Need help understanding Bitcoin DeFi?
Need help understanding Bitcoin DeFi?
Need help understanding Bitcoin DeFi?
Need help understanding Bitcoin DeFi?
Need help understanding Bitcoin DeFi?

Building on Bitcoin: a Comparison of Bitcoin Projects

New projects are bringing smart contracts, DeFi and scalability to Bitcoin, but the ultimate question is how to unlock the $800B+ in Bitcoin capital.

Deep dive
December 5, 2023
Lead Content Manager
Bitcoin Projects

In 2009, Bitcoin sparked the emergence of a new decentralized paradigm, opening a world of opportunities, business models and community involvement. In the years since, the nascent technology drove the creation of a $1T industry, and through it all, Bitcoin has remained the dominant blockchain ecosystem.

Bitcoin is an effective store of value in part because of its limited functionality (making it more secure), but we are only scratching the surface of how Bitcoin could change the world. Bitcoin can be much more than just a store of value and peer-to-peer transaction system, and innovators all over the world are tackling that exact challenge.

Bitcoin can be much more than just a store of value and peer-to-peer transaction system.

Several different projects have made headway on various approaches to unlocking Bitcoin’s potential, whether by scaling Bitcoin payments, introducing smart contract functionality, or enabling new assets on Bitcoin. In this post we will take a look at a few of the high-profile Bitcoin projects that are all collectively working toward unlocking more opportunities for entrepreneurs and developers to utilize the untapped capital in Bitcoin.

Disclaimer: I work in the Stacks ecosystem, one of the projects discussed below. Do your own research.

Bitcoin Projects: What Is the End Game?

At its simplest, BTC is a form of decentralized money, and it’s very good at being that—Bitcoin didn’t get the nickname “digital gold” for nothing. However, the end game for Bitcoin builders is to turn Bitcoin into more than just a digital currency. Projects building on Bitcoin hope to make it a foundation for DeFi, NFTs, apps, and more, while simultaneously making the network scalable for millions, and one day even billions, of users.

Today, Bitcoin is a $800 billion network but not much of that capital has been deployed for use in DeFi, DAOs, NFTs, and other Web3 applications. The recent activity on the Bitcoin blockchain with ordinals and BRC-20 is starting to change that. Despite those recent innovations, most users still simply “hodl” their Bitcoin. In fact, only about $650M is locked into the four major projects building on Bitcoin:

Total value of BTC locked in Bitcoin projects on mainnet, as of Nov 9 2023. The Stacks category reflects value locked in PoX, Stacks’ consensus mechanism that offers BTC rewards. Sources: DeFiLlama,

These early ecosystems are growing (more on them below) and in just a few years have shown impressive traction. However, $650M+ is still only a fraction of Bitcoin’s $800B+ market cap (less than 0.1%).

Compare this to Ethereum’s nearly $250B+ market cap, of which $25B is locked in DeFi alone. Other ecosystems put significantly more of their capital to work in various use cases, and the same cannot be said for Bitcoin today. Interestingly, nearly $6B BTC is bridged on Ethereum via Wrapped Bitcoin (WBTC). That’s around 1% of total Bitcoin in circulation, indicating a clear pent-up user demand to do things with their Bitcoin that the Bitcoin ecosystem cannot provide today.

By empowering developers and entrepreneurs to build on Bitcoin, we can let users put their Bitcoin to work in a safer and more native Bitcoin environment. And as we get closer to the next Bitcoin Halving, coming in April 2024, interest in projects building on Bitcoin will only grow.

And today, there are a number of different projects on Bitcoin, ranging from Bitcoin layers to improvements and innovations on the Bitcoin blockchain directly. At a high level, we can group these projects into the following categories:

Projects with a * are not yet live on mainnet.

So how are Bitcoin projects working towards this future?

Overview of Bitcoin Projects

Let’s take a closer look at these projects.

Bitcoin Projects on Mainnet

The following projects are live today, and developers and users alike can start building and interacting with these projects. These projects are loosely organized by size/community/developer activity.


Stacks is a Bitcoin layer that enables developers to create Bitcoin smart contracts and applications. Today, Stacks is home to dozens of different apps, and the blockchain is the largest and fastest-growing Bitcoin layer.

