Bitcoin-powered Portal Platform to Enable Financial Inclusion and Improved DeFi Services
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Bitcoin (BTC), which first started off as a peer-to-peer (P2P) virtual currency or electronic cash system, has already established itself as a globally-accessible store-of-value.
Bitcoin was long seen as a speculative asset class, but now consumers in many nations are increasingly using it to pay for products and services in everyday life. Inflation in fiat currencies and the gradual loss of trust in governments is now pushing more individuals and business organizations to consider using crypto-assets.
These developments could bring some stability to the Bitcoin price, because the flagship cryptocurrency may be perceived as a reliable store-of-value for wealth preservation. That combined with BTC’s censorship-resistant, simplistic, and efficient design could help with unlocking doors to decentralized finance (DeFi) activities, including lending, borrowing, trading and various other financial services.
Enabling Uncensorable and Permissionless Financial Services
There are many innovative projects in the crypto space, including Portal, that are sharply focused on enabling uncensorable and permissionless financial services while leveraging the power and security of the Bitcoin protocol. As mentioned on its official website, Portal DeFi is a decentralized financial platform that “blends the best” of Bitcoin and Layer 2 solutions.
With Portal, DeFi could become truly uncensorable, while enabling peer to peer and trust minimized services. Just like the underlying properties of the BTC protocol, Portal aims to provide a secure foundation for facilitating non-custodial digital asset trading. As noted by its developers, the Portal platform facilitates swaps and moves provable execution of cross chain contracts to Layers 2/3, which enables the same speed and liquidity of centralized platforms.
But with Portal, clients can benefit from the trust minimization guarantees of Bitcoin. Moreover, transactions are a lot faster and cheaper with Portal when compared to Layer 1 transactions. These are some of the main reasons why BTC transactions could become even more useful and powerful in the future.
Taproot Brings Smart Contact Functionality, Improved LN Efficiency
In addition to these features, the Bitcoin (BTC) Taproot upgrade, which was activated on November 14, 2021 at block height 709,632, should result in even lower fees, improved Lightning Network (LN) efficiency, as well as smart contract functionality.
This important update should lead to significant enhancements to the flexibility, security, and efficiency of Bitcoin transactions. And as BTC’s first protocol major update in over four years, it’s a key milestone in the development of the Bitcoin network.
Blockchain analysis platform Chainalysis recently shared an outline of the Taproot upgrade, what it intends to change/improve, and how it could impact the Bitcoin blockchain in the foreseeable future.
As noted by Chainalysis, Taproot activated several interconnected upgrades, which were introduced simultaneously. This key upgrade is actually an umbrella term which refers to three different Bitcoin Improvement Proposals (BIPs) that have now been completed.
BIP 340, or Schnorr was activated with Taproot. This proposal has added Schnorr signatures, which are a form of digital signature scheme that is supposed to be considerably faster, more secure, and a lot less data-intensive than the cryptographic method that was previously used (Elliptic Curve Digital Signature Algorithm).
Additionally, the Bitcoin network update also added BIP 341, or Taproot, which is a proposal that defines Pay-to-Taproot (P2TR), an innovative way to send BTC that improves privacy and flexibility for everyone. It also adds Merklized Alternative Script Trees (MAST), which are used to compress complex BTC transfers into a single hash. This helps with lowering transaction fees, while minimizing overall memory usage, and enhancing Bitcoin’s scalability.
With this latest BTC network update, BIP 342, or Tapscript has been activated as well. This proposal aims to define Tapscript, which is described as an update to BTC’s original scripting language that supports P2TR transfers, and takes advantage of Schnorr signatures’ greater efficiency, while supporting flexible updates as we move forward.
As a soft fork, the Taproot update is actually backwards compatible with previous versions of the BTC protocol and doesn’t lead to a separate, parallel blockchain. The overall adoption of Taproot, however, is expected to grow relatively slowly over an extended period of many years (similar in some ways to SegWith).
It’s also worth noting that Taproot’s impact would basically result in lower fees, because the data size of complex transactions will be significantly reduced. And transaction fees should decline proportionally. Additionally, there should be greater LN efficiency, as Taproot should make transfers via the Lightning Network considerably cheaper, more flexible and a lot more private.
After Taproot, Portal Can More Effectively Establish Bitcoin as Foundation for DeFi
There will also be improved smart contract functionality, because with Taproot, BTC can host smart contracts with several different signatories and also be able to retain the data size of a single-signature transaction.
This should help with firmly establishing the technical foundation for DeFi on the Bitcoin network. The analysts at Chainalysis (and most other crypto experts) believe that the Taproot upgrade is a “massive” improvement to the BTC protocol.
Projects like Portal should become even more effective at enabling the mass adoption of DeFi, following the Taproot upgrade. Many more consumers and organizations will be able to access modern financial services because of the rise of these uncensorable and permissionless protocols.