news Ethereum Has Become Bitcoin’s Top Off-Chain Destination

[kyoukage01 3181]

It isn't Bitcoin's companion protocols like Lightning Network nor Liquid Network that currently has more widespread off-chain uses of BTC itself, but ETH, a rival altcoin, according to this article.

 

https://www.coindesk.com/ethereum-has-become-bitcoins-top-off-chain-destination

Spoiler

Ethereum Has Become Bitcoin’s Top Off-Chain Destination

Zack Voell

 

The most popular way to use bitcoin off-chain is on Ethereum, recent data indicates. 

Since 2016, software engineers have worked to extend the oldest and largest cryptocurrency’s use cases through a variety of companion protocols, like the Lightning Network for payments or the Liquid Network for trading. But to date, the most popular off-chain protocols that use bitcoin (the currency, with a small “b”) run on the largest rival to Bitcoin (the network, uppercase).

In fact, Ethereum projects including WBTC and imBTC hold 70% more bitcoins than Lightning or Liquid.

This is “ironic” to Camila Russo, author of “The Infinite Machine“, a forthcoming book about Ethereum, but she’s not surprised. 

Ethereum was designed to be “more flexible,” Russo explained, which allows these tokenized protocols to “thrive.” Bitcoin, on the other hand, was built “to do one thing well, which is to transfer value trustlessly and in a censorless way.” 

“Tokenized bitcoins,” as these projects are called, allow users to denominate in bitcoin when transacting in the Ethereum network’s emerging ecosystem of decentralized financial products. Instead of using ether (Ethereum’s native currency) to make loans or earn interest, for example, transactions are, in effect, made with bitcoin. 

The supply of tokenized bitcoin has grown 330% year to date.

It’s important to note that the total amount of BTC held off the Bitcoin blockchain by both Ethereum- and Bitcoin-based protocols is tiny – only 8,285 BTC (worth $79 million as of Wednesday) – relative to the 18.4 million BTC issued since 2009. 

Recent growth in tokenized bitcoin on Ethereum is “only the beginning,” said Jack Purdy, a decentralized finance analyst at Messari. 

“Ethereum has an incredibly diverse set of financial applications built on it,” Purdy explained. “We’re going to start seeing a multitude of other use cases as the market for bitcoin on Ethereum continues to grow.”

Not a competition

Despite the disparate growth levels between protocols using bitcoins off the Bitcoin blockchain, some tokenized bitcoin projects see themselves as complementary to – instead of in competition with – Bitcoin’s Lightning and Liquid networks. 

“Wrapped Bitcoin represents a digital asset – bitcoin – on the Ethereum chain, and is really complementary to Lightning,” said Kiarash Mosayeri, product manager at crypto custodian BitGo, which helped spearhead WBTC at launch in January 2019. 

Growth on Ethereum- or- Bitcoin-based off-chain protocols will “drive adoption and increase the network effect for Bitcoin, attracting more applications and developers in the space,” Mosayeri said. 

Built on Bitcoin, Lightning and Liquid also aim to extend the leading cryptocurrency’s utility, similar to the goals of tokenized bitcoin projects. But these protocols have a narrower focus of improving the speed and privacy of small and large off-chain bitcoin transactions, respectively. 

“Both approaches offer different capabilities and security tradeoffs,” said Matt Luongo, CEO of Thesis, which launched tBTC in May. “I’m a huge fan of the Lightning Network, and I believe it will become more and more relevant in commerce and in new applications like gaming.” 

Growing interest in using bitcoin on other blockchains shows that “there is interest in building more advanced features that might not be directly realizable on the Bitcoin blockchain itself,” said Christian Decker, engineer and researcher at Blockstream, the technology company that launched the Liquid Network and the c-lightning implementation of Lightning. 

Both types of off-chain protocols are important, explains Olivia Lovenmark, previously at BitGo and Thesis. 