The Stacks blockchain has its own gas token (STX) that ensures efficient use of network resources and prevents spam. Without a token, a Bitcoin layer cannot work as an open, permissionless network. As part of that open membership network, Stacks also has its own miners and consensus mechanism. 

Stacks is the largest and fastest-growing Bitcoin layer.

For its security, Stacks relies on an innovative consensus model — Proof of Transfer (PoX), that enables the Stacks blockchain to settle on Bitcoin, with each new block mined on the Bitcoin chain. This is done without altering Bitcoin in any way and without Bitcoin miners having to be aware of Stacks’ existence. Thus Stacks inherits Bitcoin’s security, and to alter the history of Stacks, you’d have to alter the history of Bitcoin.

Stacks’ relationship with Bitcoin doesn’t end there. Clarity, the programming language used in Stacks, can read and react to changes in Bitcoin’s global state, and the STX token itself can generate BTC yield for users who choose to lock up their STX to secure the network. And coming later in 2024, Stacks will launch sBTC, a decentralized 1:1 Bitcoin-backed asset, alongside the Nakamoto release, which will bring Bitcoin finality to Stacks as well as faster blocks.

Stacks enables apps and businesses to be built in the Bitcoin ecosystem while maintaining and protecting the core ethos of Bitcoin: decentralization and open access to all.

Lightning Network

Lightning Network is a payments layer designed to scale Bitcoin payments by reducing transaction times and costs when you pay for goods and services with Bitcoin. Lightning Network was first proposed in 2018, and its beta version went live on the Bitcoin mainnet in 2018. 

The Lightning Network enables users to create payment channels, within which they can make an unlimited number of near-instant transactions at a fraction of what it would cost to make such transactions directly on Bitcoin. Lightning is able to reduce transaction costs because BTC transactions on Lightning do not trigger transactions on the Bitcoin chain until the Lightning channel closes, and all BTC transactions are processed at once.

Lightning scales Bitcoin payments, bringing us closer to global adoption.

Importantly, Lightning is not a blockchain, and there is no global state or ledger of transactions that occur on a Lightning channel. The protocol does not support smart contracts and focuses on delivering scalable payments infrastructure. In 2022, Lightning also proposed Taproot Assets, which enables other assets (fungible and non-fungible) to be represented on the Bitcoin blockchain as well as enable two types of transfers (swaps and sends) for those assets. As of October 2023, Taproot Assets is now in alpha on mainnet, so devs can start building with this new protocol today.

The Lightning Network is making it easier to use Bitcoin for everyday transactions, and there are currently about 5,000 BTC being used for transactions within ~62,000 different payment channels on the Lightning Network.


Ordinals enable users to inscribe data on Bitcoin, effecticaly creating Bitcoin-native NFTs. Ordinals were launched on Bitcoin mainnet on January 21, 2023, and since then, they’ve taken Bitcoin by storm. To date, users have paid $110M+ to inscribe 43M+ ordinals, and there are days when ordinals accounts for 85% of the activity on Bitcoin.

Ordinals enable users to inscribe data on Bitcoin, effectively creating Bitcoin-native NFTs.

Ordinals are based on ordinal theory, a convention to individually number every single satoshi (1/100M of a Bitcoin, the smallest transferable unit of Bitcoin), and the ability to inscribe arbitrary data on a particular satoshi. The ordinal theory convention (which sat corresponds to which number) is only valuable to the degree that people accept the convention. So far, the convention has seen a lot of acceptance (see the traction stats above), and people have been able to inscribe all types of data on Bitcoin.

In less than a year, users have inscribed everything from art (Bitcoin-native NFTs) to websites (ordinals can reference and build off other ordinals) to the entire video game DOOM. The protocol is still young, and devs are figuring out how best to build with it. One metaprotocol that is gaining traction on top of ordinals is BRC-20, a standard to create fungible tokens on Bitcoin.

Ordinals are a way to put more data on Bitcoin, making the blockchain a richer database with more possibilities for devs to innovate and build on.


