Bitcoin stands tall as the Rosetta Stone for decentralized ethos. Its decentralization also made it the first cryptocurrency to be deemed “not a security” by the SEC.

But it has a problem — Bitcoin was built for value exchange, and value exchange only.

Moreover, Bitcoin's original design didn’t foresee the explosion of blockchain technologies that would soon follow. The current ecosystem consists of over a thousand different blockchains, each with distinct USPs.

There’s more to finance than simple currency exchange — think contracts, loans, and more. As a result, new chains emerged, each with a unique offering.

Consequently, interoperability and chain abstraction are vital for seamless interaction and the free movement of value across blockchains. In this paradigm, the question on everyone’s mind is; Can Bitcoin, the original blockchain, survive and thrive, or will it fade into obsolescence?

The Fragmented State of Blockchain

In its early stages, Bitcoin’s singular focus on immutability and security made it the strongest candidate for a decentralized currency. As more industries adopted blockchain, specialized networks emerged.

These new blockchains adjusted the trilemma parameters — decentralization, security, and scalability — to optimize their performance for specific industries. Whether it's supply chain management, gaming, DeFi, or ID verification, there’s a chain for everything.

The downside of the emergence of hundreds of new “specialized” chains is it created more silos. The more tailored a blockchain is to a particular use case, the more it becomes an isolated island, locking up liquidity, data, and assets. As a result, the vision of a decentralized world without intermediaries faces a new threat: fragmentation.

Information and liquidity (assets) become trapped within isolated chains, with limited pathways for fluid transfer, leading to inefficiencies, higher costs, and points of failure.

The Future Is Multichain

Today, the DLT space is at a juncture where a lot of the foundational infrastructure has been laid for pioneering blockchains and user experience (UX) is being prioritized.

Bitcoin, with its focus on security and immutability, operates in a monolithic way, making it less adaptable to other uses. As a result of the non-homogeneity, cross-chain communication (of information and asset transfer) remains cumbersome and inefficient. Many solutions rely on complex, centralized bridges or intermediaries that can become points of failure.

So, will Bitcoin fade away as a legacy blockchain? Perhaps “NO” is the definitive answer because new projects are actively addressing these pressing issues through innovative solutions.

For instance, Flare Network is working on a way to enable cross-chain communication without the need for centralized intermediaries, thus freeing up Bitcoin’s liquidity and allowing it to interact with other chains. How? By enabling trustless bridging of Bitcoin to the Flare Network and, subsequently, to other connected chains.

Flare enables the representation of Bitcoin on its network as an FAsset (a representation of any token from another chain), which can interact with smart contracts on Flare.

This allows Bitcoin holders to utilize their assets in DeFi activities like lending, borrowing, and yield farming, which are traditionally unavailable on the Bitcoin network itself.

In A Multichain World, Blockchains Will Be Interoperable

Looking at the pace at which new chains and tokens are created every year, we can safely conclude that a multichain world would only make sense if there were measures and standardizations in place to allow interoperability.

The goal is to create an ecosystem where liquidity and information can flow seamlessly among chains without excessive transaction fees or risks of failure. Chain abstraction plays a critical role here. By abstracting the complexities of various blockchain architectures, developers and users alike can work with multiple chains without needing to understand the underlying differences.

Stacks, a sidechain, proposes a unique solution by leveraging the security and decentralization of Bitcoin as a base layer while enabling smart contract functionality and interoperability with other chains.

It employs Proof of Transfer (PoX), a consensus mechanism that intertwines Stacks' security with Bitcoin's. Miners on the Stacks network compete to secure the chain by transferring Bitcoin, thus aligning incentives and fortifying the network.

Clarity, Stacks' smart contract language, is designed around predictability and security. So, developers can build complex applications atop Bitcoin, confident in the robustness of the underlying infrastructure.

Internet Computer Protocol (ICP) is another project that’s helping Bitcoin stay relevant in a multichain ecosystem by providing generalized frameworks centered around building interoperable dApps.

True Interoperability Is Easier Said Than Done

While many of these initiatives are promising, the road to true blockchain interoperability is quite bumpy.

The lack of standardized protocols for data exchange and asset transfer between blockchains makes seamless interaction difficult to achieve and will fuel further fragmentation.

Bitcoin, in particular, faces a unique challenge. Ironically, Bitcoin’s robust security model is also its Achilles’ heel from a flexibility standpoint.

Unlike newer blockchains built with native interoperability, Bitcoin’s architecture is resistant to change, requiring external solutions like Flare and Stacks to bridge the gap. Even as these projects enable cross-chain communication or smart contract functionality, Bitcoin must strive to minimize fees and improve efficiency in cross-chain transactions to maintain its relevance in a more interconnected ecosystem.

Cross-chain communications ought to be standardized. Currently, standardization frameworks themselves are not compatible with each other in many cases — this, too, should change to accommodate newer solutions.

Right now, cross-chain interoperability is a bridge we talk more about than build due to the inherent complexities. Therefore, the next power-up of Bitcoin demands collaborative efforts across the ecosystem.