What are Bitcoin dApps?
Bitcoin dApps are decentralized applications (dApps) that run on Bitcoin-powered blockchains.
Unlike Ethereum and other L1s, where dApps are built directly on the blockchain, Bitcoin dApps deploy their smart contracts on other scaling solutions, sidechains, and parallel blockchains.
Developers have chosen not to build dApps directly on Bitcoin due to its limited altering possibilities and risk of scalability/vulnerability issues.
Bitcoin was originally designed as a decentralized cryptocurrency, leaving out smart contract functionality like non-fungible tokens (NFTs) and hosting decentralized finance (DeFi) products and protocols.
Subsequently, new options to create a Bitcoin-powered dApp have emerged, and this sector has started gaining more traction with Ordinals. Bitcoin dApps became especially popular after Ethereum started having problems with gas fees and transaction throughput.
How do Bitcoin dApps work?
Bitcoin dApps work on sidechains and smart contract layers. That’s why developers have created additional, Bitcoin-powered layers that leverage the mainnet’s security and decentralization.
Other than that, Bitcoin dApps work exactly the same as dApps deployed on other L1s. They are powered by smart contracts and provide different functionalities such as swaps, borrowing, lending, token issuance, etc.
The innovative solution here will be to build a new ecosystem on the Bitcoin blockchain, which currently holds the largest market cap. Suddenly, the locked liquidity will have more functionality and will probably be the new factor in the 2024 bull market.
This was previously not possible as Bitcoin is considered a store of value and does not have smart contract functionalities.
Bitcoin dApp Solutions
With developers unable to deploy dApps directly on Bitcoin, sidechains have been created to solve that issue. Let’s look at the most popular ones.
1. Stacks
Stacks is a smart contract layer that connects dApps to Bitcoin through its consensus mechanism, Proof of Transfer (PoX).
This way, developers deploying dApps on Stacks can take advantage of Bitcoin’s stability, security, and economy. In addition, they contribute to BTC miner earnings through transaction fees.
With Stacks, developers can write fully expressive smart contracts, allowing the creation of NFT marketplaces, lending protocols, and many more dApps.
Arkadiko is one of the most popular dApps built with Stacks. The application enables users to take self-repaying loans in USDA, a stablecoin backed by STX.
2. Rootstock Network
Rootstock Network (RSK) is a smart contract platform integrated with the Bitcoin network. The RSK network uses merged mining with Bitcoin, meaning miners can mine two cryptocurrencies simultaneously without extra computational power.
What sets the RSK apart is its full compatibility with Ethereum Virtual Machine (EVM). This feature allows developers to migrate existing smart contracts from Ethereum to Bitcoin without many changes.
Artoshi is one of the biggest Bitcoin NTF aggregators that leverage the power of RSK. The marketplace aggregates all the NFTs in the Bitcoin ecosystem while allowing new Bitcoin NFTs to be minted.
Conclusion
Bitcoin dApps are decentralized applications that run on Bitcoin sidechains, parallel blockchains, and smart contract layers. They tap into Bitcoin’s security and decentralization while providing the full smart contract functionality of an Ethereum dApp.
