media tipping, and streaming.
The Lightning Network addresses the criticism that “you can’t do anything on Bitcoin” — enabling micro-transactions, everyday purchases, tipping, and streaming payments at near-zero cost and near-instant settlement.
Taproot and Taro
Taproot is a groundbreaking enhancement in the Bitcoin protocol that facilitates smart contracts, seamlessly integrating with conventional Bitcoin transfers. Taro, in collaboration with Taproot, introduces versatility to Bitcoin transactions — enabling the issuance of NFTs, stablecoins tethered to the US dollar, and tokenized securities on the Bitcoin network.
My hot take:
I am cautiously optimistic. The Bitcoin protocol has suffered from a narrative that you “can’t do anything on Bitcoin.” Recent developments have the potential to change that narrative. The Bitcoin protocol is the most decentralized and secure blockchain that exists. However, its lack of native functionality has historically spawned copycat blockchains that compromise decentralization or security to offer greater functionality. If Taproot and Taro deliver their promised functionality, the Bitcoin ecosystem should see a significant uptick in developer talent — as increased functionality, combined with its security attributes, will make it an extraordinarily attractive design space for innovation.
Only time will tell.