Bitcoin

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Bitcoin, the biggest blockchain in the world, is constantly evolving. With its last upgrade, Taproot, the “Godfather” of all crypto has been reshaped drastically.The Bitcoin blockchain has transformed from an old, finance-directed blockchain to an innovative one, potentially rivaling Ethereum.Many have embraced this new technology, dubbing it the revolution of all Web3. Others, on the contrary, have rejected this new approach to the oldest blockchain out there, arguing that Bitcoin’s functionality should be resumed for computing financial transactions.Either way, there’s no doubt that Taproot has opened a bunch of new possibilities within the space. Let’s see what new possibilities has Taproot created for Bitcoin.<h2 id="header-0">What is Taproot and How Does it Work?</h2>Taproot is a significant upgrade to the Bitcoin protocol that aims to enhance the privacy, scalability, and flexibility of the network. It was activated as a soft fork in November 2021. Taproot introduces a new scripting language called &#34;Schnorr signatures,&#34; which enables the creation of more complex and secure transactions while reducing their size on the blockchain.This improvement enhances privacy by making all transactions appear more uniform, hiding the specific details of complex multi-signature transactions.Taproot also brings increased scalability to the Bitcoin network by optimizing the way transactions are structured, allowing multiple transactions to be combined into a single one. This bundling reduces transaction fees and improves overall efficiency.Additionally, Taproot provides greater flexibility by introducing a new feature called &#34;smart contracts.&#34; These contracts allow users to set conditions for spending their Bitcoin, adding more sophisticated functionality to the network.<h2 id="header-1">Top 3 Most Important Bitcoin Technologies</h2>After the introduction of Taproot, Bitcoin devs started exploring the new possibilities of the blockchain. Here are the three most interesting and relevant changes made in the last 2 years.<h3 id="bitcoin-domains">Bitcoin Domains</h3>The most interesting usage of Taproot’s possibilities is the creation of human-readable Bitcoin domains. Just like with Web2, you can now create a domain and use it as you want.A Bitcoin domain provider consists of two key components: a registry and resolvers. A registry is a smart contract that maintains a mapping of domain names to the Bitcoin addresses. The resolvers are responsible for resolving domain names to their corresponding Bitcoin addresses.When a user wants to register a domain name, they send a transaction to the smart registry contract with the desired domain name and the Bitcoin address they want it to resolve. Once the transaction is confirmed, the registry will store the domain name mapping to the Bitcoin address.This technology has a ton of different use cases that can be useful in one way or another.For example, if you’re one of those lucky individuals who forgot about fiat currencies and only use Bitcoin and crypto to settle financial transactions, this new Bitcoin functionality is perfect for you.You&#39;ve likely encountered people who struggle to remember their Bitcoin addresses, leading to difficulties when conducting new transactions. Or maybe you’re the one struggling to keep the lengthy address title in mind.Now, just imagine how much simpler your life would be if instead of dealing with a complex address like &#34;3FZbgi29cpjq2GjdwV8eyHuJJnkLtktZc5,&#34; you could utilize a user-friendly name like &#34;money.btc.&#34; With Taproot, this is an attainable mission.Multiple companies are already using the power of Ordinals and Bitcoin to provide such a service. <a href="https://btcdomains.io/" rel="noopener noreferrer nofollow">BTC Domain</a>, for example, offers the remarkable ability to assign a human-readable name to your Bitcoin address, significantly streamlining the process of completing cryptocurrency transactions.They use a combination of Ordinals and ZK-Proofs to develop a system that emulates smart contracts exclusively utilizing the Bitcoin blockchain.Another interesting company that took a similar approach to Ethereum Name Service is Stacks. <a href="https://stacks.org/" rel="noopener noreferrer nofollow">Stacks </a>is a Layer 2 blockchain on Bitcoin. Hence, all their .BTC domains are registered through a smart contract on Stacks, secured by Bitcoin.This smart contract implements a decentralized name registry written in Clarity lang. Ownership of every .BTC name is represented in a hash of the Bitcoin blockchain.