Imagine how powerful Bitcoin could become if more developers were actively building in its ecosystem.
In the past, when developers thought about building decentralized apps, they rarely thought about building them for Bitcoin. That’s because they couldn’t. Bitcoin mostly functioned as a store of value, but now that’s changing thanks to Bitcoin layers, like Stacks and its fully expressive smart contracts for Bitcoin.
Today, there’s a whole world of opportunities for developers to help propel the Bitcoin economy forward by building Bitcoin apps across a range of categories, including DeFi, ordinals, social apps and more.
How Big Can the Bitcoin Economy Become?
Led by Bitcoin, the crypto industry built a $2 trillion financial economy from scratch in less than a decade with little institutional support. Today, Bitcoin has a market cap of about $978 billion, and Bitcoin ETFs were just approved in the US a few weeks ago. Many expect capital inflows over the course of 2024 to drive Bitcoin higher. Where does it go from here?
We believe there’s more to the potential size of the Bitcoin economy than Bitcoin flipping gold.
We can extrapolate what the future for Bitcoin may look like based on what we know today. Let’s start with the basics. Today, Bitcoin’s market cap (which has fluctuated from lows of $300B to $1.2T in the past few years) is largely centered around hodling: users and entities holding Bitcoin as a store of value. Bitcoin itself is not a productive asset.
For example, if you look at Bitcoin DeFi, the total amount of Bitcoin being utilized within decentralized finance is over $13.3 billion, but the rest of the $960B+ locked into Bitcoin is dormant. In other words, over 98% of the capital in Bitcoin is latent and not being put to productive economic use.
That lack of productivity helps support the narrative that Bitcoin is digital gold. It is a scarce, and natively digital, store of value. Let’s take a look at Bitcoin’s growth potential through this narrow lens. Gold’s market cap sits around $12.7 trillion. If Bitcoin realizes its full potential as digital gold, then its current market cap could still see ~10X growth (at minimum) as adoption increases and the world becomes more digital. This isn’t a perfect analogy, but it is an illustrative one.
Regardless, we believe there’s still more to the potential size of the Bitcoin economy than Bitcoin flipping gold. We see a much bigger market, one where developers make Bitcoin a productive asset through smart contracts.
Bitcoin today is a $1T opportunity for developers. All of this latent capital eliminates the uphill task of preaching the message of decentralization to crypto skeptics. A lot of the public is already bought in. Capital is already in the ecosystem. The earliest crypto adopters are holding Bitcoin, and the money in crypto typically flows in and down (but never out).
Building attractive Bitcoin projects that drive new users and cash flows provide streams into which the wealth lying dormant in Bitcoin can flow.
And the best part: when new apps put more of the Bitcoin in circulation into productive use, developers can unlock flywheel effects for the growth of the Bitcoin ecosystem. Here’s what that flywheel looks like:
- Developers build new Bitcoin applications and create new use cases for BTC.
- New apps bring new users to the Bitcoin ecosystem.
- Together, the addition of new users and new BTC use cases increases the value of Bitcoin.
- That increased value means Bitcoin developers have greater financial resources to build new applications, and we cycle back to the first step but with more developers building more applications.
Today, Bitcoin is the bedrock of the crypto market, and all crypto transactions eventually settle in Bitcoin. What happens to the value of Bitcoin when dozens of popular applications are running on top of it?
As decentralized applications continue to gain mainstream adoption, we believe Bitcoin will also become the global reserve currency of the internet. Imagine if Bitcoin became a global reserve on par with the US dollar, the Euro, and the Chinese Renminbi, among others. We see that possibility as an inevitability.
This is still the early days of Bitcoin. We’re in the first inning. So what does the next phase of growth look like?
Opportunities for Bitcoin Developers in the Decentralized Economy
Today, there are about 1,000 Bitcoin developers, with more building in various Bitcoin layers. For example, there are another 150+ building Bitcoin apps on Stacks. That’s really not that many when you consider that there are 13.5M full-time software developers in the world. The good news for developers is that Bitcoin (and all of crypto) is still young, and there are numerous sectors ripe for disruption and innovation. Let's take a look at some of the biggest opportunities for Bitcoin developers to grow the ecosystem.
