8 things that could happen after the Internet Computer’s Bitcoin Integration
The integration of Bitcoin into the Internet Computer presents a host of opportunities for both ICP and Bitcoin holders alike.
In the cryptosphere, Bitcoin represents the hardest of money. Most crypto investors choose to invest at least part of their portfolios into Bitcoin because, by and large, it represents the culmination of the entire crypto market. Most people believe that if anything in crypto is going to do well, it will be Bitcoin.
This also means that the addressable market of Bitcoin is substantial as well. Attracting Bitcoin holders to interact with your platform unlocks a large number of market participants that may bring their value to your business.
Additionally, outside of strictly financial reasons, in supporting Bitcoin, you support the oldest cryptocurrency and one that stands as potentially the most decentralized. Bitcoin has adopters far and wide across the entire globe. Many people believe it to be the truest testament to decentralization. By adding Bitcoin support, you engage with this ethos and signal your support for the future of decentralization.
These are among some of the reasons that the Internet Computer is integrating with Bitcoin. The Internet Computer has strong ideals of decentralization and empowering its users to interact with the web freely and without censorship. Furthermore, Bitcoin holders make up a large collection of cryptocurrency holders, which means attracting them to the Internet Computer can help bootstrap adoption.
Being the most valuable cryptocurrency out of the thousands that exist gives a strong incentive to make the Internet Computer as inviting as possible to Bitcoin natives, who in turn can branch out and experience other facets of the Internet Computer. Given these bright ideals, what are some things that can happen once Bitcoin and the Internet Computer are tightly integrated?
1. Bitcoin holders can access InfinitySwap liquidity pools.
Bitcoin is not an interest-bearing asset. This means there is no way to earn interest on Bitcoin without giving up control of it to third parties or bridging it to alternative networks over centralized platforms. For example, one way to earn interest on Bitcoin would be to give your Bitcoin to a centralized exchange to lend out.
This is a terrible option for most BTC holders because giving up control of their BTC is precisely what they want to avoid, especially to centralized parties. Another option is to bridge that Bitcoin onto another network, for example, Ethereum, and receive “wrapped Bitcoin.” This is somewhat more decentralized, but there is still a risk that the bridge can get hacked, and their wrapped BTC becomes worthless.
Because the Internet Computer is integrating directly with the Bitcoin network, BTC never needs to be bridged and, as such, will be able to participate in liquidity pools without any of the centralization or bridge hacking risk. BTC will become an interest-bearing asset by means of depositing it into InfinitySwap LP pools, where holders can collect swap fees on their Bitcoin.
2. Borrowing against Bitcoin will become more popular
While Bitcoin holders don’t want to sell their assets, it’s an unfortunate reality that most things still need to be paid for in fiat currencies. One way of accomplishing both having Bitcoin and spending it too will be to borrow against it. This means to put BTC up as collateral and borrow stablecoins against it. This way, a holder can benefit from potential price appreciation while still being able to spend its value. With the IC integration of Bitcoin, this will likely become more popular as it is a more secure way to borrow against Bitcoin than bridges or centralized exchanges.
The idea of borrowing against Bitcoin is simple: take Bitcoin, lock it into a smart contract on the IC, and then use the Bitcoin as collateral for borrowing stablecoins. You then have the freedom to use your stablecoins for spending or investing purposes until you need to pay back your loan. Once the loan is paid back, you can withdraw your Bitcoin as normal.
3. Defi applications will widely support Bitcoin
Decentralized finance on the Internet Computer is gaining in popularity. With more apps being worked on every day, it’s only a matter of time until the Internet Computer has a bustling application collection that users transact on daily. Whether it be to borrow, lend, LP, or otherwise, Bitcoin will become a core part of the defi landscape on the IC once the integration is complete. Because Bitcoin is such a popular asset, more developers will be incentivized to support it in order to bring value to their protocol.
Adding Bitcoin makes sense for developers because it allows them to access a large pool of users who are already familiar with digital assets and transactions. The value proposition for developers can be summed up as follows: if they build a protocol that supports Bitcoin, then their protocol will have access to millions of potential users who already understand how cryptocurrencies work and are willing to use them as part of their daily lives. Additionally, it is the most valuable cryptocurrency of all, unlocking billions in potential value for the application.
4. Smart Contracts on the Bitcoin Network will become possible
The Bitcoin Network currently does not support smart contracts. Because of this, the complex applications and trustless processes that are so common in defi are impossible with Bitcoin. For example, a smart contract that splits payments to it between 2 addresses is straightforward yet impossible on Bitcoin. This will change when the IC directly integrates the Bitcoin Network. Because the IC will support smart contract interactions with Bitcoin, it becomes possible to program complex applications where all the value transfer happens directly on the BTC Network, instead of on a third-party chain such as Ethereum.
This means that any application which requires a trustless process and Bitcoin can be implemented on top of the IC. For example, A decentralized exchange would be able to have its order book stored directly on the IC and only successful transactions committed to the Bitcoin Network’s ledger. This would be done without relying on centralized servers or external blockchains. This also means that trades could also happen directly on BTC in real-time without going through multiple layers of applications or intermediate blockchains.