<h3 id="ordinals">Ordinals</h3>The Ordinal protocol was created by software engineer Casey Rodarmor on January 21, 2023. At its core, it enables users to inscribe their unique NFTs directly onto the Bitcoin network, without the need for additional instruments.The Ordinals protocol empowers Bitcoin node operators to individually inscribe data onto each satoshi, transcending traditional boundaries and allowing for the creation of distinct Ordinals. These inscriptions can encompass various forms of media, including JPEGs, videos, and audio files.Ordinals differentiate themselves from typical NFTs in various ways. In the Ethereum network, NFTs are typically associated with off-chain data sourced from the Interplanetary File System. Users often encounter the term &#34;refresh NFT metadata&#34; when minting a new NFT, which involves updating the cover image and revealing information about the minted NFTs and their rarity.In contrast, Ordinals store their data directly on the blockchain itself, diverging from the conventional NFTs&#39; reliance on server-based connections. This characteristic makes Ordinals true immutable digital artifacts that are intricately intertwined within the fabric of the Bitcoin network, hence referred to as &#34;inscriptions.&#34;Since the launch of the protocol, Bitcoin NFTs gained more and more popularity among digital asset lovers. Right now, Bitcoin NFTs are just $4M short to reach the trading volume of Ethereum NFTs, significantly surpassing other blockchains.The biggest collection of Bitcoin NFTs is currently the Ordinal Punks. FlowStay, the creator of the Ordinal Punks collection, crafted this unique set of NFTs as a nostalgic tribute to the original CryptoPunks collection on the Ethereum network. These Ordinal Punks were among the first 650 inscriptions created using the Ordinals protocol.Not far behind are the <a href="https://twitter.com/ordinalbirds?lang&#61;en" rel="noopener noreferrer nofollow">Ordinal Birds</a>. These are a tribute to another established Ethereum NFT collection, Moonbirds, and have been trading OTC at prices ranging from 0.17 BTC to 0.72 BTC.<h3 id="brc-20-tokens">BRC-20 Tokens</h3>The BRC-20 token standard revolutionizes the creation and transfer of fungible tokens on the Bitcoin blockchain through its experimental framework known as the Ordinals protocol.Drawing inspiration from Ethereum&#39;s ERC-20 tokens, BRC-20 tokens introduce unique mechanisms and functionalities that bring an entirely new perspective to the Bitcoin blockchain.In addition to capitalizing on Bitcoin&#39;s widespread popularity and an esteemed reputation, BRC-20 tokens inherit the robust security and decentralization of the Bitcoin network. This allows them to be seamlessly exchanged between peers, similar to any other cryptocurrency in existence.By harnessing Ordinals inscriptions of JSON (JavaScript Object Notation) data, BRC-20 tokens enable the deployment of token contracts, minting of new tokens, and seamless execution of token transfers.While Bitcoin NFTs attach digital assets to satoshis, the BRC-20 token standard attaches a JSON (Javascript Object Notation) code to satoshis using the ordinals protocols. The JSON contains pieces of executable code bits that can be deployed on the Bitcoin network. These define every aspect of the token including the supply, minting limit, and the token’s Identity.The industry of BRC-20 tokens is growing fast. There are currently over 34,000 tokens in circulation with a collective market capitalization of ~$200M. These tokens have seen a substantial daily trading volume of around $40M in the last month.The most popular BRC-20 project right now is <a href="https://ordinals.com/" rel="noopener noreferrer nofollow">Ordi</a>. With more than $160M in market cap and $20M in daily trading volume, Ordi has taken the initiative in the race for the best BRC-20 token out there.Despite its fame and financial viability, the rise of BRC-20 transactions has placed significant strain on the Bitcoin blockchain. The speed of the Bitcoin network, which typically handles around 7 transactions per second (7TPs), has become overwhelmed by the sheer volume of transactions associated with BRC-20 tokens and ordinal NFTs.Binance was one of the multiple victims of BRC-20 tokens. Their Bitcoin transactions clogged up, resulting in users not being able to withdraw, send or deposit Bitcoin on Binance.Also, reports indicated that the Bitcoin network had accumulated over 300k transactions in the queue on May 8th, resulting in transaction fees reaching record highs not seen in the past two years, surpassing $30.<h2 id="header-2">Wrapping Up</h2>To sum everything up, Taproot was a significant step for Bitcoin and the Bitcoin community. While not everybody thinks of Ordinals and BRC-20 tokens as a good thing, it is progress and we have to embrace it with open arms.The upgrade addresses some of its limitations and expands its potential applications while maintaining the network&#39;s security and decentralization principles.

How Did Bitcoin Change After Taproot?

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