Bitcoin Maxis welcomes after the launch of the Taproot Assets protocol for Bitcoin and Lightning. And they are right to do so.
Lightning Labs’ mainnet alpha launch last month was big news. Until now, Ethereum and Tron have dominated smart contracts. Now, with this latest protocol, Bitcoin is poised to challenge their dominance and bring new vigor to the network. This new feature will provide developers with the tools needed to make Bitcoin a multi-asset network, allowing users to hold real-world assets like gold on the Bitcoin blockchain, marking a critical moment for Bitcoin’s evolution.
But Lightning’s Taproot assets have even broader implications than what they initially generated hype for. As the next bull run prepares, the demand for various use cases is intensifying. This will create huge opportunities for networks and developers. Not only will a diverse ecosystem expand the global reach of blockchains, but it will also foster an environment of cross-functionality that will in itself spawn new use cases.
Bitcoin may have entered a new stage of its development, but Bitcoin is not the only one to benefit. Rather than viewing Web3 as a zero-sum game, isn’t it time to eschew crypto maximalism and welcome an industry that supports a large and healthy ecosystem?
Ethereum or Bitcoin? Or neither?
The Ethereum platform has until now been the de facto platform for smart contracts and DeFi. As the world’s largest cryptocurrency by market capitalization, if Bitcoin expands its role beyond just a store of value and ventures into the realm of smart contracts, it could shake Ethereum’s position . But this does not mean that it will definitively become a leader in this field.
With the pace of technology pushing Web3 to the forefront of many industries, innovation companies around the world are rushing to meet the demand for Web3 solutions. An isolated network cannot hope to build the future of Web3 alone. Rather than viewing the development of a second major multi-asset chain as a change in Web3 rankings, it is instead an opportunity for the industry to diversify.
Ryan Gentry, Head of Business Development at Lightning Labs, shared his thoughts in a recent interview on how Taproot assets will contribute to a “spider web tunnel network” that increases network capabilities: “When I think about the lightning network from an infrastructure perspective, I think about it in the same spirit as electrical networks, oil pipelines, fiber networks. This is mission-critical infrastructure, or it will be mission-critical infrastructure for the world.”
This idea of a network of tunnels extending into Web3 is reminiscent of Metcalfe’s Law, a term originally coined by Bob Metcalfe, inventor of Ethernet, who described the network effect as a centripetal force that makes networks more valuable as they connect to more things. Essentially, the more people join a network, the more other people are likely to join. Social media is the best example of this, but this phenomenon will become increasingly important in Web3 as we see more use cases emerge.
While it is true that the network effect can help existing projects and networks maintain their competitive advantage, the demand and popularity generated by one group can also have a similar impact for others.
Diversification is the key to Web3 success
Web3’s thought leaders in the space were quick to share their thoughts on Taproot assets, focusing largely on how it will benefit Bitcoin’s scalability. But while many Web3 experts may converge on Bitcoin as the standard, the reality is that the future of Web3 is bigger than most of us will ever experience. Antoni Trenchev, co-founder of Nexo, spoke about the broader implications of Taproot Assets in a recent article Tweeter: “Think about the overall scalability of the ecosystem – imagine how many more users and transactions can be processed by blockchain companies with a second large multi-asset chain. It is a treasure to adopt. 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 as well as major multi-asset chains to support them. Beyond simple financial solutions, Web3 is experiencing a boom that is pushing it into almost all technological areas, thus revolutionizing the entire economy. Hundreds of billions of capital are locked in Bitcoin, most of it as a passive store of value, and demand for use cases around Bitcoin is growing. Instead of competing with Bitcoin, other layer 2 protocols, such as Stacks and Liquid Network, offer new use cases for bitcoin holders. And many more layer 2s are emerging, seeking to exploit the hundreds of billions of currently idle capital.
Surviving the new digital age
As the global economic landscape evolves, driven by advances in AI, machine learning and other technologies, it is becoming increasingly clear that Web3 will be a centrifugal force in the new digital era, ushering the door to new innovations and economic models. This large-scale adoption will require diverse networks and infrastructure that will support future use cases. As important as healthy competition is to disruption, the industry must ensure it also champions inclusiveness and fosters the community it was built on. Bitcoin maximalists, or anyone who believes in a single-chain monopoly, need to step back and look at the bigger picture, which is that network scalability is not as valuable as ecosystem scalability. Having more than one major network is not only valuable, it’s essential for Web3 to scale and its many startups to have the best chance of success.
This is a guest post by Sadie Williamson. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.