Bitcoin is just one step away from surpassing Ethereum

The Bitcoin blockchain could be able to compete with Ethereum when it comes to decentralized financial activity (DeFi), thanks in part, due a single long-dormant piece of code hidden deep inside the Bitcoin stack. 

This upgrade is known as “OP_CAT” The code (short form for concatenate operation code) was originally developed by Satoshi. The code, which was originally part of Bitcoin’s scripting system, increased the transactional utility of Bitcoin and allowed users to perform more operations with Bitcoin. 

Nakamoto’s initial concern was that OP_CAT Could expose Bitcoin to potential security risks including DoS attacks, and creating exponential memory demands that would potentially overwhelm network. 

Nakamoto then removed the OP_CAT opcode from active opcodes as part a larger effort in 2010 to make Bitcoin easier and more robust. 

In October 2023, Botanix Labs’ lead engineer Armin Sabouuri and cryptographer Ethan Heilman revived the idea of the opcode, proposing to introduce it via a “soft fork” to the Bitcoin Network. 

If the upgrade is approved, it will lead to a number of network upgrades, including the ability to rollups as well as the extension of Bitcoin Tapsprict, which has smart contract like functionality.

Since then, OP_CAT’s popularity has grown rapidly not only within Bitcoin circles, but in the broader development community as well. 

On April 25, the OP_CAT program was launched. granted Bitcoin Improvement Proposal 327 marks the first step towards introducing the upgrade and acceptance.

While the OP_CYou can also find out more about the A-Team here.T upgrade is certainly not short of advocates — most notably Taproot Wizard co-founders Udi Wertheimer and Eric Wall — StarkWare CEO Eli Ben-Sasson is one of the key industry heavyweights from the Ethereum side pushing for OP_CAT to be introduced.

A “simple” Addition with big benefits

Ben-Sasson, speaking to Cointelegraph said that his aim is to increase the Bitcoin’s network capacity to thousands of transactions per seconds and create Starknet as the first blockchain to settle simultaneously Bitcoin and Ethereum.

The approval of OP_CAT — which will enable rollups, covenants, fraud proofs and STARK scaling — holds the key to achieving genuine scalability for Bitcoin, said Ben-Sasson. 

“By simply adding OP_CAT, you can’t introduce actual smart contracts on Bitcoin itself. Bitcoin will not be able to execute something like Uniswap, but you can easily have Ekubo, which is like a version of Uniswap v4 on Starknet, running on an L2 [layer-2 network] on top of Bitcoin,” He also added. 

“But even with this, you could technically have all of DeFi and more: gaming, SocialFi and DePIN.”

Some people are not convinced that OP_CAT is necessary for Bitcoin to grow in the future. They say the sidechain structure is sufficient.

Bart van der Voort is the chief strategy officer for Bitcoin liquid stake protocol pSTAKE. He said OP_CAT may pose an unneeded risk due to its relative success in scaling Bitcoin. 

“It’s introducing a risk — to a degree — for Bitcoin. Why mess with something that’s working?”

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“I really don’t know if it’s that necessary because you can already see all of these side chains that are coming up and building around Bitcoin itself. This should be more than enough.”

Bitcoin sidechains are networks such as CORE, Stacks BitLayer, and bSquared. These networks run in parallel with the Bitcoin network, but they settle on the Ethereum Virtual Machine. They use a bridge for asset transfers between the network and parent.

CORE — much like other Bitcoin sidechains — allows Bitcoiners to bridge their idle Bitcoin (BTCThen, you can add BTC (or any other cryptocurrency) to the protocol of CORE DAO. This will earn you a profit on BTC which is otherwise left in your cold wallet. 

Ben-Sasson, who is well aware of OP_CAT’s risks, has created a grant fund of $1,000,000 for researchers to help them assess the benefits and drawbacks of OP_CAT. This will allow developers to better understand the technology and its pros and cons. 

It’s not enough to have sidechains.

Labrys’ founder Lachlan Feney is on the opposite side, claiming that sidechains don’t provide enough innovation or security for OG Bitcoiners to be interested in them.

“There are no real L2s on Bitcoin right now — other than Lightning Network, which doesn’t do too much.”

Feeney stated that the vast majority of current Bitcoin L2s is essentially nothing more than EVM-settling L2s or glorified bridges, which are incorrectly labeled Bitcoin layer-2 networks. 

“A lot of these projects even settle to Ethereum and have a bridge to Bitcoin, and while they’re technically Bitcoin-aligned, they’re not really what anyone could call a real Bitcoin L2.”

Feeney stated that the issue is this. The current Bitcoin sidechains do not settle into the Bitcoin network natively, so they cannot provide the feedback loop that is needed to make Bitcoin rival Ethereum.

“All of the sidechains being put forward right now are just fast, short-term solutions. The only way Bitcoin DeFi grows larger than Ethereum DeFi is when you have massive Bitcoin whales moving their capital around and plugging them into the protocols.”

“And to do that, you need to move towards having a legitimately trustless environment, and OP_CAT is absolutely going to have a very large role to play in doing this.”

Feeney explained that Bitcoin DeFi as well as other possible applications on the network, following the introduction OP_CAT may not be a path of rapid mass adoption. She said it might take a bit of time for Bitcoin’s famously cautious maximalists. 

“I don’t think the Ethereum DeFi crowd is going to leave Ethereum and all of a sudden start using Bitcoin L2s and Bitcoin DeFi and whatever else.”

“You also have a massive contingent of the Bitcoin crowd that are going to look at a lot of these protocols and applications as scams and shitcoins and want no part in that as well, especially when these are sidechains that are settling to other networks.”

Feeney believes that OP_CAT is the solution to this problem, as it offers real utility and safety on Bitcoin.

It’s not just a upgrade, it’s also a survival kit.

Feeney, however, doesn’t think that OP_CAT will just be a nice upgrade that brings DeFi to Bitcoin. It’s a critical component that is needed for its survival. 

Both critics and supporters of the Bitcoin Network are concerned that eventually it may not be able sustain itself with its current economic model. 

Right now, Bitcoin is almost entirely dependent on miner revenue and fees, and — barring the idealistic and unlikely scenario where the price of BTC perfectly doubles every four years — block rewards won’t be able to sustain and incentivize interest in securing the network forever. 

“Bitcoin cannot survive long term as it is today. It has to have a thriving L2 ecosystem,” Feeney said. 

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“If you take it to the extreme, roughly 90-something percent of miner revenue today comes from block rewards. Eventually, block rewards dry up and there are no more block rewards. And so, miner revenue has to come from transaction fees. So, you will eventually get to a point where Bitcoin must sustain itself based on transaction fees or it dies.”

“A lot of people think that’s 100 years away, but it’s actually only one or two halvings away when the block reward is so small that they’re not sufficient to sustain the security of the network, and so transaction fees have to rise substantially,” Added he.

“Its options are: It fails to create an L2 ecosystem and it dies, or it has this thriving L2 ecosystem where the L1 becomes a settlement chain and thrives.”