Bitcoin Infrastructure Is Not Plug-and-Play

Bitcoin's 10-minute block time and 4MB block size cap are security features, not design flaws. This creates a fundamental throughput bottleneck.

• ~7 TPS maximum theoretical throughput.
• ~$50M daily in transaction fees during peak demand.
• Ordinals and BRC-20 tokens turn fee markets into a zero-sum game for builders.

Bitcoin Script is intentionally non-Turing complete. Building complex logic requires cryptographic contortions like Taproot covenants and OP_CAT proposals.

• State management is externalized to layers like Stacks or Rootstock.
• Every new primitive (e.g., BitVM) requires a novel, untested security model.
• This fragmentation increases systemic risk and developer friction.

Moving value to L2s or sidechains like Liquid Network or Stacks introduces a massive trust assumption. These bridges are multi-sig federations or require new validator sets.

• $2B+ in total value locked across Bitcoin bridges.
• Each bridge is a centralized chokepoint and a high-value attack surface.
• This recreates the custodial risk Bitcoin was designed to eliminate.

Bitcoin's simple mempool is not immune. Transaction ordering becomes critical for time-sensitive L2 withdrawals and ordinal auctions.

• Proposer-Builder Separation (PBS) solutions don't exist natively.
• MEV will migrate to the dominant L2, creating a new centralization vector.
• This undermines the predictable, fair settlement Bitcoin promises.

Projects like Lightning Network (payment channels) and Rootstock (EVM sidechain) offload computation. But they trade Bitcoin's security for new trust models.

• Lightning requires active channel management and inbound liquidity.
• Drivechains like Liquid use a federated peg, centralizing control.
• True scaling requires accepting that finality happens off-chain.

Innovation happens at the protocol layer, but at a glacial pace. Upgrades like Taproot took years. The path forward is through soft fork opcodes (OP_CAT, OP_CTV).

• This enables BitVM-style optimistic verification for complex contracts.
• It allows for non-custodial bridges and vaults on L1.
• The timeline is measured in years, not quarters, creating a massive execution risk for builders.

Bitcoin's UTXO model and lack of a native VM means you can't deploy smart contracts. Every protocol must build its own execution layer from scratch, leading to fragmentation and security re-audits for every new primitive like BitVM or RGB.\n- No Composability: Each L2 or sidechain is a walled garden.\n- Massive Overhead: Every team re-implements core logic (e.g., bridges, oracles).

Bitcoin's ~10-minute blocks and unspent transaction output (UTXO) model make querying state impossible for dApps. You must run or rely on a dedicated indexer like Ordinals Indexer, Stacks API, or a Babylon-style staking coordinator.\n- Critical Dependency: Your app's liveness depends on this third-party service.\n- Data Integrity Risk: You're trusting their chain reorganization handling.

Moving BTC to an L2 like Stacks, Merlin, or Rootstock requires a custodian or a complex multi-sig federation. This creates a centralized attack vector and insurance dilemma absent in native DeFi chains like Ethereum or Solana.\n- Custodial Risk: Billions in TVL secured by 8-of-15 multisigs.\n- Withdrawal Delays: Fraud proofs or challenge periods can take 7 days.

The emerging paradigm shifts execution and data availability off-chain. Protocols like RGB and BitVM use Bitcoin solely as a consensus and timestamping layer. Users validate state changes locally.\n- Scalability: Throughput is unbounded by base layer blocks.\n- Privacy: Transaction graphs aren't published on a public ledger.

Bitcoin's limited block space and predictable fee market create massive arbitrage opportunities in L2 settlement and bridging transactions. While less sophisticated than Ethereum's Flashbots ecosystem, it's a growing tax.\n- Frontrunning: Visible pending transactions for L1 settles.\n- Centralization Pressure: Miners/bridges can censor or reorder.

The killer app for Bitcoin infrastructure is absolute settlement security, not high-frequency trading. Architect for staking derivatives (Babylon), timestamping, and sovereign asset issuance where ~$10B+ in security budget is the primary feature.\n- Competitive MoAT: No other chain offers this security/credibility.\n- Right Workload: Batch settlements, not micro-transactions.