The approval of Bitcoin ETF marked a pivotal moment in its journey to widespread mainstream adoption. In addition, the Ordinals boom represented an expansion of Bitcoin beyond the payment layer and a surging interest towards the narrative ‘Building on Bitcoin’.
These new developments suggest that there’s a need for solutions that can drive more scalability and functionality to the BTC ecosystem. One such solution that enables programmability on Bitcoin and enhances its capacity is the Bitcoin integration on ICP.
The case of mainstream adoption for Bitcoin
In recent times, there has been a notable increase in interest towards leveraging Bitcoin’s foundational blockchain not just as a means to store value, but as a settlement layer for a broader range of activities.
In 2023, the Bitcoin network experienced a paradigm shift with the emergence of Ordinals. By June of 2023, the network saw over 11 million Ordinals inscribed, with November 12th seeing a daily record high of 505,345 inscriptions.
On the other hand, institutional money is expected to overflow with the recent approval of Bitcoin ETFs. As per a recent report by Reuters, US Bitcoin ETFs generated a trading volume of $4.6 billion on the first day after getting a green light from the SEC (Securities and Exchange Commission).
However Bitcoin scaling remains an issue
The issue of Bitcoin scalability has been a serious problem for a long time as the number of on-chain transactions continue to rise through the years. This problem has and will only continue to become more challenging as it gains mass adoption. Even last year, Bitcoin saw its network clogged as Ordinals drove most of the action spurring high transaction costs.
In December 2023, Bitcoin’s transaction fees surged to their highest single day reading of $23.6 million. Subsequently, the congestion remained high throughout the year as there was a pending backlog of 249,000 transactions in the Bitcoin mempool by December 2023. At this time, Ordinal inscriptions were consuming up to 50% of the transactions daily.
ICP’s scaling solution for Bitcoin
Bitcoin integration on ICP looks promising, as it eliminates the need of a cross-chain bridge to interact with the BTC ecosystem. This represents a fundamental shift of engaging directly with the base layer within a trustless environment. Instead of relying on cross-chain bridges, the integration facilitates ICP’s canisters – smart contracts, to buy, sell, and hold bitcoins. The result has been a plethora of innovation that extends the capabilities of the Bitcoin ecosystem while maintaining its core ethos of decentralization and security.
The BTC<>ICP has been functional since the start of 2023 and has even processed over 1M ckBTC (Chain-key Bitcoin) transactions by December of 2023. ckBTC, a real-world application of BTC integration on ICP, is a multi-chain Bitcoin twin which is backed 1:1 by real bitcoins.
ckBTC is currently being used to unlock BTC across applications in DeFi, SocialFi, and GameFi amongst others. This is made possible as the integration allows developers to build dApps with complex smart contracts functionality.
Addressing scalability, this solution enables a transaction finality of 1-2 seconds, reducing the network congestion from the base layer even during the times of increased activity.
Bitcoin integration on ICP marks an integral step in ICP’s journey to enable a multi-chain trustless ecosystem. It has already taken steps towards this with the launch of ETH integration in the later half of 2023 and the upcoming launch of ckERC20 planned in 2024.
With the influx of liquidity into the Bitcoin ecosystem, driven by significant events such as the approval of Bitcoin ETFs, the network may experience an increase in transaction volumes. Solutions like ICP will not only enhance scalability of the Bitcoin network but also bring the layer of smart contract programmability.