Money, Schmoney: What Else Is Bitcoin Good For?August 21, 2019
Bitcoin is best known as a currency, but that’s not its only use. As the oldest and most-secure blockchain, the Bitcoin ledger has many applications that aren’t directly related to finance or payments.
In fact, anyone is free to use Bitcoin for their project, provided they pay for the space they use. But these complex applications typically need a secondary network to take care of the heavy lifting.
That means Bitcoin is much more versatile than most people think, even though these functions have been largely overshadowed by Ethereum and other competitors. Here are some of the most notable Bitcoin-based projects and the goals that they’re trying to accomplish. We’ll also look at the precise ways in which they rely on Bitcoin’s various features.
Veriblock: Blockchain Security Based On Bitcoin Mining
Veriblock allows minor blockchains to leverage Bitcoin’s proof-of-work consensus mechanism for their own security. This is useful because minor blockchains usually don’t have robust mining communities, and as a result, they are vulnerable to 51% attacks. Essentially, Veriblock allows independent blockchains to enjoy same the level of security that Bitcoin does.
Veriblock relies on a novel consensus mechanism, dubbed “Proof-of-Proof” (POP). While blocks are created through normal PoW mining, a separate set of miners uploads a signature of the blockchain to the Bitcoin blockchain in the form of a zero-value transaction.
Veriblock’s early activity caused Bitcoin transactions to surge – however, those numbers dropped off after its testnet period ended in March. Regardless, this dynamic doesn’t put a burden on Bitcoin: Veriblock’s economic incentives are aligned with those of Bitcoin.
RSK: Smart Contracts For Bitcoin
RSK Network, formerly known as Rootstock, is a sidechain that introduces smart contracts to Bitcoin. Technically, smart contracts are a financial application, as they simply allow transactions to be programmed and carried out automatically. However, they can also serve as the basis for complex web applications, such as gambling apps, decentralized exchanges, and everything in between.
RSK Network interacts with Bitcoin in a few different ways. First of all, it uses merged mining, which brings Rootstock better security in the form of a greater hashrate. Second, RSK uses a two-way peg to quickly swap value with the Bitcoin main chain. However, despite these features, it has been largely overshadowed by Ethereum, which dominates the realm of smart contracts.
MaidSafe: Decentralized File Storage With Incentives
MaidSafe is a decentralized peer-to-peer file storage system that primarily relies on its own network, the SAFE Network. Due to Bitcoin’s small block sizes, MaidSafe doesn’t actually store user data on the Bitcoin blockchain. Nor does it use BTC as a financial incentive: that’s left to the Safecoin token (SAFE), which is used to compensate users who provide storage space.
MaidSafe tokens, like the original Tethers, are based on the Omni Layer, which is in turn built on Bitcoin. This means that all of its transactions are recorded on Bitcoin’s distributed ledger in an indirect way. Maidsafe also has several other competitors in the crypto space that should not be overlooked.
Microsoft ION: Identity Management On the Bitcoin Blockchain
Microsoft is building the Identity Overlay Network (ION), a system that allows its clients to create decentralized IDs and manage decentralized public key infrastructures (DPKIs). ION uses Bitcoin as an anchor for its DID/DPKI operations, and in conjunction with Sidetree, ION is able to anchor tens of thousands of operations in a single Bitcoin transaction.
ION will rely heavily on Bitcoin’s economics if it ever reaches maturity. Bitcoin is ION’s only unit of value, as the project doesn’t have its own token. That said, Microsoft is currently covering ION’s costs, and it hasn’t established a business model yet. In the meantime, ION will face competition from adjacent identity projects like Civic and Datawallet.
What Is Bitcoin Really Good For?
Bitcoin isn’t really a go-to platform for innovative applications. However, Bitcoin does have a few strengths. For one thing, years of energy have been put into Bitcoin mining, which makes the Bitcoin blockchain highly secure and immutable. Additionally, it leads the cryptocurrency market, meaning that independent projects can reliably exchange value with Bitcoin.
There are also a few drawbacks: Bitcoin’s transactions are slow and expensive, and Bitcoin as a whole is not a very flexible platform. This means that Bitcoin-based projects either need to run their own network or choose a second-layer system, such as Omni or RSK Network. This isn’t a bad thing, but it does mean that many projects are better off building their own networks.
Finally, it’s important to note that there’s not always a clear line between financial and non-financial applications. Many Bitcoin-based projects include a token as a financial incentive, even if that is not the main goal of the project in question. Nevertheless, Bitcoin can be used for purposes that go far beyond ordinary payments – although it may require some creative programming.
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