4 Ways That Bitcoin Can Scale Massively!

The emergence of NFT and BRC-20 tokens has once again pushed the scalability of the Bitcoin ecosystem to the forefront.

Currently, supporters of the Bitcoin ecosystem are divided into two camps: the conservative group believes that Bitcoin must maintain its pure monetary nature, only used as a store of value, and does not require other forms of scalability; the radical group believes that Bitcoin needs to scale, only then can it have more native application ecosystems, and promote its scalable and sustainable development.

Until now, both sides are still unable to reach a consensus. Is there a solution that can satisfy both the conservative and radical groups, and allow Bitcoin holders to make free choices according to their own needs?

Let's explore the four directions of the development of Bitcoin scalability from the perspectives of scalability level, decentralization, ledger security, and implementation difficulty, and explore their development trends.

1. Non-Upgradeable Scaling

Non-upgradeable scaling refers to using the existing features of Bitcoin to achieve specific types of scalability without changing the current technical system of Bitcoin.

Representative technologies include RGB and Bitcoin Script. RGB is an expandable and encrypted smart contract system that can run directly on the Lightning Network. However, all the data generated by it exists outside the Bitcoin transactions (off-chain), which means that the security of the entire ledger will not be protected by Bitcoin's Proof-of-Work consensus.

Bitcoin ordinals is a system for numbering satoshis, giving each satoshi a serial number and tracking them across transactions. To put it simply, it adds additional data and assign a unique serial number to each Satoshi (Sats) (which is the smallest unit of Bitcoin (1 BTC = 100,000,000 sats)). However, this method can only make minor improvements to Bitcoin's scalability. Currently, there is a speculative frenzy around Bitcoin NFTs and BRC-20 tokens in the market, but its sustainability of their value remains to be seen.

Overall, the non-upgradeable scaling technology solution is decentralized and does not require the overall consensus of the Bitcoin community. However, at the same time, RGB cannot rely on the consensus mechanism from the Bitcoin mainnet, and the scalability of Bitcoin transactions through scripts is very limited.

2. Sidechain

The second method is sidechain, which create a separate chain and link it to the Bitcoin mainnet through specific cross-chain technologies.

This method was once a popular and relatively easy scaling solution for Bitcoin because sidechain projects can issue their own tokens, which can generate interest from the community and the market as their value increases. However, the main participants in this solution face some challenges in expanding Bitcoin.

Projects such as Liquid (Blockstream), Stacks, and Rootstock map BTC to sidechains through bi-directional cross-chain bridges, which is their common feature, but have some subtle differences.

• Liquid is more like a Bitcoin consortium chain composed of large institutions, and the mapping and conversion of BTC between the sidechain and the mainnet require multi-signature agreements from these institutions.
• Stacks is a Bitcoin sidechain technology that issues new tokens. Its Proof-of-Transfer (PoX) protocol allows miners to pledge STX and thus pledge BTC. However, how the protocol achieves decentralized distribution is still under study.
• Rootstock adopts merged mining sidechain technology, and the cross-chain transfer of BTC is controlled by multi-signatures of multiple institutions (BTC→rBTC).

However, not everyone has access to sidechain nodes, and ledger consensus relies on the management of certain centralized institutions, resulting in low decentralization, which may be the main reason why sidechain scaling solutions have not been widely adopted after multiple attempts.

3. Upgrade-based scaling

Upgrade-based scaling refers to the need to upgrade the technical architecture or technical system of the Bitcoin network. A representative example is BIP-300/301 proposed by the LayerTwo Labs team. Its scaling concept is called Drivechain, which essentially uses Rollup to scale.

Currently, LayerTwo Labs' approach is to directly hard fork a PoW main chain with BIP-300/301. When the Bitcoin community reaches consensus and approves this main chain, the Bitcoin mainnet will be upgraded to BIP300/301.

Overall, LayerTwo Labs' solution can ensure the decentralization of Bitcoin and solve the scaling problem. However, its scaling upgrade requires consensus from the Bitcoin community, and under the current overall atmosphere of the community, upgrading the Bitcoin mainnet is extremely difficult.

4. One-way Transfer

Two-way transfer in Bitcoin is a common method used in cross-chain and sidechain scenarios. The one-way transfer scaling solution for Bitcoin is proposed by the Hacash community and the Hacash.com team. The idea is to irreversibly transfer Bitcoin to a theoretically more decentralized and technically mature new chain, and then use a multi-layer approach for scalability.

Hacash's first layer can achieve one-way transfer of Bitcoin, transferring BTC on the Bitcoin chain to the Hacash chain. During the transfer process, the user's private key remains the same and the Bitcoin can be used directl on the Hacash chain (still the same private key). The control of BTC has not been transferred to any other entity.

Based on the Hacash chain, there are Layer 1 and Layer 2 payment networks, and the Hacash.com team has also proposed a Layer 3 multi-chain scalable infrastructure. Bitcoin can be used for real-time payments on Layer 2 and for application expansion on Layer 3. The essence of Layer 2 is to use state channels for real-time payments, and the essence of Layer 3 is to use multi-rollup and multi-rollup's customizable scalability methods. Overall, the Hacash chain still uses pure PoW consensus mechanism even though it accepts BTC one-way transfers and anyone can run a full node.

On top of this, Layer 2 and Layer 3 solve the scalability problem. Anyone can choose to transfer their BTC to the Hacash mainnet, and each Bitcoin holder decides whether they need scalability, with relatively low implementation difficulty compared to other solutions.

Summary

There are four main methods for expanding the Bitcoin ecosystem: non-upgradeable scaling, sidechains, upgradeable scaling, and one-way transfer. Non-upgradeable scaling cannot achieve both strong scalability and ledger security at the same time, sidechains have centralization issues, upgradeable scaling has a high implementation difficulty, and one-way transfer performs relatively well in all four evaluation dimensions but has not received widespread market attention.

In the past decade, Bitcoin was created with the goal of decentralized currency, and its core function of value storage has been proven. In theory, it does not need any expansion to achieve this goal. How to scale while maintaining Bitcoin's ability to store value, even after mining 21 million coins, and achieve sustainable development in the future, will undoubtedly be the main direction of Bitcoin's future development.

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References

• https://www.rgbfaq.com/faq/what-is-rgb
• https://blockcast.it/2023/05/07/4-directions-of-bitcoin-ecosystem-scalability/
• https://academy.binance.com/en/articles/what-are-ordinals-an-overview-of-bitcoin-nfts
• https://coinmarketcap.com/currencies/bitcoin/