Ergo has the capacity to act as a powerful smart scripting layer for the leading crypto – enabling Bitcoin to maintain its focus on being a secure store of value, while allowing Ergo to provide complex dApps. It enables this without requiring controversial and potentially risky layer-2 platforms to be built directly on Bitcoin itself.
Bitcoin is now the undisputed king of peer-to-peer value storage and transfer. The Bitcoin network does one thing exceptionally well. However, it’s not fast, it has limited capacity, and its fees can be high. But as digital gold, its reputation is unsurpassed. It is incredibly secure and reliable – and that’s exactly what you need when storing upwards of a trillion dollars of value.
In recent months and years, developers have attempted to add further functionality to the Bitcoin blockchain. This includes Ordinals, following the Taproot upgrade and launch of the Ordinals protocol. It also includes various scaling systems. The Lightning Network is one such initiative, focusing solely on fast, low-cost payments.. Other projects are building with the intent to introduce smart contract functionality to Bitcoin.
Bitcoin Layer-2 Controversies
There are a number of reasons why this approach has proven controversial within the crypto community. While micropayments are an extension (and arguably fulfillment) of the Bitcoin blockchain’s intended functionality, advanced scripting and smart contracts are something qualitatively different. The Lightning Network has generally been accepted by the Bitcoin community, but other features have proven to be far more divisive. Stacks, for example, is an L2 that seeks to extend Bitcoin’s financial capabilities, but it has not been universally embraced within the community.
There are concerns that adding more advanced functionality to the Bitcoin blockchain could introduce attack vectors, whether economic or technical. Alongside these security considerations, there is a cultural divide in the community: Should Bitcoin support such functionality? Does doing so detract from its key purpose of secure value storage and settlement?
One of the clearest flash points within the community has been the launch of Ordinals, a form of NFT or “digital artifact” hosted on the Bitcoin blockchain. Ordinals have proven immensely popular, but they are also viewed by many Bitcoiners as a subversion of the Bitcoin protocol’s true purpose. Some even view them as an attack on the network, causing blockchain bloat and driving up fees for those who use Bitcoin to make financial transactions. There is a bitter dispute within the community, and more and more miners are voting with hashrate. One core developer has even created software, called Knots, that explicitly blocks Ordinals transactions. The Jack Dorsey-backed OCEAN mining pool uses Knots, and currently accounts for over 1 Exahash (1 quintillion hashes per second) of mining power.
The Alternative To Bitcoin L2s
The development of functionality that extends the protocol beyond value storage and transfer may be useful, and it may appeal to certain elements of the Bitcoin world, but it threatens to undermine the chief purpose of Bitcoin. The Bitcoin community is notoriously conservative when it comes to adding new features to the protocol, and for good reason. Bitcoin secures a huge amount of value and changes are risky. Any flaws resulting from network changes could undermine confidence in the protocol, which has worked near-flawlessly for 15 years.
There is an alternative, and that is to use other blockchain networks to provide that advanced functionality. Ergo is one such platform, and it already offers features that can never be available on Bitcoin – or on most other blockchains.
Ergo: A “Smart Layer” For Bitcoin
Ergo’s functionality and philosophy make it the ideal candidate to serve this purpose.
Ergo offers advanced and efficient native cryptographic features as well as a safe, Turing-complete smart contract language, powering complex DeFi applications. In practice, Ergo can operate as a Bitcoin smart layer by using double merged-mined sidechains. These offer an innovative approach for bridging Ergo with other PoW blockchains, while minimizing trust requirements. In this scenario, an Ergo Sigma Chain would act as a Bitcoin sidechain, and would include commitments to both the Bitcoin and the sidechain UTXO sets written to the blockchain.
In order to facilitate the transfer of assets between Bitcoin and Ergo, Rosen Bridge presents an ideal and innovative service. Set within a decentralized framework, Rosen Bridge uses oracles and asset staking to achieve a high level of trustlessness and speed for cross-chain transfers, opening the way to a new set of use cases. It is important to note that transactions on Ergo reach finality within minutes, while final confirmation and full security using a protocol like Stacks on Bitcoin takes 100 blocks, or almost a whole day.
Through the versatility and security of Rosen Bridge and Ergo, there is the potential to provide a “best of all worlds” outcome, where Bitcoin’s undisputed security credentials and role as the leading decentralized store of value are extended by Ergo’s highly flexible and customizable contracts. In doing so, we avoid the political and technical downsides of implementing additional features directly on top of the Bitcoin blockchain.
This approach enables the execution of complex applications directly on the Bitcoin blockchain, with Bitcoin transactions submitted to the Bitcoin blockchain and auxiliary data submitted to the Ergo sidechain.
The Perfect Complement
Ergo is the ideal network for extending Bitcoin’s functionality. It is a strong match for Bitcoin, both technologically and culturally.
Ergo’s unique features, such as ErgoScript and Sigma protocols, offer sophisticated DeFi functionality that would be risky, expensive or impossible elsewhere. Ergo is based on the same UTXO model as Bitcoin, but extends this to enable advanced scripting and smart contracts.
Moreover, Ergo shares a very similar ethos to Bitcoin. It comes from the same cypherpunk roots. It is fully decentralized and trustless, and was not funded by an ICO, pre-mine or VC interests. This is in stark contrast to most blockchain platforms launched after it, and Layer 2 protocols (including those built on Bitcoin). Ergo’s proof-of-work consensus is modeled on Bitcoin’s approach, updated to remain memory-hard and support decentralization.
In terms of technology and philosophy, Ergo perfectly complements Bitcoin in a way that few other platforms can claim to do.
Conclusion
Bitcoin needs a smart layer that will support complex dApps, but the Bitcoin blockchain itself is not the ideal host for such functionality. The existence of Ordinals and other platforms that enable more sophisticated scripting has already proven controversial. Additionally, there are various security issues that these raise. Bitcoin stores well over a trillion dollars of value, and it is wise not to jeopardize this key use case by introducing changes at this stage.
Ergo offers the ideal way to extend Bitcoin’s functionality. Rosen Bridge allows seamless integration of Bitcoin and Ergo, allowing users to transfer Bitcoin between the two blockchains. It enables access to advanced features on Ergo without compromising on security or decentralization.
Ergo has a number of qualities that make it a natural fit for Bitcoin, both technologically and culturally: PoW consensus, UTXO model, high level of decentralization, and no pre-mine or centralized influences.
The combination expands the range of possibilities for Bitcoin users and developers, allowing the community to drive innovation and adoption within the Bitcoin ecosystem, but without alienating a core part of the community.
In short, this approach allows Bitcoin to continue doing one thing very well, while utilizing Ergo’s features to expand Bitcoin’s capabilitites into its next era of adoption and functionality.
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