“Tokenized protocols like tBTC and wBTC can be more personally exciting because they expand a bitcoin holder’s financial options, whereas tokenless protocols, like Lightning, improve network infrastructure, which is broadly a community benefit,” said Lovenmark. 

Is this good for Bitcoin?

Ultimately, whether on Ethereum or Bitcoin, recent growth suggests users want to transact in bitcoin.

According to Decker, interest in using bitcoin on other blockchains is “a strong signal that the interest in Bitcoin itself is increasing, and that other tokens are losing ground when it comes to bitcoins.”

“I’m not really surprised that users on Ethereum are looking to get exposure to bitcoin, but don’t want to switch over to the Bitcoin network,” Decker added. “That’d also explain why these wrapped bitcoins exist on Ethereum and not on Bitcoin, since the base functionality of Bitcoin already covers what the users are looking for.” 

Regardless of the motivations behind tokenized bitcoin projects, these Ethereum-based protocols could benefit bitcoin through broader adoption, Lovenmark said. 

“Growth of off-chain Bitcoin protocols means greater optionality for holders,” she said. “This increases use cases for bitcoin and, thus, adoption.”

 

(For an idea of what is an off-chain transaction, check out this link.)

 

Shouldn't Bitcoin's native protocols be the ones to have preeminence over other alternatives? Why have this happened?

 

Does the Bitcoin Lightning Network and others not performing as well as ETH's 'tokenized BTC', or is Ethereum's flexibility proving to be the greater asset? Apparently, it's both, if the article is interpreted this way.

 

Now that Ethereum has made it apparent that it is the users' better choice when it comes to off-chain applications, will we see some changes and improvements on the Lightning Network in the following days, or will they continue on in their current path of "a narrower focus of improving the speed and privacy of small and large off-chain bitcoin transactions" as the article says? We'll see.

 

[ETheHedgehog 3104]

i think Ethereum's flexibility and faster and lower fees transactions played a good role in this, but as the article said, this is a good sign that interest in bitcoin is increasing even more

[jamesvince 2389]

The use of eth blockchain is widely used because most of crypto business tokens used eth blockchain wallets and technology it means high chance in near future eth networking will beat to the whole crypto currencies market specially to the btc and xrp.

[Whited35 15285]

8 hours ago, ETheHedgehog said:

i think Ethereum's flexibility and faster and lower fees transactions played a good role in this, but as the article said, this is a good sign that interest in bitcoin is increasing even more

Bitcoin lighting networks are still in the construction phase to add more advanced features in this scenario, Ethereum is becoming the best alternative to be an off chain destination. Ethereum itself, is adding some advanced features to make everything fit and fine to handle more transactions in a second.  

[CryptoLover21 0]

Yeah the flexibility, easier to transact and low transaction fees of the eth blockchain technology had helped a lot for the cryptocurrency. Ethereum is the best alt coin and it can beat whole the other networking of coin.

[Honny143 13612]

ETH block chain share 2nd place in crypto market, so many investors use ETH because its transaction confirmed quickly and fees also low, now a days we see so many coins and tokens launch in ETH platform, in this analysis base in future this technology occupied no 1 position, and take over other technologies.

[gourav789 2834]

@jamesvince true mate , I also see that New tokens as well Coin used Etherium blockchain . low amount of fees , instant Transaction , easy to used , this is main reason behind it . I also think there is highly chances that Etherium touch a good price in future .

[magd 5231]

Ethereum has become more flexible than Bitcoin and Bitcoin is considered as a main base to start trading, but Ethereum is the free base for trading, investment and fast transactions and we are all waiting for the launch of the new upgrade for it to see how it merges with the new networks.

[Laboni 755]

Ethereum is a very popular currency like Bitcoin but there is no currency that can surpass Bitcoin Ethereum's price is rising but Bitcoin's depends Ethereum's position after Bitcoin from other currencies in the crypto market.