Rootstock is working towards its mission of enabling a global economy built on Bitcoin. Rootstock is an Ethereum Virtual Machine (EVM)-compatible sidechain to Bitcoin. Being EVM-compatible means that developers can port over the code from other EVM-chains for use on Rootstock and can write new smart contracts for Rootstock using Solidity (Ethereum’s smart contract programming language).

Rootstock derives its security from Bitcoin’s security through a merge-mining consensus mechanism that enables miners to concurrently mine both Bitcoin and Rootstock blocks. Rootstock launched as a private federation in 2018 and has since evolved its federated design to a “PowPeg”, a multi-sig system, comprised of 12 leading companies that maintain the RBTC peg.

Rootstock brings EVM-compatibility to Bitcoin DeFi.

Since Rootstock is a sidechain, it has a “SmartBitcoin” (RBTC) token that is pegged 1:1 to BTC. RBTC enables users to lock up their Bitcoins on the Bitcoin chain to mint an equivalent amount of RBTC for transactions on the Rootstock sidechain. Today, there are currently 3,200 RBTC in circulation, and users can put their RBTC to work in a number of different apps on Rootstock.

Liquid Network

Liquid Network is a sidechain that focuses on building financial infrastructure for the Bitcoin ecosystem, ranging from security tokens to stablecoins. While Liquid facilitates the issuance and settlement of various financial assets, it does not facilitate general-purpose applications.

To secure its network, Liquid uses a federated consensus mechanism that is managed by 15 functionaries, who are responsible for validating blocks and adding transactions to the ledger.

Liquid is a sidechain enabling the issuance and settlement of financial assets on Bitcoin.

Similar to Rootstock, the Liquid Network also has a token that is pegged 1:1 to Bitcoin (called Liquid Bitcoin L-BTC) –  and there are about 3,000 L-BTC in circulation. L-BTC allows users to access faster transaction times and higher transaction throughput on Liquid’s sidechain relative to the transaction speed and throughput on the main Bitcoin network.

Internet Computer

DFINITY’s Internet Computer (ICP) is an independent blockchain protocol created to facilitate the emergence of a decentralized internet and a decentralized global computing system. In April 2023, ICP launched its Bitcoin integration, enabling BTC to be used in apps and smart contracts on ICP, such as BTC trading pairs on DEXs, using BTC for payments and tips on social media platforms, and more.

ICP leverages smart contracts and a network of transaction signers to bring ckBTC to the Internet Computer.

This integration works through “canisters” (smart contracts) that can communicate with the Bitcoin blockchain. These canisters replicate the Bitcoin chainstate on ICP and are able to generate Bitcoin addresses (so users can deposit BTC in the canister) and sign Bitcoin transactions (so users can withdraw BTC), with the secret key being held by a federation of nodes. These canisters then mint Chain-Key Bitcoin, or ckBTC, in a 1:1 peg with the deposited BTC, which users can interact with apps on ICP.

There are some trust assumptions in this design, where users must rely on a federated node network to sign Bitcoin transactions and process BTC withdrawals. On top of transaction fees, users must also pay “know your transaction” fees upon both deposits and withdrawals to prevent tainted BTC (Bitcoin associated with criminal activity) from entering the network. Currently, 80 BTC are deposited in the ICP network.


Launching just last month in October 2023, Nomic is a layer-1 blockchain that lets users bridge Bitcoin on the Bitcoin chain to Cosmos through a new asset called nBTC. With nBTC, users can put their BTC to work in the Cosmos ecosystem, whether on the DEX Osmosis, the Cosmos Hub, or any other Cosmos chain.

Nomic uses Taproot and Schnorr signatures in its design to provide a secure bridge that lets users easily deposit BTC into a multisig on Bitcoin and receive nBTC in their wallet in exchange. This bridge is non-custodial and decentralized. and is maintained by a network of signatories that are stakers participating in Nomic’s Proof of Stake consensus mechanism. 66% of signatories must sign transactions in order to process withdrawals, and their stake can be slashed if they act maliciously. 

Nomic bridges BTC to the Cosmos ecosystem.

Additionally, Nomic offers other failsafes to protect users, such that if the bridge fails, there is an emergency disbursal process to send BTC back to users from the multisig if the signatories go offline for an extended period of time.

Users have to pay a 1% fee to deposit—fees that go to the signatories, which offset collateralization requirements for the bridge, and Nomic even offers a Metamask integration, so users can use the popular Ethereum wallet to deposit BTC and receive nBTC. At present, Nomic is capped at a 21 BTC deposit limit, which will increase over time as the blockchain becomes battle-tested. Nomic is one of many Bitcoin bridges currently on mainnet. Other projects worth following are Threshold and Interlay.

Bitcoin Projects on Testnet

These projects are in testing and will hit mainnet in the near future (fingers crossed). If you’re a builder, it’s not too late to get involved with these projects and start building. These projects are organized alphabetically.


Mintlayer is working to bring Bitcoin DeFi to life by creating a smart contract platform on which you can build DeFi applications through Mintlayer’s Script programming language, which also uses Bitcoin’s UTXO model. Mintlayer facilitates the bridging of other cryptocurrencies in and out of its ecosystem, as well as the minting of new tokenized assets (including equity, real estate and more), and peer-to-peer transfers via decentralized Lightning Swaps (Mintlayer integrates with Lightning).

Mintlayer is designed to augment Bitcoin’s UTXO model and bring new programming capabilities to Bitcoin.

To secure its network, Mintlayer uses a Dynamic Slot Allotment (DSA) consensus protocol, a new Proof of Stake (PoS) consensus model that attempts to merge with Bitcoin’s Proof of Work (PoW). The consensus mechanism ensures that Mintlayer’s blocks are mined alongside Bitcoin blocks and anchored to the Bitcoin blockchain by using a checkpoint system to prevent long-range attacks and validating blocks through a randomized selection.

Importantly, Mintlayer lets developers choose to use Mintlayer’s native MLT token or a different token altogether for gas fees for any given application. Mintlayer is live on testnet, and it is scheduled to launch on mainnet sometime in 2024. 


Spiderchain is a new design for bringing EVM-compatible sidechains to Bitcoin. The paper was first published in March 2023 by Botanix Labs. The design uses a Proof of Stake-style system, meaning validators (also called orchestrators) stake funds in order to compete to verify transactions as opposed to depending on miners, merge-mining or other consensus mechanisms common in other Bitcoin sidechain designs. 

This design has attracted the attention of technical Bitcoiners.

Spiderchains leverage the Bitcoin base layer in several ways. Besides the obvious—using Bitcoin as a settlement, or base, layer—spiderchains use Bitcoin blockhashes as inputs for the Variable Random Functions that select validators and multisig signers. This design has attracted the attention of technical Bitcoiners such as Jameson Lopp since it doesn’t require a soft fork. However the design’s security assumptions rely on a number of factors, making it hard to evaluate in theory. Botanix, the team behind spiderchains, has already released a testnet, and devs are stress testing the project to see how it holds up in a public environment.

Bitcoin Projects in R&D

These projects are in the research phase. It’s unclear when they will arrive on the market, if ever, but they are worth monitoring and learning more about. Innovation on Bitcoin is a great thing, and these projects are questioning the boundaries of what’s possible with Bitcoin.

These projects are organized alphabetically.


Ark is a layer 2 protocol that hopes to enable fast and scalable transactions on Bitcoin without liquidity constraints. Unlike Lightning, there is no channel opening or closing process in Ark’s design, reducing the on-chain footprint and simplifying the onboarding process of users looking to receive payment.

Ark aims to enable fast transactions on Bitcoin without liquidity constraints.

To enable these payments, Ark uses a set of virtual UTXOs that exist off-chain that a) users can trade between each other and b) can be redeemed for on-chain UTXOs. Ark’s design also introduces Ark Service Providers, or ASPs, that work similarly to Lightning service providers and collect liquidity fees for bundling and processing Ark transactions.

Today, Ark’s design can only be implemented in a limited way on Bitcoin: in a fashion that requires all users to be online. In other words, users have to self-host an Ark client in order to receive payments. To enable offline transactions, changes to Bitcoin core would be needed.


BitVM is a new white paper discussing a Bitcoin rollup that brings more expressive logic directly to the Bitcoin Chain. The paper was published in October 2023 from Robin Linus on the Zero Sync team (a project which is covered below). This paper caused a stir because it enables new smart contract functionality on the Bitcoin chain without requiring any changes to Bitcoin.