Decentralized Finance (DeFi) refers to a new class of permissionless and transparent financial services managed by smart contracts and powered by blockchain technology. DeFi broadly has reinvented the entire financial services industry, including categories like lending and borrowing, liquidity pools, trading and decentralized exchanges, among others.
DeFi has gained significant traction over the past few years. The Gross Total Value Locked (TVL) in DeFi across all ecosystems is $68B, and 59% of that total is on Ethereum. That sum is a small fraction of Bitcoin’s nearly $1T, and when you think of Bitcoin’s dominant use case being financial, whether as a form of digital money or a form of digital gold, then creating more robust financial applications on Bitcoin to tap into that latent capital is an obvious bet.
Stepping back to look at the big picture, despite the billions of dollars locked in DeFi across all chains, DeFi trades are still less than 1% of the global banks’ market cap. As DeFi continues to eat into traditional finance (TradFi), the total value locked in DeFi projects will continue to soar — Bitcoin DeFi can catalyze much of that growth through Bitcoin layers like Stacks and Rootstock.
These layers are enabling a new wave of Bitcoin DeFi apps, such as ALEX, a platform of AMM pools and token launchpads, Arkadiko, which offers self-repaying loans, Sovryn, a decentralized lending platform, Tropykus, a savings platform Latam, and so many more.
These are only a few of the many different ways Bitcoin developers are unlocking DeFi. Bitcoin DeFi is in its infancy, and it still needs more developers like you to create mature DeFi products and all kinds of new use cases.
2021 was the year of non-fungible tokens (NFTs) — trades in NFTs surged by more than 21,000% to cross $17 billion by the end of 2021. In 2023, the worlds of NFTs and Bitcoin collided with the creation of Bitcoin Ordinals, a new way of inscribing arbitrary data into individual satoshis (the smallest unit of Bitcoin). This new innovation has led to the rise of NFTs natively stored on Bitcoin and even the creation of fungible tokens on Bitcoin through BRC-20 tokens, an extension of Ordinals.
In other blockchain ecosystems, NFTs have taken off in seemingly every industry, whether it’s art, gaming, fashion, and everything in between. The possibilities created by assets that enable digital scarcity are endless.
And in just over a year, the market has become enamored with the potential of Ordinals. To date, 60M ordinals have been created, and some days 85% of Bitcoin network activity is ordinal activity. Bitcoin Ordinals trading volume has periodically surpassed Ethereum NFT trading volume.
There are a number of ordinals builders in the space today, including Hiro, where we support the Ordinals API, the Ordinals Explorer, and our own Ordinals indexer Ordhook. You also have marketplaces like Gamma, Magic Eden, and Ordhub to trade. But the opportunities for builders don’t stop at tooling and marketplaces; Ordinals could extend into all kinds of use cases, and it will be up to innovative developers to figure out what those use cases might be.
One timeless theme that won’t go away is the human need for connection, and the rise of social media shows that the digital age won’t change that. Decentralized social media apps are a way to right the wrongs of the current social media giants (a list that includes controlling public discourse, monopoly, profiting off creators, and more).
And we are already beginning to see the rise of a new generation of social apps to combat those woes, a list that includes names like Farcaster, Bluesky, Lens, Friend.tech, DeSo, and more. In recent months, we’ve seen that popularity climb. Bluesky got 800,000 signups in its first day of public access. Farcaster has gone viral with its new Frames feature, and we are seeing some of this social innovation come to Bitcoin.
For example, .BTC domains enable users to create handles that tie their identity to the blockchain. Sigle is a decentralized blogging platform, and Console is a community chat platform. These apps secure user identity, empower creators to own their content, and take down the walls of existing social platforms by enabling anyone to build on the social graph data at the platform's core.
If Farcaster’s Frames innovation is any indication, decentralized social apps are still early, and we are in the process of discovering powerful unlocks that are only possible thanks to a decentralized foundation. There’s plenty of opportunity for developers to build new social experiences and welcome onboard the next wave of Web3 users.
Start Building on Bitcoin
There’s a growing community of developers building out the Bitcoin ecosystem, and you can join them in building the next generation of Bitcoin apps to tap into Bitcoin’s $1T of latent capital. As if you need another reason to get started.Dive into the world of Bitcoin DeFi and learn about the emerging world of finance on Bitcoin in our free ebook: