Although many people regard Bitcoin as a new currency, it is far more nuanced. Bitcoin is a multi-layered financial ecosystem. It is independent of today’s economic and monetary systems because of this monetary system.
Bitcoin’s native monetary system is its most notable accomplishment and novelty. People have attempted to rebuild finance using fintech over the last two decades. While fintech innovations have resulted in many interesting financial applications, they have all remained tied to the traditional fiat system. True economic and monetary innovation has only begun with Bitcoin.
And this is due to Bitcoin’s native monetary policy being elegantly straightforward and its endless supply being free of human discretion, which no other currency has had since gold. In contrast to the precious yellow metal, Bitcoin’s monetary policy is algorithmically determined and thus perfectly predictable, rule-based. Events or emotions do not drive it.
Bitcoin’s monetary asset is structured as neutrally as possible by depoliticizing monetary policy and grounding it in a code that follows a strict formula. Bitcoin (BTC) is sound money because it is the most stable, reliable, and secure monetary system.
Financial Logic in Bitcoin
While most people know Bitcoin’s monetary layer, many are unaware of its fast evolution into an economic system. This new system does not directly build into the Bitcoin protocol code. Bitcoin’s programming and scripting are purposefully restricted. Bitcoin streamlining is for stability, reliability, and security by avoiding full programmability on its base layer.
Implementing any financial logic has offloaded to a second layer within Bitcoin’s multi-layered financial system. Sidechains that run alongside Bitcoin with a history of transactions populate this layer. These various approaches form the foundation of what I refer to as the infrastructure layer of Bitcoin’s financial system.
Its goal is to improve Bitcoin’s expressive power in some way. Meanwhile, this layer exists on its own. As a result, the monetary layer can provide the necessary assurances for a stable financial base asset. At the same time, the expressive economic logic in the form of smart contracts is moved off Bitcoin’s blockchain and onto the infrastructure layer higher up the stack.
Free Innovation Market on Bitcoin
The infrastructure layer of Bitcoin is igniting free-market competition to build a financial system on top of Bitcoin. This competition benefits users because more qualitatively distinct options mean greater freedom of choice. As a result, the more extensive and diverse the Bitcoin decentralized finance (Defi) ecosystem, the better.
Concerning consensus and security, users should keep in mind that all projects endorse some tradeoffs. Because different protocols perform different tasks, these tradeoffs will vary by project. This variety also benefits users, who can select the options that best suit their needs.
Bitcoin’s Native Application Layer
The beauty of Bitcoin’s open and private blockchain setup is that anyone can create helpful software to interact with the new financial order. You may visit and sign up on https://bitalpha-ai.io to easily interact and trade using bitcoin.
The plethora of decentralized applications will constitute the fourth layer of Bitcoin’s multi-layered financial order. Token swaps, collateralized trading, leveraged lending, and uncollateralized lending are Bitcoin characteristics. Users can freely choose which infrastructure setup they prefer.
Financial Operating Systems Based on Bitcoin
In various ways, the different Defi strategies on Bitcoin connectivity enable smart contract functionality for Bitcoin. To make this functionality as applicable to as many customers as possible, financial operating systems based on Bitcoin that represent the third layer in Bitcoin’s multi-layered economic order will gradually but steadily. The infrastructure layers’ components – second and sidechains – will serve as intermediaries between Bitcoin’s base layer blockchain and financial operating systems.
