cardano-bitcoin

Cardano becomes a layer 2 solution for Bitcoin: New capabilities and potential for the crypto ecosystem

By Albertocrypto | Cripto tips | 30 Oct 2024


Recently, Charles Hoskinson, founder of Cardano, announced that this blockchain network would guide its development towards becoming a Layer 2 solution for Bitcoin. This change implied that Cardano would bring significant improvements to Bitcoin, adding functionalities that it did not currently have, such as the ability to execute smart contracts. This movement generated great expectations in the crypto community, as it opened new possibilities for the use of Bitcoin.

What Did the Term Layer 2 Mean?


To understand this change, it was essential to understand the difference between Layers 1 and 2. Layer 1 (L1) referred to the base blockchain network, such as Bitcoin or Cardano themselves. Layer 2 (L2), on the other hand, was a system created on top of Layer 1 to improve aspects of speed and functionality, thus allowing more advanced and efficient user experiences.

Cardano Would Boost Bitcoin with Smart Contracts


Romain Pellerin, Cardano's chief technology officer, explained that this conversion would allow Cardano to offer Bitcoin a functionality it was missing: smart contracts. These contracts could be used to build decentralized applications (dApps) and carry out transactions without the need for intermediaries. In Pellerin's words, “Cardano would give Ordinals the smart contract capability that Bitcoin doesn't have.” Ordinals were a method of inscribing data on the Bitcoin blockchain, and by enabling smart contracts, Cardano sought to unlock new practical applications for the Bitcoin network.

It Was Not a Total Change: Cardano Preserved Its Independence


However, it was important to note that Cardano did not completely change from being a Layer 1 to a Layer 2 of Bitcoin. Instead, it implemented what was called “UTXO-enabled interoperability” between two Layer 1 networks, allowing both blockchains to coexist and complement each other without losing their autonomy. This approach was described by Pellerin himself as a way to allow Bitcoin and Cardano to share strengths, creating a more integrated experience for users while maintaining their technological independence.

A Collaborative Approach to Drive Ecosystem Growth


Bitcoin was always perceived as the “king” of digital currencies, although it also had limitations. By integrating Cardano's advanced features, Bitcoin became more versatile and easier to use, which could attract a broader user and developer base. This move had the potential to make the crypto space more diverse and vibrant, opening doors for the creation of new applications and experiences.

With this interoperability strategy, Cardano sought to maximize the potential of Bitcoin and its own network, while promoting a more robust and dynamic environment in the blockchain ecosystem.

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Albertocrypto
Albertocrypto

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