Bitcoin recently underwent a historic milestone after executing its fourth block halving on April 20th, dropping its block reward to miners from 6.25 BTC to 3.125 BTC per block. The event was a landmark moment for the network as it continues to prove itself as the most resilient, secure, and most-adopted blockchain in the world.
With Bitcoin making history yet again, we decided to examine its progression over the years to highlight its unfolding path into the proof-of-stake world.
While we believe Bitcoin will never leave its proof-of-work roots and become a proof-of-stake blockchain, we do think that elements of Bitcoin will start to be introduced into the PoS world, or vice versa. In fact, it’s already happening!
Buckle up because we’re about to take you through Bitcoin’s history and outline the steps its ecosystem is taking to integrate itself into the PoS landscape.
A Brief Journey Through Bitcoin’s History and Its Entrance Into the PoS World
On October 31st, 2008, the legendary pseudo-anonymous developer – Satoshi Nakamoto – released a whitepaper titled “Bitcoin: A peer-to-peer Electronic Cash System.” The paper outlined a decentralized digital currency system set to change the world by introducing a decentralized public ledger known as the blockchain.
Here’s a brief summary of what happened next:
| Timeline | Event |
| January 2009 | The genesis block was minted with an interesting reference to the second bailout of the banks from ‘The Times’ newspaper. |
| 2012 – 2016 | The first and second block halvings occurred as the block reward was slashed from 50 to 25 BTC, and then to 12.5 BTC. |
| October 2017 | The Bitcoin core development team introduced the SegWit upgrade, raising the block size from 1MB to 4MB, setting the foundation for developers to begin building on Bitcoin years later. |
| December 2017 | Bitcoin starts to shine, reaching as high as $20,000 by the end of the year. In addition, the CME added Bitcoin Futures to its exchange. |
| May 2020 | The third halving dropped rewards to 6.25 BTC. |
| November 2021 | The Taproot upgrade goes live and developers discover that files under 4MB could be inscribed onto the satoshis, bringing about an entirely new range of innovations for Bitcoin beyond a store of value, beginning its journey into the PoS world. |
| January 2024 | The US SEC approves 12 ETFs, solidifying Bitcoin’s goal of becoming integrated into the financial world |
| April 2024 | Bitcoin’s fourth halving occurs, dropping rewards to 3.125 BTC per block. |
Isn’t Bitcoin a Proof-of-Work Blockchain?
Now, to the matter at hand.
Indeed, Bitcoin is a proof-of-work (PoW) blockchain that utilizes the SHA-256 hashing algorithm to generate hashes for each block. Transactions are placed into the block to be verified by miners who run dedicated computers to solve complex mathematical problems in exchange for rewards.
The sheer hashing power behind Bitcoin’s PoW consensus mechanism gives it security. A single Bitcoin transaction is estimated to use the same amount of energy as a US household over the course of a month.
On the other hand, proof-of-stake (PoS) relies on financial stakes rather than computational power. Validators must lock their tokens onto the chain to facilitate transactions and receive rewards.
While both consensus mechanisms have their merits, they also have their pitfalls. For example, Bitcoin’s throughput is sluggish, facilitating only seven transactions per second (TPS), while PoS networks experience a much higher throughput, with top PoS chains like Cosmos achieving 10,000 TPS.
On the other hand, Bitcoin has unprecedented security, with over 600M Terahashes per second (TH/s) securing its network. Comparatively, some PoS chains have much lower security, requiring high degrees of staked assets to maintain security, often turning to high inflation to incentivize security.
Building on Bitcoin: Bitcoin’s Unfolding Route Into the PoS World
While Bitcoin might never transition into a PoS blockchain, the protocol’s upgrades (including SegWit and Taproot) created the foundation for developers to build on Bitcoin’s network to increase its programmability.
As a result, a string of projects have emerged that utilize Bitcoin as a Layer-1 to create underlying layers that either bring PoS networks to Bitcoin or take Bitcoin’s security to PoS networks. These projects aim to increase Bitcoin’s scalability or use its gigantic security system to secure other blockchains. Best of all, they’re using PoS elements to make it happen!
Let’s quickly look at some of today’s projects working on making it happen.
