BTC's current technical stack and trends are filled with contradictions and debates.
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BTC's current technical stack and trends are filled with contradictions and debates.
This article discusses the current technical stack and trends of BTC, which are filled with confusion and controversy.
Navigating Web3 tides with focused insightsAuthor: Lao Bai
This post was originally meant to cover trends in derivatives, NFTs, and NFTFi. However, given how hot the BTC ecosystem has become recently—and after reviewing several early-stage projects in the BTC ecosystem—I’ll first focus on the current tangled and controversial technical stack and trends within BTC.
I. History
To understand things like BRC20 and Ordinals, you need a basic grasp of their technical history. Let me explain it in the simplest terms possible:
Satoshi Nakamoto originally designed Bitcoin as a peer-to-peer cash system. Later, he mentioned on forums that once Bitcoin became powerful and mature, it could support more advanced functions like escrow transactions, bonded contracts, and third-party arbitration.
But people soon realized BTC had terrible performance and high price volatility, making it impractical for daily payments. So it gradually evolved into today’s “digital gold” narrative. Satoshi’s original vision, however, planted the seeds for later scaling debates and forks like BCH and BSV.
Bitcoin has a script opcode called OP_Return, which can store 80 bytes of arbitrary data. Back in 2012, someone proposed Colored Coins—using OP_Return to tag certain bitcoins so they could represent non-fungible assets. But due to BTC's poor performance, this never took off.
Later came Mastercoin (which evolved into OmniLayer—the platform where BTC-based USDT was issued) in 2013, and CounterParty in 2014. Both used OP_Return for various purposes, but unsurprisingly failed. Today, almost no one uses BTC-issued USDT anymore.
One of the co-authors of Colored Coins, Vitalik Buterin, proposed an upgrade to BTC at Mastercoin—but his suggestion was ignored. He left and created Ethereum. From there, endless disputes arose over scalability, most notably leading to the BCH and BSV forks. These chains pursued large block sizes: BCH aimed for gradual increases—from 1MB to 8MB, then 32MB—while BSV went extreme, starting with hundreds of MB or even 1GB blocks.
Meanwhile, BTC took a slow and steady path by adopting Segregated Witness (SegWit), separating signature data from transaction data. The original 1MB block limit now effectively became 1MB of transaction data plus up to 3MB of witness data—a modest form of "soft scaling."
Note: SegWit is crucial! Everything that follows—Ordinals, BRC20, etc.—stems from this upgrade.
II. Problems and Current State
Beyond direct block expansion, BTC has explored multiple technical approaches, though none have gained the traction seen on ETH. Supporting smart contracts versus not doing so is a fundamentally different level of complexity and feasibility. Yet one real concern remains: what happens to BTC’s security when block rewards dwindle to near zero in a few decades? Will it switch to PoS and start inflation? How do we generate enough on-chain transactions to sustain miner incentives?
Current exploration paths include:
1. Sidechains – Liquid Network, developed by Blockstream, is a federated sidechain offering about 10x BTC’s throughput, mainly used by institutions for large BTC transfers and settlements;
2. State Channels – The Lightning Network, well-known in crypto circles, is currently BTC’s most successful tech stack. Designed for fast, small, or micro-payments, it's supported by companies like Walmart and McDonald's. Yet adoption remains limited, with only around 5,000 BTC locked and roughly 70,000 channels active;
3. Quasi-Sidechains – RSK and Stacks. RSK is EVM-compatible and uses merged mining with Bitcoin. Stacks is non-EVM-compatible, built with its own Clarity language and uses Proof-of-Transfer (PoX) for block production. Neither truly inherits BTC’s security or hash power—they just mimic some aspects superficially and are conceptually far removed from ETH L2s;
4. Client-Side Validation – RGB and Taro represent a relatively new paradigm. They bind off-chain asset issuance to on-chain UTXOs, but store and validate transaction data client-side. When verifying, users only need to check relevant UTXOs via client software instead of full network consensus. It’s innovative, but progress has been slow—especially compared to the rapid rise of Ordinals;
5. Ordinals (including NFTs, BRC20, etc.) – This leverages the 3MB witness space introduced by SegWit. Previously, OP_Return allowed only 80 bytes; now, thanks to Taproot’s removal of per-transaction limits in late 2021, entire 3MB images can be inscribed. That’s how we got BTC NFTs and BRC20 tokens.
