Bitcoin Maxis is giving itself a pat on the back following the launch of its Taproot Assets protocol for Bitcoin and Lightning. And they are quite right to do so.
The Lightning Labs mainnet alpha launch last month was big news. So far, Ethereum and Tron have dominated smart contracts. Now, with this latest protocol, Bitcoin is ready to challenge its dominance and breathe new life into the network. This new feature marks an important moment in Bitcoin’s evolution by giving developers the tools they need to make Bitcoin a multi-asset network, allowing users to hold real-world assets, such as gold, on the Bitcoin blockchain. .
But Lightning’s Taproot assets have had much more far-reaching consequences than they initially got the hype about. Demand is strengthening for a variety of use cases ahead of the next bull market. This will create tremendous opportunities for both networks and developers. A diverse ecosystem will not only expand the global reach of blockchain, but will also create an inter-functional environment that will itself spawn new use cases.
Bitcoin may have entered a new phase of development, but it is not only Bitcoin that will benefit from it. Rather than viewing Web3 as a zero-sum game, isn’t it time to welcome an industry that eschews the maximalism of cryptocurrencies and supports a broad, healthy ecosystem?
Ethereum or Bitcoin? Or is it both?
The Ethereum platform has been the de facto platform for smart contracts and DeFi until now. If Bitcoin, the world’s largest cryptocurrency by market capitalization, expands beyond simple value storage and expands into the smart contract area, Ethereum’s position may be shaken. But that doesn’t mean it will be a leader in this field.
With the pace of technology pushing Web3 to the forefront of many sectors, innovators around the world are rushing to keep up with the demand for Web3 solutions. Isolated networks cannot build the Web3 future on their own. Rather than viewing the development of a second major multi-asset chain as a change to the Web3 leaderboard, this is an opportunity for the industry to diversify.
In a recent interview, Ryan Gentry, Head of Business Development at Lightning Labs, shared his thoughts on how Taproot assets will contribute to a “web tunnel network” that powers network capabilities. “When I think about the Lightning Network from an infrastructure perspective, I think of it in the same breath as the power grid, oil pipelines, and fiber optic networks. This is mission-critical infrastructure, or will be the mission-critical infrastructure of the world.”
This idea of tunnel networks proliferating in Web3 brings to mind Metcalfe’s law, a term first proposed by Bob Metcalfe, the inventor of Ethernet. He described network effects as centripetal forces. The more things connected, the more valuable the network becomes. Basically, the more people who participate in a network, the more likely it is that others will also participate. Social media is the biggest example of this, but as more use cases emerge, this phenomenon will become even more important in Web3.
While it’s true that network effects can help existing projects and networks maintain a competitive advantage, the demand and popularity generated by one group can have a similar impact on other groups.
Diversification is the key to Web3 success
Thought leaders in the field at Web3 were quick to share their thoughts on Taproot Assets, primarily focusing on how it will help Bitcoin scale. But while many Web3 experts are converging on Bitcoin as the standard, the reality is that the future of Web3 is broader than most of us will ever experience. Nexo co-founder Antoni Trenchev recently spoke about the broader implications of Taproot Assets. Twitter: “Think about the overall ecosystem scalability. Imagine how many more users and transactions a blockchain company with a second major multi-asset chain could handle. This is a treasure trove for adoption. “It’s not Bitcoin or Ethereum, it’s Bitcoin and Ethereum.”
Those who believe that Bitcoin is the only blockchain-based digital asset that will be needed in the future cannot foresee the use cases that will require niche blockchains and major multi-asset chains to support it. Beyond financial solutions, Web3 is experiencing a boom that is expanding into almost every area of technology and revolutionizing the entire economy. Hundreds of billions of dollars of capital are tied up in Bitcoin, much of it used as a passive store of value, and demand for Bitcoin-related use cases is growing. Instead of competing with Bitcoin, other layer 2 protocols like Stacks and Liquid Network offer new use cases for Bitcoin holders. And more Layer 2s are emerging, looking to leverage hundreds of billions of dollars of capital that currently lies dormant.
Surviving in the new digital age
As advances in AI, machine learning, and other technologies transform the global economic landscape, it is becoming increasingly clear that Web3 will become the centrifugal force of the new digital era, opening the door to new innovations and business models. This large-scale adoption will require a variety of networks and infrastructure to support future use cases. As important as healthy competition is for disruption, the industry must use it to champion inclusivity and foster community. Bitcoin maximalists or those who believe in a single chain monopoly should take a step back and look at the bigger picture. Network scalability is not as valuable as ecosystem scalability. Having at least one major network is not only valuable, but essential for Web3 to scale and for many startups to have the best chance of success.
This is a guest post by Sadie Williamson. The opinions expressed are solely personal and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.