Analysis of the Four Major Directions and Development Trends of Bitcoin Ecosystem Expansion

With the rise of OrdinalsNFT and BRC-20 tokens, the scalability of the Bitcoin ecosystem has once again become the focus. Currently, there are disagreements within the Bitcoin community regarding the scaling issue: conservatives advocate for keeping Bitcoin as a purely value storage tool, while radicals believe that scaling is a necessary means to drive the scalability and sustainable development of Bitcoin.

This article will explore the four main methods of Bitcoin scaling and their development prospects from four dimensions: scalability, degree of decentralization, ledger security, and implementation difficulty.

1. No Upgrade Expansion

Non-upgradeable scaling refers to achieving specific types of scaling by utilizing the existing characteristics of Bitcoin without changing its current technical framework. Representative technologies include RGB and Bitcoin Script.

RGB is a scalable and cryptographic smart contract system that runs directly on the Lightning Network. However, the data it generates is stored off-chain and cannot rely on the security of the Bitcoin mainnet.

Ordinal assigns a unique serial number to each minimum unit Satoshis through Bitcoin scripts, achieving a slight expansion. Recently, there has been a surge in Bitcoin NFTs and BRC-20 tokens in the market, but their long-term value remains controversial.

From the perspective of the Bitcoin mainnet, this additional data is essentially meaningless and may lead to wasted block space and transaction congestion, causing dissatisfaction among community members.

Overall, non-upgradeable scaling solutions have decentralized characteristics, are relatively easy to implement, but have limitations in terms of scalability and ledger security.

2. Sidechain Scalability

Sidechain scaling refers to the creation of independent chains that connect to the Bitcoin mainnet through specific cross-chain technologies. This approach was quite popular, mainly because sidechain projects could issue their own tokens to attract market attention. However, this solution also faces some challenges in practical applications.

Representative projects include Liquid, Stacks, and Rootstock, all of which map BTC to sidechains via bi-directional cross-chain bridges, but the specific implementation details vary.

• Liquid is similar to a Bitcoin consortium chain composed of large institutions, and the conversion of BTC between the main side chains requires multi-signature.
• Stacks is a Bitcoin sidechain technology for issuing new tokens, and its PoX protocol allows miners to indirectly stake BTC by staking STX.
• Rootstock uses merged mining technology, and the cross-chain transfer of BTC is controlled by multi-signatures from multiple institutions.

However, the admission threshold for sidechain nodes is relatively high, and the consensus of the ledger relies on the management of certain centralized institutions, resulting in a lower degree of decentralization. This may be the main reason why sidechain scaling solutions have not been widely adopted after multiple attempts.

3. Upgrading Capacity Expansion

Upgrade-based scaling requires upgrading the technical architecture or system of the Bitcoin network. A typical example is the BIP-300/301 proposed by the LayerTwoLabs team, whose core concept is Drivechain, which essentially uses Rollup technology for scaling.

Currently, LayerTwoLabs' approach is to directly hard fork a PoW main chain that includes BIP-300/301. If the Bitcoin community reaches a consensus and recognizes this main chain, the Bitcoin mainnet will upgrade to a version that supports BIP-300/301.

This solution can guarantee the decentralized nature of Bitcoin while addressing the scalability issue. However, due to the need for overall consensus within the Bitcoin community, achieving this is extremely difficult under the current community atmosphere.

4. One-way Transfer Expansion

The one-way transfer expansion plan was proposed by the Hacash community. Its principle is to irreversibly transfer Bitcoin to a theoretically more decentralized and technologically mature new chain, and then use a multi-layer architecture for expansion.

The first layer of Hacash implements the one-way transfer of Bitcoin, allowing BTC to be transferred to the Hacash chain, where users can control the transferred Bitcoin using the same private key. Based on the Hacash chain, there is also a Layer2 payment network and Layer3 multi-chain scalability infrastructure.

This solution maintains a high degree of decentralization and security while addressing scalability issues. Users can choose whether to transfer BTC to the Hacash mainnet, with relatively low implementation difficulty and strong selectivity.

Summary

The four main methods of scaling the Bitcoin ecosystem each have their advantages and disadvantages: non-upgradeable scaling struggles to balance scalability and security, sidechains have centralization risks, upgradeable scaling is difficult to implement, and one-way transfer solutions perform relatively well but have not yet gained widespread attention.

In the future, the main direction of Bitcoin's development will focus on how to achieve scalability while maintaining its store of value function, as well as ensuring sustainable development after all 21 million Bitcoins have been mined. These challenges will continue to drive innovation and evolution in the Bitcoin ecosystem.