Improving Scalability and Programmability for Bitcoin’s Blockchain
Layer-2s have been the primary route for projects attempting to scale Bitcoin or increase its programmability by creating an underlying execution layer through which transactions can be routed.
Bitcoin Layer-2 networks utilize the main chain as a settlement network for transactions that occur on the underlying layer. As a result, they can maintain the same level of security and decentralization as the mainnet.
For example, the most popular Layer-2s today, such as Rootstock and Blockstream’s Liquid, utilize their own infrastructure to facilitate transactions while using Layer-1 for settlement. Blockstream’s Liquid is built on the Elements-based sidechain, which is still derived from the Bitcoin codebase. Similarly, Rootstock is a sidechain that brings Ethereum contracts to Bitcoin but still uses a PoW algorithm through merged mining, allowing miners to mine both blockchains simultaneously.
There are dozens of Layer-2s currently building in the Bitcoin ecosystem that introduce a wide variety of use cases to Bitcoin, such as DeFi, cross-chain swaps, NFTs, DAOs, and inscriptions. While many high-profile Layer-2s and sidechains exist, not all utilize PoS elements on the execution layer.
The following are some examples of Layer-2s that are bringing PoS elements to the Bitcoin network:
1. Stacks:
- A Layer-2 focused on extending Bitcoin programmability.
- It uses its own Proof of Transfer (PoX) consensus algorithm, a hybrid of PoS and Proof-of-Burn.
- Connects Bitcoin miners and Stackers on the Stacks network.
- Essentially, it borrows miners from the Bitcoin network to validate transactions on its layer.
2. Mintlayer
- A sidechain focused on bringing smart contract programmability and DeFi to Bitcoin.
- Incorporates its own blockchain where transactions are anchored to a Bitcoin block.
- Utilizes a refined version of PoS where participants run nodes and stake ML tokens to be selected to add blocks.
- Essentially, Mintlayer inherits Bitcoin functionalities while offering higher throughput and lower transaction costs.
3. BEVM
- A Layer-2 bridging EVM-compatibility to Bitcoin.
- Allows Ethereum dApps to run using BTC as gas through cross-chain interactions.
- Utilizes Bitcoin light nodes combined with a PoS consensus mechanism through Taproot.
- Essentially, BEVM is a decentralized Layer-2 that allows Ethereum dApps to run using BTC as gas.
Sharing Bitcoin’s Security With PoS Blockchains
In addition to bringing PoS elements to Bitcoin, some projects are focused on bringing Bitcoin to PoS chains. One of the primary utilities of taking Bitcoin to PoS chains is sharing the security of its robust blockchain. A standout project turning this into a reality is Babylon.
Babylon is an ambitious protocol designed to enhance the security of PoS chains by tapping into the reservoir of unutilized security Bitcoin provides. It’s a Bitcoin staking protocol that allows BTC holders to stake their tokens to gain the ability to validate PoS chains and earn a return in altcoin yields.
The protocol is groundbreaking as it doesn’t require BTC holders to bridge their tokens. Instead, by utilizing the time-locking feature embedded in the Bitcoin network, the security-sharing protocol creates a two-sided marketplace that lets Bitcoin holders lock their tokens in a self-custodial way, allowing them to validate and secure multiple chains simultaneously.
Babylon is entirely modular, meaning it can be seamlessly used to secure any PoS chain. The PoS chains can opt into the Bitcoin-backed security and choose how much they will pay for it through staking rewards.
The result is that Babylon allows PoS chains to access over $1 trillion in BTC security while BTC holders can earn a yield on their idle assets.
Persistence One: Leveraging Bitcoin’s Unfolding Journey into the PoS world.
Persistence One is leveraging Bitcoin’s introduction into the PoS world by bringing Bitcoin security to the Persistence Core-1 chain through a collaboration with Babylon, allowing BTC stakers to earn XPRT rewards for providing security.
Overall, Bitcoin’s 15-year journey has been remarkable, sparking an entirely new and independent financial ecosystem. Although most would agree that Bitcoin will remain a PoW-based blockchain, its unfolding journey into the PoS world sets up the stage for additional utility for BTC holders, showcasing the number-one-ranked blockchain’s ability to adapt in the ever-evolving crypto landscape.
With Persistence One at the helm of innovation, we’re proud to be able to do our part in paving the way to increase the adoption of Bitcoin in the PoS landscape.