A new white paper causing a stir in the Bitcoin community.

In BitVM, contracts and logic would be executed off chain, and only verification would happen on-chain via fraud proofs. However, there are considerable limitations to the project. For one, it is limited to two parties (the prover and verifier), and Bitcoin itself doesn’t verify anything; rather it serves as a data plane where these two parties can interact with each other. For another, the design is very inefficient and would be extremely costly on chain, both in terms of data storage onchain and the corresponding fees paid by users. However, there is an active community of developers and researchers working on improvements to address these limitations.


Chainway is building a sovereign zk rollup on Bitcoin. The rollup inscribes zk proofs of state changes directly on Bitcoin, allowing anyone with a Bitcoin node to verify Chainway and retrieve the entire rollup state using only Bitcoin, increasing the decentralization of the network.

As a rollup, Chainway uses Bitcoin for data availability and doesn’t have a separate miner network or token. However, it does introduce some trust assumptions around who the validators are. Importantly, Chainway is EVM-compatible, and devs can use Ethereum tooling when building with Chainway, making it easy for builders to migrate to this upcoming layer. Worth noting that Kasar Labs, RollKit are also experimenting with Bitcoin as a data availability layer, making this an interesting use case to keep an eye on.

An alternate design for bringing zk rollups to Bitcoin.

Chainway also has a “forced transaction” mechanism, so if a rollup sequencer censors a user, the user can inscribe a transaction directly on Bitcoin and force the sequencer to pick it up in order to create the next valid proof. Chainway is currently in development and doesn’t have any market traction stats that we can point to (yet).


Covenants are a category of proposed changes to Bitcoin core, enabling Bitcoin Script programs that restrict how funds are allowed to be spent. Covenants on Bitcoin have been debated for over a decade, proving just how hard it is to make changes to Bitcoin’s core protocol. Covenants need new op_codes to function, which require a softfork upgrade. The two primary BIPs associated with covenants are BIP 118 and BIP 119.

Covenants on Bitcoin have been debated for over a decade.

If approved, covenants could unlock major UX improvements for Bitcoin as well as many more use cases, including bringing smart contract functionality closer to the base layer. However, the risks include adding more complexity to basic Bitcoin transactions, and therefore making the protocol more vulnerable to attacks. There is considerable support for covenants among Bitcoin’s technical community, but the risks and tradeoffs are still hotly debated. 

Discreet Log Contracts (DLC)

Discreet Log Contracts (DLC) is another solution designed to enable the creation of Bitcoin smart contracts. DLCs were proposed in 2018 by Tadge Dryja under MIT’s Digital Currency Initiative. DLCs are designed to run on Bitcoin’s limited scripting capabilities and rely on information from independent oracles to determine the winner in precomputed potential outcomes. DLCs enable programmability by locking funds in a multisig wallet (effectively an escrow) with the participating users and the oracle.

DLCs can lock user funds and release them to “winners” in precomputed outcomes.

In 2020, the first live implementation of DLCs on Bitcoin was recorded in a bet between Nicolas Dorier of BTCPay Server and Chris Stewart of Suredbits, on the outcome of the U.S. presidential election. DLCs are still in development and its most recent updates include multi-signature setup, and multi-oracle support, among others.

This design would likely require some change to the Bitcoin blockchain in order to work.


Drivechains are part of BIP 300 & BIP 301, published by Paul Sztorc. Drivechains introduce a handful of new `op_return` codes to Bitcoin that would enable the creation and destruction of Bitcoin sidechains, as well as the ability for users to move BTC between the Bitcoin blockchain and the sidechain.

These various sidechains could have different configurations, enabling various apps and use cases. These drivechains would be secured through blind merge mining, meaning Bitcoin’s existing miners could secure these sidechains without running any new software.

A BIP that would enable the easy creation of Bitcoin sidechains.

However, to implement drivechains on mainnet, there would need to be a Bitcoin soft fork (and it is notoriously difficult to align the Bitcoin community around any change), and additionally, there is concern with how these drivechains would change miner incentives. There’s also some security risk with multiple drivechains each introducing their own version of Bitcoin, opening the door for scammers and unanticipated double spending bugs.


