What is stereotyping anyway?
The modularity is the result of a strange experiment conducted in Ethereum as a reaction to the blockchain's poor scaling properties. To address this bottleneck, developers have taken the radical approach of auctioning off the core functionality of the main chain to…other blockchains.
This standard shift is centered around clustering technology, and has completely redefined how products and services are built on top of Ethereum. Breaking down each element of the stack allows different architectures to be designed according to their use cases. Understandably, this has led to the spread of… blockchain.
I'm kidding, you're not. Everyone has become ridiculously rich by selling blockchains again.
While each new consensus protocol offers new and interesting opportunities for expansion, it also introduces a strange coordination problem. If users become dispersed across different networks, how can the economy be made more efficient? How can we sync everyone across this distribution? Maybe another one… blockchain?
It's turtles all the way.
This fragmentation of the ecosystem has had some clear consequences. First, users are isolated and trapped between intermediaries. Although compilation processes have compelling trust-reducing properties, the inefficiency resulting from transferring in and out of these systems results in unreasonable costs for users. It also exposes them to riskier options such as bridges and central services.
For developers, the lack of cross-platform interoperability creates friction and fosters a competitive rather than collaborative environment. Every two days, a new protocol is created for new and existing teams to compete on another version of the same applications. In many cases, teams choose to “bet on themselves,” moving to their own ecosystem (read: blockchain). It is necessary to emphasize the attractiveness of this model, which allows the various components of each application to be customized and optimized. This flexible structure enables anyone to contribute their own unique frameworks and inspire new designs. The possibilities are endless!
Unfortunately, these incentives have fragmented the network effect. If nothing built is compatible with each other, users will team up with only a few competing networks. As a result, economic activity becomes concentrated in a smaller number of permissible systems.
This kind of stereotyping has led people off the mark when they shouldn't have. Using different interfaces to interact with the consensus protocol is a completely valid idea. However, Ethereum's strategy has proven problematic; It views interoperability as an optional feature rather than a core design principle. As long as Ethereum continues to pursue scalability by multiplying blockchains, the debate will continue, providing ample opportunities for competitors to exploit these divisions and encourage discord. Divide and conquer.
Bitcoin opportunity
In Bitcoin, a different architecture emerges that favors a fundamentally different design. Using Lightning as the backbone for interoperability, developers are slowly coalescing toward a technology stack much closer to Bitcoin's peer-to-peer model.
Instead of trying to replicate shared global instances, protocols like Cashu or Fedimint optimize for local, permissionless interactions. Financial services can now be spread across different economic hubs and remain connected through the accelerated network.
Liquidity providers, atomic bridges, and cash mints. A new financial network that all shares the same settlement layer.
Nostr Access provides the social image that ties everything together. It is a social network based on principles similar to Bitcoin, and provides a simple set of rules designed to maximize interoperability. By avoiding guidance on the functionality it enables, Nostr unleashes Cambrian explosion Of open innovation.
Today, various projects have begun exploring ways to facilitate Bitcoin trading by making Nostr a native component of the Bitcoin user experience. The public key infrastructure underlying the protocol is a natural match for wallets and other payment applications, allowing them to communicate with each other and exchange messages securely. This communication layer can connect users to others and various services available over the network. Standards like Nostr wallet connection is created New opportunities For Bitcoin applications to interact with Nostr's growing ecosystem.
Case Study
Projects like insurgency Perfectly captures the differences in vision of these Bitcoin units. Users can simultaneously connect to services such as Nostr Relays, Fedimint federations, Lightning Service Providers (LSPs). Each of these grants access to an increasing number of features and applications. Using Nostr as a discovery service, we are able to leverage our social network to identify and access apps and services approved by our peers locally. This network of trust offers an interesting alternative to so-called untrusted systems. Participants can begin to rely on market incentives to engage in more efficient exchanges that are not burdened by the trade-offs required for more decentralized systems.
Eventually, markets will emerge for liquidity providers, mints, lenders, and… Accession coordinators To advertise their services through Nostr. Decentralized Order Book Projects Civkit can seamlessly integrate with Mutiny and allow users to participate in peer-to-peer trading. Each integration is designed around permissionless sharing so users can maintain complete sovereignty over their interactions.
Platforms versus protocols
The story of Bitcoin units is not without its own risks. Key pieces of the puzzle, such as logistics providers, involve significant capital requirements that create economies of scale among competing providers. The growth of electronic money minting companies may be hindered by regulatory concerns and operator fraud. I have already shown Nostr relays Central tendencies It remains unclear how the network topology will work.
The success of this approach depends on market choices and it is essential that barriers to entry for these companies remain low. A number of different efforts are being made to this end. For example, several Lightning companies are currently collaborating on a project Customize This would allow any market actor to implement its own LSP.
It may be too early to predict how any of these architectures and protocols will evolve. As both worlds continue to collide, it is likely that groups will find their place within the Bitcoin ecosystem. Application specific designs such as exchange groups or zkCoins It does not require a global case and could probably be made interoperable with Lightning.
The tension between the two approaches is somewhat reminiscent of the early days of the Internet. Commercial interests may prefer platforms that allow them to capture parts of the network effect in order to monetize it. It may take longer for more open, permissionless protocols to actually take off. The Internet offers a cautionary tale regarding the integration of services and applications into gatekeeping parks. Hopefully, Bitcoin's current development path will transform into a future that prioritizes interoperability and unauthorized access over financial silos.