Bitcoin started out as digital cash back then. The title of the Bitcoin White Paper makes this claim clear: “Peer-to-peer Electronic Cash System”. Eleven years after its appearance, however, the narrative of BTC dominates as digital gold 2.0. Its function as a decentralized, non-censable store of value has given BTC its reputation as a “safe haven”, as a safe haven asset.
Lightning Network vs. Block enlargement
The Bitcoin Lightning Network is supposed to remedy this and bring Bitcoin on par with Visa and Co. in terms of TPS. The blockchain is to be relieved by setting up payment channels between transaction partners. Transactions within these channels are practically instantaneous. The whole thing takes place outside the BTC blockchain (“off-chain”). Only when one of the transaction partners closes the payment channel is their status verified via the BTC blockchain.
The third way: Bitcoin tokens on Ethereum
In the meantime, in addition to the Lightning Network and block size enlargement, another way has emerged that is supposed to make Bitcoin more useful for payment applications and other (decentralized) financial services: The tokenization of Bitcoin with the help of smart contracts that run on Ethereum. A well-known example is Wrapped Bitcoin (WBTC). This is an Ethereum token based on the common token standard ERC-20, which forms the basis for most of the altcoins that started on the Ethereum blockchain.