Starknet looks to be the first Layer 2 network to support transactions on both Bitcoin and Ethereum, opening new opportunities for decentralized finance.
Bridging Bitcoin and Ethereum: A Bold Vision
Bitcoin is often seen as 'digital gold,' primarily used for storing value. Starknet aims to change this by adding scalability, smart contracts, and lower fees. As a Layer 2 solution, Starknet will process transactions off-chain, bundle them into STARK proofs, and then reserve them on both Bitcoin and Ethereum. This will allow Bitcoin to support DeFi activities such as staking, lending, and trading while maintaining security.
The Challenges Bitcoin Faces Today
Despite its dominance, Bitcoin has several limitations:
- Limited functionality: the design is only for basic transactions, making it difficult to develop complex financial applications.
- Security risks: many solutions require custodial services, increasing risks, as seen in cases with FTX and BlockFi.
- High fees and slow transactions due to long block times and network congestion.
How Starknet Plans to Solve These Issues
According to the team, Starknet will act as Bitcoin’s execution layer, speeding up transactions and lowering costs. This will unlock new DeFi use cases:
- Layer 2 scaling: combines multiple transactions into a single proof, reducing congestion and costs.
- STARK proofs: ensure secure and trustless transactions.
- Instant and low-cost transactions: complete within seconds at low cost.
- Smart contracts on Bitcoin: developers can create DeFi applications, like staking and lending.
Starknet's plans for Bitcoin aim to meet the demand for safer and scalable DeFi solutions. In the coming months, Starknet will expand partnerships and research to promote Bitcoin within its ecosystem.