III. Controversy and Future
Ordinals have sparked intense debate—not just between BTC and ETH supporters, but also within the BTC community itself.
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On one hand, Ordinals have significantly boosted on-chain transaction volume, increasing fee revenue share from 2% to as high as 74%. With Bitcoin becoming expensive and congested, miners couldn’t be happier.
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On the other hand, many Bitcoin purists argue that filling the network with tiny images or useless “inscription junk” goes against BTC’s intended purpose.
So the core question is simple: How should this 3MB space be used? What belongs in it? Several options exist now and in the future, but technically, each has fundamental flaws (setting aside speculative value).
1. NFTs – BTC NFTs emphasize full on-chain storage. In contrast, most ETH NFTs only store a link to Arweave or IPFS. But does it really matter whether the image lives on-chain? After two years of ETH NFT mania, few seem to care. Is storing an image in BTC’s 3MB witness space inherently more valuable than using AR or IPFS? Seems stretched;
2. BRC20 / ORC20 / SRC20 / BRCXXX – BRC20 has many limitations, so people created ORC20 with better functionality and flexibility, with more variants like BRCXXX on the way. But the more powerful XRC becomes, the more it resembles ERC standards. Then why bother? Without native smart contract support, BTC will never match ETH or other smart contract platforms in usability;
3. DA (Data Availability) – Celestia Rollkit is exploring this. Technically, DA data could fit into the 3MB space. But in terms of speed and capacity, BTC offers no advantage. ETH’s upcoming Cancun upgrade will bring one block every 12 seconds with 1MB of data (and eventually 16MB with full Danksharding). That’s 5MB per minute, 50MB per 10 minutes. BTC produces one 3MB block every 10 minutes—and must compete with BRC traffic. It’s smaller and more expensive;
In short, whatever you put in this space, ETH can do better. As previously noted, the lack of smart contracts puts BTC at a structural disadvantage. No matter how hard BTC tries, its ceiling is ETH.
You might argue BTC is more OG or more secure—that’s fair. But do you really need that extra layer of security? And honestly, after ETH’s shift to PoS, it’s debatable which chain is actually more secure…
Finally, here are some new BTC applications I’ve seen, across both primary and secondary markets
1. Timestamp Server – Babylon from the Cosmos ecosystem uses BTC as a timestamp server to help PoS chains resist long-range attacks. It “borrows” BTC’s security to enhance, but not replace, existing PoS consensus mechanisms;
2. DA – Already discussed above;
3. EVM Compatibility/Equivalence – RSK already attempted EVM compatibility but didn’t gain traction. Merged mining now seems “outdated.” Some new early-stage projects are exploring this: one involves staking BTC to run nodes enabling EVM-equivalent execution; another forks OP Stack and uses a BVM-like approach to create a “BTC-based Optimistic Rollup”;
4. ZK + BTC – ZeroSync is working on this in a public good-oriented manner. Using ZK-STARKs, they generate succinct proofs for Bitcoin’s latest state, eliminating the need to sync years of historical data—which can take hours or days. Currently supports proofs for block headers and transaction data; signature verification proofs are still in development.
Overall, the BTC ecosystem is deeply conflicted. On one hand, any new development can spark hype—after all, it’s the original blockchain. On the other, many ideas don’t hold up under technical scrutiny or long-term testing. It’s like the old Ford car: while others move to turbocharging, hybrid, or full electric systems, you’re stuck just enlarging the engine cylinder. You simply can’t catch up.
Yet the long-term issue of BTC’s security and declining mining rewards in decades to come is a real concern. We urgently need to find a direction to utilize that 3MB witness space and stimulate on-chain transaction activity. Ideally, something native to BTC—something unique, or best suited for BTC. But logically, every promising direction seems replicable on ETH, and done better. A real dilemma…
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Lao Bai