5. Private transactions on the Bitcoin Network will become possible
Spinner.cash recently won the Supernova hackathon. It’s a protocol that allows for ICP or Bitcoin to be privately transacted by mixing with other deposits of an identical size and only allowing that amount to be withdrawn by knowing a password. This means while the depositor is known, the withdrawer is unknown because withdrawal amounts across all users are identical. This is impossible on the Bitcoin Network without trusting a third party because the Bitcoin Network does not support smart contracts. Once the Internet Computer integrates directly with Bitcoin, smart contract interaction with Bitcoin will be possible, allowing this privacy-enabling protocol to work with Bitcoin directly.
The importance of being able to transact privately is because it allows users to transact in ways that cannot be tracked by third parties and is thus safer than if those third parties could inspect your transactions. For instance, if someone wanted to make a large purchase in private, for example, an expensive watch or car, then it would be vital for them not to have their purchases tracked or viewable publicly by any third parties. This protocol would allow you to do just that. Spinner.cash will enable you to anonymize your crypto assets and be able to invest or spend them without the connection to your real wallet or identity.
6. The bridging of Bitcoin will no longer be necessary
It is no secret that bridges are a point of failure for many applications across defi. With the Ronin bridge, Harmony bridge, and Wormhole bridge all getting hacked in the last year for almost a total value of nearly $1 billion lost, bridges are simultaneously more important than ever, yet still a critical vulnerability. This is why many users dislike using bridges. Even Vitalik Buterin, creator of the Ethereum Foundation, warns about the danger of bridges.
Currently, the only way to use Bitcoin in decentralized finance is through a bridge. This would be done by sending your Bitcoin to a bridge on the Bitcoin Network, and the bridge sending you a token representative of that Bitcoin on your target blockchain. Because this wrapped Bitcoin is not Bitcoin itself, it is only worth Bitcoin if it can be redeemed back for Bitcoin. If the bridge were to get hacked and the Bitcoin stolen, then the wrapped Bitcoin would be worthless, as it would not be able to be redeemed for Bitcoin.
The Internet Computer integration of Bitcoin makes this security risk vanish completely because Bitcoin will only be moved on the Bitcoin network itself, not bridged to foreign blockchains or represented non-natively. Each application or canister on the network will have its own assigned Bitcoin wallet and will transact on the BTC Network directly instead of needing to rely on hackable infrastructure such as bridges.
7. More Bitcoin developers will build on the IC
Many Bitcoin users are developers themselves. Unfortunately, there is not much room for these developers to use their skills to develop on Bitcoin because the network is very conservative with its changes and does not have an application layer to support smart contracts. This means that Bitcoin-passionate developers are an untapped market. Once Bitcoin can be transacted on the Internet Computer without the need for external blockchains or even external tokens for gas, developers may use the Internet Computer to make Bitcoin-native applications to create the complex financial tools that the Bitcoin Network itself does not support.
With the Internet Computer, developers will finally be able to build applications that use Bitcoin as money instead of wrapped versions. This could include creating a decentralized exchange where users can trade tokens for other tokens from other users. These applications already exist on many other blockchains but only use wrapped versions of Bitcoin instead of the native asset.
8. The IC will be regarded as an “L2” for Bitcoin
With all the possibilities that native integration of Bitcoin onto the Internet Computer can bring, it would not come as a surprise if the IC became the “hot spot” for Bitcoin-centric applications. The Bitcoin network has long settlement times, taking thirty minutes or more for a transaction to be considered “finalized.” The IC would solve this because the Internet Computer’s finalization time is less than one second. This means that the transaction would be finalized on the Internet Computer instantly, and the Bitcoin Network would be able to take as long as necessary to finalize without having any impact on the security of the IC.
These robust possibilities brought to the Bitcoin Network through the Internet Computer may cause the Internet Computer to be recognized as a layer 2 to the Bitcoin Network itself. If the IC can capture most of the development energy that goes towards Bitcoin, it may cause a network effect. This would result in a snowball effect, bringing in more and more Bitcoin enthusiasts to have new found interest in the Internet Computer.
The integration of Bitcoin into the Internet Computer presents a host of opportunities for both ICP and Bitcoin holders alike. Aligning the interests of both modern smart contract developers and the decentralization-oriented mindset of Bitcoin will lead to advances in blockchain technology as well as the increasing popularity of the IC. The network effects of Bitcoin are powerful, so bridging the gap between the Bitcoin Network and the IC without relying on centralized bridges will be a step in the right direction for decentralized finance.
While most of these things are not certain guarantees, many of them are logical next steps after the integration. We will likely see these things happen and more as the IC gains in popularity among developers and users alike. Stay tuned for future IC developments, and the Internet Computer welcomes all Bitcoiners to transact on its platform!
Connect with InfinitySwap
Twitter | Website | Telegram | Discord | Github
*Disclaimer: While every effort is made on this website to provide accurate information, any opinions expressed or information disseminated do not necessarily reflect the views of InfinitySwap itself.