What Has Bitcoin Been Up To?

Bitcoin is an interesting thing on its own. It has a cult following, and nearly $2T market cap as of writing. For many, Bitcoin is the first cryptocurrency they've heard of, and they have a misconception that all cryptocurrencies are the same; That is, a commodity-like asset, akin to a coin, but digital. The digital gold narrative is not incorrect, but I have my reservations about the "special sauce" that is Bitcoin. In my mind, nearly every other blockchain has the capabilities to create guarantees as strong as those about the limited supply of the asset that drives the value of Bitcoin. This quickly devolves into a heated argument about Proof of Work (POW) vs. Proof of Stake (POS) blockchains, which is outside the scope of this article. ^[1]

Instead, this article will serve as a tour of the Bitcoin ecosystem and highlight a handful of additions over the last few years.

Core Protocol

The core Bitcoin protocol is a peer-to-peer network that keeps a digital ledger of transactions between users. It runs on what is called the Unspent Transaction Output (UTXO) model ^[2], notably different from the account-based model used by Ethereum. The UTXO model is conceptually similar to bill denomination. Let's say we have a $20 bill in our pocket but need only spend $10. We 'send' the $20 and receive a $10 bill as change. We can now send that $10 bill to someone else or group it with another denomination to send a larger amount. A neat feature of this method is that denominations are arbitrary; we can create denominations of any value, like $3 or $1,000,000. Under the hood, coins don’t move like physical cash; rather, the denomination is created and assigned to the owner's address, which would be the receiver.

For most people, this is already a deeper dive into web3 than they would ever venture. With the introduction of Ethereum, smart contracts, or onchain executable code, it's not just the ability to send money, but also the ability to create programmable money, and much, much more.

A side effect of smart contracts is a divergence of the Bitcoin community over time to incorporate layering to the Bitcoin protocol. Additional functionality is built on top of the core protocol, rather than built into it or in conjunction with it. The core network makes few changes as its strongest acolytes preach protocol purity; communities have sprung up to offer additional capabilities to the Bitcoin ecosystem.

TL;DR: Bitcoin uses a UTXO-based peer-to-peer ledger with arbitrary-denomination outputs, and most new features are added in layers rather than changing the base protocol.

Ecosystem

The Bitcoin community has less diversity compared to other layer 1 ^[3] but there are a couple of notable additions over the years. This is not an exhaustive list, but some interesting additions I personally have come across in the wild through my work and personal projects.

In no particular order:

• Ordinals - An inscription on Satoshis ^[4] for encoding.
• Silent Payments - A privacy solution to Bitcoin pseudonymity.
• Lightning Network - A payment channel to route Bitcoin payments instantly.
• Stacks - An interpreted Layer 2
• Rootstock - An EVM sidechain

Ordinals

Tracking information assigned to individual Satoshis, the most atomic unit of Bitcoin, allows for arbitrary data to be attached to a transaction. By following a specific set of standards, ordinals can be used to encode any data and to create interesting attached data structures like NFT‑style collections or on‑chain metadata. This is different than smart contracts, as ordinals are not executable code, but rather a way to attach data to a transaction. There is some interesting theory around the rarity of individual sats for one reason or another, such as when that sat was mined or who owned it. Mostly, ordinals serve as a proof of concept to leverage the Bitcoin network for additional higher-order applications, without the need for smart contracts.

TL;DR: Ordinals let you attach arbitrary data to individual sats, enabling onchain inscriptions without smart contracts.

Silent Payments

Silent Payments is a privacy solution to Bitcoin pseudonymity where the sender and receiver don’t create obvious, reusable address links. A receiver generates a payment address which a sender uses as an input to generate a private key to derive a shared secret to send the payment. In other words, the sender and receiver never create an identifiable link between their addresses.

Silent payments are but one piece of a large set of additions to private payment technology. Notably, zero-knowledge proofs (ZKPs), which are a growing part of the Ethereum ecosystem. ZKPs are used to provably verify something is true without revealing the underlying information. A rough, analogous conceptual example is proving that a triangle satisfies the Pythagorean theorem (so it’s a right triangle) without revealing the exact lengths of its sides. In real systems, zero-knowledge proofs do something similar for financial data: they prove a statement is true without revealing the underlying data. This technology is still in its infancy but is a step towards total payment anonymity. Another privacy coin technology is Monero ^[5], It incorporates several privacy features into the core protocol to create a privacy solution that is similar to Silent Payments, private transactions being its highest priority. While its approach is different from Silent Payments, they both pursue the same goal: hiding who pays whom and how much.

