The Bitcoin dApp Store: Utopia or Reality?

Today's article covers the differences betwen Bitocin and altcoin dApps. Why they have different time preferences, how you can help and what the future will look like.

I recently watched this podcast episode by The Compound. A show I quite enjoy because they don’t take themselves too seriously. Both co-hosts work in wealth management and speak to fellow finance experts. It’s a nice mix between banter and valuable information. 

About two-thirds in, they start talking about Bitcoin and the crypto market. Even though not many wealth managers want to admit it, they do have some exposure to Bitcoin or altcoins. Josh, one of the co-hosts, got on board with Bitcoin but slowly started expanding into altcoins. Michael, the other co-host, is more outspoken about Bitcoin and understands a lot of the fundamentals. 

However, these guys are not Bitcoin maximalists or crypto bros. As you might have guessed. They manage money for families, wealthy individuals, or friends and therefore focus on diversification, not YOLOing everything into one asset. They accept that younger investors primarily focus on Bitcoin or crypto and try to keep up with the technology. 

That doesn’t mean they don’t make fun of the ecosystem. In this case, the guest, JC, actually makes a great case against their western bias, which was nice to see. 

Bitcoin doesn’t have an app ecosystem

As mentioned, about two-thirds into the conversation, they start talking about Bitcoin, and Josh immediately comes out of the gate swinging. First, they talk about the price drop, then they move to the topic of Store of Value and how Bitcoin isn’t one, which is a whole other topic for a separate article. OK, all things we’ve heard before. Nothing new so far. 

But then, Josh mentioned how he’s more bullish on Ethereum because you can build stuff on top of it, and it’s more versatile with stablecoins, NFTs and DeFi. To the unknown, this statement might be true. However, if you spend some time in the Bitcoin ecosystem, you’ll quickly realize this isn’t the case. Many projects are working on Bitcoin DeFi, NFTs on Bitcoin, and even stablecoins. 

The main problem for all these projects is that they’re in early development and not great at communicating what they do, which is a vast difference from the web3 or crypto crowd. Take this from someone who used to write copy for them; they know how to market themselves, and the ecosystem around Ethereum and all the other altcoins is steps ahead with these kinds of applications. 

Hardcore maxis might come at me now and tell me how this is different because Bitcoin doesn’t sacrifice security with Proof of Work, and its slowness is a feature, not a bug. It is true Bitcoins’ development has always been slower and in favor of keeping safety mechanisms in place. OK, all good. 

This is something I acknowledge and agree with completely. I’m willing to sacrifice time in the short run to have a better and simpler experience in the future. We have to tip our hats and agree that altcoins were faster in building the first versions of DeFi and things like NFTs. 

Complexity is a double-edged sword

However, that speed came with a huge sacrifice, complexity. If you’ve ever tried different DeFi protocols or wallets, you quickly realized how complex these systems are. Just because some of the altcoins allow more creative ways of using smart contracts doesn’t mean that things get easier. Each time you move up one layer or use different chains, you add complexity to the system. 

That difficulty is not necessarily in the underlying base layer but in the user experience itself. Let’s look at a DEX and say you want to use some features on Ethereum and others on Polygon. As a user, you have to add that network to MetaMask, then make sure to allocate them over there by using a bridge and, in the end, swap different tokens with each other. Bear in mind some of them have to be added manually to the wallet. It’s definitely not a system newcomers could use right away. 

I’m not stating that Bitcoin does this better, but the approach is different. Where altcoins might offer different networks, Bitcoin projects aim to use the same standard and either build on top of that, look at Lightning, or build sidechains for specific use cases. I think both solutions are not perfect, but if I had to choose, I would go with the version that allows me to use one standard and build on top of that. 

There are a few Bitcoin DeFi projects now that managed to copy the altcoin approach, often by implementing their token, but that doesn’t solve the issue. It just paints it in a different color. 

What’s the right approach?

This is the question many developers in all ecosystems have been trying to answer for the past five years. Not only is it difficult to achieve, think about the different systems in place in today’s financial world and how bad they are with communicating, but harder to implement for everyday users. 

The average citizen is interested in something other than the underlying tech. All they want to do is to be able to get their loan or pay their groceries with a simple tap. They don’t care what system we’re using as long as it’s fast and easy. 

That doesn’t mean we cannot do it, but it will be hard work. For now, we’ll see two approaches. The currently more advanced is the altcoin approach, where you have different layers with their functionalities built on top of an evolving foundation—one which adds complexity to the system with future updates. 

The second option is slower to build but goes about things differently. Instead of trying to add complexity to the base layer, they opted to add functionality on top of it. This could be a separate layer, or you would see one-stop solutions. These are also layers, but they would allow using Bitcoin as a network to send different assets. That could be a stablecoin, NFT, or even FIAT.

Is the Bitcoin dApp store a reality?

This is a simple question to answer. No! These projects are still extremely early and will be ready in 10 to 18 months. Once they’re prepared to test for early adopters, we will have to teach everyday users where the real work begins. 

With that in mind, be clear when your friends tell you how they prefer Ethereum or other altcoins over Bitcoin because they see more use cases. Don’t be a crybaby and teach them about the differences between the two systems, explain why Bitcoin is slower by design, and show what the possibilities will be in the future.

We’re in a unique position in history where for the first time, users can choose which system they want to work with and how they want to manage their money. 

I know which of the two I’ll be using. How about you?