[Omar Ommeish 4872]

On 6/9/2020 at 8:50 AM, Laboni said:

Ethereum is a very popular currency like Bitcoin but there is no currency that can surpass Bitcoin Ethereum's price is rising but Bitcoin's depends Ethereum's position after Bitcoin from other currencies in the crypto market.

I agree with you and believe that there will be no currency that will precede bitcoin in price because bitcoin is the first and most popular cryptocurrency.

[TheRaed 1247]

Ethereum is the candidate currency for the increase after Bitcoin. Analyzes indicate a significant increase, and Bitcoin may match the increase as a percentage.

[Saheli 138]

On 6/6/2020 at 9:26 AM, Reostra77 said:

the reason for the high number of transactions that occur on the ethereum network is because there are still many tokens that have a large number of transactions as high as the demand for ethereum is high

Yes I agree with you i also see that many token are available Ethereum base transaction network and 
its true too many token have large number of transaction with ethereum that mean ethereum will
go high

[TimopheyKa 3900]

It seems to me that this image is used more only because it is more optimal, and it has some divisions that allow more stable transactions, exchanges, and much more! This is really cool. In General, if we formulate the sphere in more detail, it will develop!

[Captain Karim 0]

Well, I see that the Ethereum network will have the tremendous capabilities and vast improvements in Ethereum 2.0, however it should not be considered a competitor to Bitcoin because the difference between them is great. While Ethereum is building decentralized applications on the Ethereum blockchain network, we find that investors regard Bitcoin as a similar asset to gold.

[Sarahden111 1231]

Now waiting for the new Ethereum network 2.0, according to what we publish, the number of transactions that can be performed will increase to thousands per second, and it is absolutely certain that the price of this currency will rise in a crazy way.

[Shaza Ahmad 1682]

This is because of the decentralized financing projects that have caused a sensation in the world of Crypto, many protocols have appeared for lending and borrowing on the Ethereum network, making the Ethereum blockchain network the most used project in the Crypto world. It can also be considered a safe place to store bitcoin off-chain

[Razan alikac 1899]

Ethereum
 It has become significantly more popular off-chain for Bitcoin and has attracted significant investor traction and decentralized applications have been built on Ethereum which indicates that it is the best collateral

Ethereum
 It has become significantly more popular off-chain for Bitcoin and has attracted significant investor traction and decentralized applications have been built on Ethereum which indicates that it is the best collateral

[SuperCrypto 7193]

Ethereum has features that make it better than all other alternative cryptocurrency projects and is possibly a strong competitor to Bitcoin. Although Bitcoin is older than Ethereum, today we see that the Ethereum network has become the largest blockchain network in terms of size.

[Cryptomint 433]

Yes the Ethereum is one of them which can compare with the Bitcoin and it has potential to go up and it can talk with the Bitcoin...

[yonkii 3205]

I think that this was about the wBTC which was tokenized Bitcoin used for defi. Some Bitcoin investors or holders, experimented with tokenizing their BTC to invest in DeFi and earn from this. There have been some articles and some hype on defi in the past and I have seen videos explaining how to put Bitcoin in good use. I don't think there was defi in the lightning network or in Liquid network. However I am still in learning mode about both of these and I have never seen the lightning or liquid networks how they work. Maybe there are some developments there in the defi part too.

Edited January 4, 2021 by yonkii

[abohasnn9 2401]

Yes, my friend, Bitcoin is
The undisputed best and the most traded currency among all other currencies, but we must look at the Ethereum currency, as it is a very excellent currency and is valued for the second largest currency in terms of trading after Bitcoin and the feast of traders rely on it, it is a very wonderful currency and I recommend trading it Thank you

[Harbeeboullah 428]

Ethereum as been raising faster than any other cryptocurrency recently but bitcoin is still fat away from its standard, bitcoin has already lead all other cryptocurrency in the world exchange market 

[Bruno52 1141]

I think that maybe ethereum might have a chance to become the biggest crypto currency in the market if bitcoin keeps issuing high transfer fees and long wait time in their transactions because people might become impatient and switch to ethereum.