TL;DR: Silent Payments lets senders derive one-time addresses from a receiver’s data so payments are unlinkable onchain, enhancing Bitcoin privacy.

Lightning Network

The Lightning Network aims to solve a common criticism of Bitcoin: the long confirmation times. Waiting for 10 minutes for a transaction to confirm is not ideal, pushing mainstream adoption away and crypto users to faster transactions per second (TPS) networks. Lighting attempts to solve this by using a network of payment channels that utilize multi-signature scripts to route payments instantly with settlement on the main network.

Lightning explains this to be similar to a contract being enforced until needing to settle in court; Likewise, Lightning runs essentially offchain with provable settlement happening in the smart contract onchain for final consensus.

While faster payment is a crucial problem for this protocol to solve, Bitcoin is just not that kind of money. It is good money, but not fast money. If we liken it to gold, transacting quickly between two parties is nice, but probably insignificant when compared to transacting in dollars. While I think volatility will continue to recede as global institutions and nation-states buy Bitcoin, it will be unlikely to see transactions in everyday life. Stablecoins, and possibly future digital assets, will fill that niche more gracefully.

TL;DR: Lightning enables near-instant, low-fee Bitcoin payments via offchain channels with onchain settlement for security.

Stacks

Stacks is a Layer 2 that runs on top of Bitcoin using something called Proof of Transfer (PoX), where spending BTC allows for the production of Stacks blocks, enabling the execution of smart contracts and further functionality.

Stacks uses an interpreted coding language called Clarity that will execute smart contracts on the Stacks blockchain rather than precompiling the code. While PoX incentivizes liquidity and markets, from the developer perspective, choosing interpreted code over precompiled code is a tradeoff, but gives developers the ability to read what will be executed directly, rather than needing to create a separate bytecode certification of the code the bytecode produces. The Clarity language was also purpose-built to have some security considerations similar to Vyper, an EVM-compatible smart contract language. These design choices help prevent some common smart contract vulnerabilities, such as reentrancy attacks.^[6]

TL;DR: Stacks adds smart contracts to Bitcoin via PoX and the Clarity language, favoring readable interpreted code and added safety tradeoffs over precompiled bytecode.

RootStock

Rootstock is a Bitcoin sidechain that shares mining capability alongside the Bitcoin network in order to share economic incentives and security.

The proposed benefits of Rootstock are the ability to port EVM code to what they call the Rootstock Virtual Machine (RVM), which is an opcode-compatible virtual machine. In simpler terms, a user can take their Ethereum-based smart contract and run it on Rootstock, utilizing the economic security of the Bitcoin network.

Rootstock is not the only sidechain in town, Liquid is another open source Bitcoin sidechain with several billion dollars in Total Value Locked (TVL) at the time of writing.

Sidechains are a useful addition to the cryptocurrency ecosystem, but generally have fewer security guarantees when compared to Layer 2s and rollups, which can inherit the economic security of their parent blockchain. ^[7]

TL;DR: Rootstock is a Bitcoin-aligned EVM sidechain that reuses Bitcoin’s security and lets Ethereum-style contracts run with opcode compatibility.

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1. https://www.coinbase.com/learn/crypto-basics/what-is-proof-of-work-or-proof-of-stake
2. https://www.kraken.com/vi/learn/what-is-bitcoin-unspent-transaction-output-utxo
3. A Layer 1 is base blockchains like Bitcoin, Ethereum, or Solana; A Layer 2 is a blockchain that runs on top of another blockchain, a strategy to scale the network without increasing the cost of transaction.
4. Satoshis are the smallest denomination of Bitcoin. Akin to an atomic unit of currency.
5. https://www.getmonero.org/
6. https://owasp.org/www-project-smart-contract-top-10/2025/en/src/SC05-reentrancy-attacks.html
7. https://www.kraken.com/learn/layer-2-solutions