Fedimint is a modular protocol designed for community custody. Self-custody isn’t for everyone, and Fedimint aims to solve the problems with 3rd party custodians today: users sacrifice security and privacy when they use them.

A community-driven solution to custody.

Instead, Fedimint distributes that custodianship across communities called “Fedimint Federations.” In other words, Fediment lets the Bitcoin community onboard new users themselves—you can onboard your friend instead of referring them to a 3rd party custodian. This design protects user privacy and is interoperable with Lightning. However, this design comes with trust assumptions (you have to trust the federation), and Fediment itself is not a blockchain and so does not unlock any new use cases. This project is in active development.


RGB is a smart contract protocol for Bitcoin. First conceived in 2016 and later relaunched in 2019, RGB is a client side system that works on layers 2 and 3 of the Bitcoin ecosystem. Smart contract data is stored off-chain but relies on blockchain for cryptographic proofs. RGB uses client-side validation. Users are required to keep data (source code) client-side with the risk of losing access. Since data is stored off-chain, there is no global state for RGB apps. Notably, RGB is compatible with the Lightning network, which introduces more efficient scaling possibilities.

RGB is a client-side smart contract protocol for Bitcoin that is in active development.

In terms of market readiness, RGB is still in development. You can make transfers using RGB on Bitcoin mainnet, but the team doesn’t recommend it as they are still releasing breaking changes, which would cause the loss of any assets. There are a number of projects building with RGB already however, including a Bitfinex team that released a Lightning node compatible with RGB assets and DIBA, the first RGB-powered NFT marketplace.


Sapio is a smart contract programming language being developed for Bitcoin that would require change to the bitcoin blockchain itself. Sapio is created by Jeremy Rubin, a Bitcoin core developer, as part of his Bitcoin research and development organization Judica. Sapio is still in development and is not actively used by any apps. But if and when it is officially released, it will help developers to create intuitive, secure, and composable Bitcoin smart contracts.

A proposed smart contract language for Bitcoin.

Sapio extends the limited scripting functionality within Bitcoin to create complex smart contracts for Bitcoin. The language leverages the concept of “covenants,” which are added security measures that can add restrictions to a batch of Bitcoin, such as limiting their ability to be transferred to only a handful of addresses.


ZeroSync is a project in active development that is working on bringing zero-knowledge proofs to Bitcoin. They’ve prototyped two types of initial proofs for Bitcoin, a proof that validates Bitcoin block headers, difficulty adjustments, and proof of work, as well as a proof that verifies all Bitcoin consensus rules except for transaction signatures.

ZK-proofs would offer a number of advantages to the Bitcoin ecosystem, including greater scalability on the Bitcoin chain, increased transaction privacy, trustless bridges, and more. ZeroSync is first working on the rollout of a zk-proof light client, which would enable users to run a full Bitcoin node on, say, a mobile phone.

ZeroSync is working to bring zero-knowledge proofs to Bitcoin.

In the future, ZeroSync plans to launch a full L2, which would bring greater scalability, stablecoins, and more to the Bitcoin network. However, that work would require a Bitcoin soft fork. However, even witohut that fork, ZeroSync’s design can still support useful features, such as paying Bitcoin transactions with stablecoins instead of BTC.

ZeroSync’s tech stack leverages StarkWare’s Cairo programming language. StarkWare is a company developing zero-knowledge tech in the Ethereum ecosystem, and ZeroSync is the first project to work with Cairo outside of the EVM-world.

More Bitcoin Projects = More Opportunities for Developers

Bitcoin grows stronger the more that developers choose to build and innovate on it. Developer adoption is still early across all of Web3, and Bitcoin, as the largest and strongest cryptocurrency, remains a solid bedrock for builders, entrepreneurs, and startups to build on.

Today, most of the buzz around dApps and Web3 innovation is occurring outside of Bitcoin. We expect to see that narrative shift. It’s still early days in Web3, and we believe that apps built on the most secure blockchain (Bitcoin) are apps designed to be around for the long term. We’ve yet to scratch the surface of what can be built on Bitcoin, and with each new project launched, the bull case for Bitcoin grows.

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