Is Bitcoin’s Blockchain expansion necessary?
According to analyst Nikhil Chaturvedi, yes!
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"Layer-2 solutions for Bitcoin are not just a luxury but a necessity."
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CoinDesk’s Daniel Kuhn says,
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"Bitcoin is no longer just 'digital gold,' but a platform on which to build."
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Bitcoin is the undisputed digital gold standard. It continues to pave the way for cryptocurrency and the cryptoverse to grow.
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It controls over half the total market capitalization at between 50-51%.
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The Bitcoin Blockchain does one thing: it records Bitcoin transactions.
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That is, up until January 2023, when Ordinals were introduced.
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My story, Has Bitcoin entered the NFT space?, will give you a better understanding of Ordinals.
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Ordinals is a layer two L2 protocol that launched Bitcoin's Smart Contract-like answer to Ethereum's Smart Contract domain.
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My story, Layers 1, 2, 3: You can almost taste it, will explain layers.
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It was a success, with over $100M in transaction fees in 2023.
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However, like any increase in activity, there are increased fees. It is the nature of the beast, as noted in the $100M transaction fees from the launch of Ordinals and the post-halving transaction fees (Read about more news in the Why It Matters section below).
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The innovative anticipation of such an increase moved Stacks to develop a dedicated chain for cheaper, faster Bitcoin transactions without compromising miners' security (or finality of transactions).
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Since its launch in 2021, Stacks creator Muneeb Ali has been working on an upgrade he calls Nakamoto.
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Nakamoto went live on April 19/20, 2024, in conjunction with Bitcoin's fourth halving. It is a way to decouple Stacks from Bitcoin while also bringing the two networks closer together.
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It addresses the slow settlement speed by introducing a form of parallel processing that allows Stack miners to produce multiple blocks between Bitcoin blocks, which is about every 10 minutes.
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Ail said the development of Stacks fulfills Satoshi Nakamoto's idea of shared computational power with Bitcoin.
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"In a way, [Nakamoto is] sort of fulfilling the original intent of Stacks."
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Without getting technical, Stacks works through a blend of proof-of-stake (validators) and proof-of-work (mining), called proof-of-transfer.
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Instead of burning energy mining, it creates an economic cost to maintain the Blockchain. Stack miners buy Bitcoin and send it to a predetermined address, which is distributed to Stacks validators who receive STX—Stacks tokens.
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That's almost too technical, but it is an innovative concept.
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Ali said,
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"What I'm feeling the most proud of is this may be a massive improvement to Bitcoin UX for normal people. People want a way to use their BTC."
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Why It Matters
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Miners drive Bitcoin's Blockchain by solving the algorithm puzzle (approximately every 10 minutes). The halving reduces their payment by half (this cycle is 3.125 BTC).
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Transaction fees are how miners make up for the halving's lost revenue.
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Ordinals support the miners by replacing the reduced payments. This is why the over $100M worth of transaction fees in 2023 was important; it gave miners an incentive to keep going.
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After halving, Bitcoin transaction fees reached their highest-ever level, thanks, in part, to Bitcoin-based digital collectibles.
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Between April 19 and 20, 2024, over $89M in transaction fees were collected, more than the $85M collected in March.
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So, is the expansion of the Bitcoin Blockchain necessary?
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Because it gives miners an incentive to stay in business, which, in turn, keeps the Bitcoin Blockchain alive and well.
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How it impacts everyday people
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Blockchain technology is changing our lives. We must embrace it. Like it or not, the good old days are gone—unless electricity is taken away.
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Digital currency is the future. Whether it replaces fiat currency or becomes the dominant currency remains to be seen.
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Education is critical, and intelligent investing is paramount for everyday people to navigate these bumpy roads.
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The thought of change often scares everyday people back into old, comfortable living patterns. There is nothing comfortable about being uncomfortable.
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However, IF change is to occur, you must weigh the length of your uncomfortableness against the lifetime of enjoyment.
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In other words, is it worth the temporary discomfort to avoid a lifetime of complacency and lack?
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If your answer is YES, you can follow along and learn how to make a change by being educated in the cryptoverse.
?Although the cryptoverse is not the end-all, cure-all, it is a simple investment tool that everyday people can utilize.
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I am committed to the cryptoverse, which offers a path to help you change—possibly find financial freedom.
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Investing in any of the various segments of the cryptoverse (Currency, DeFi, gaming, NFT, Metaverse, or Web3) can provide you the opportunity for financial freedom, but it takes a plan.
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Disclaimer: I am not a financial planner, and therefore do not offer financial advice. I am an avid student of the cryptoverse who is willing to make the things I learn available to everyday people willing to take a chance, change, and explore your financial freedom in the cryptoverse.