What is Bitcoin 2.0?

Bitcoin 2.0 refers to using and leveraging the Bitcoin protocol beyond the bitcoin (BTC) digital currency. Back in 2014, Ethereum (ETH) was frequently referred to as Bitcoin 2.0 but that is no longer the case.


To begin, Bitcoin 2.0 is not a new coin, a forked coin or token. Bitcoin 2.0 is a vague term that refers to leveraging the Bitcoin (or another coin’s) protocol above and beyond its cryptocurrency application via sidechains.

Bitcoin (BTC) as we know it has gathered incredible attention, capital and the brightest minds since being introduced by Satoshi Nakamoto in 2009. Its underlying technology, an open blockchain that is decentralized, censorship-resistant and borderless, has the ability to change the world like the internet changed the way we do virtually everything.

Bitcoin 2.0 is the next generation of crypto as we know it where ecosystems are built and pegged to a robust blockchain like Bitcoin.

Throughout this article, Bitcoin 2.0 will be referred to as the concept of building sidechains that interoperate with the main chain.

Defining and understanding Bitcoin 2.0

Bitcoin 2.0 is a concept that describes the creation of sidechains and provides for the network to be used in securing and validating external transactions that don’t originate on the main chain. To some, this may sound like the Ethereum platform.

Sidechains are essentially unique blockchains outside of another blockchain. Due to Bitcoin’s (BTC) temporary low throughput problem, its ability to be leveraged to scale and expand sidechains is limited. Ethereum’s (ETH) design and early mover advantage have made it the leading Bitcoin 2.0 platform.

What is Bitcoin 2.0?Is Ethereum (ETH) Bitcoin 2.0?

In its early days, Ethereum was coined as Bitcoin 2.0 (the newer, better Bitcoin), however, it’s rarely ever referred to that anymore.

As mentioned above, Ethereum’s was designed from the ground up with Bitcoin 2.0 in mind. Ethereum is a platform for decentralized applications (dApps). The high volume of ERC20 tokens issued on the Ethereum platform (using Ethereum as a peg) is evidence of its success.

How Bitcoin 2.0 works

Sidechains will be new blockchains of various and unique applications that will be pegged to Bitcoin through the use of contracts. This is the same idea of having gold-backed reserves, in this case, bitcoin (BTC) as a ‘reserve’.

Over the years, the idea of sidechains has gathered momentum and many of the emerging blockchain projects have some sort of sidechain functionality. The most notable Bitcoin 2.0 platforms are the Bitcoin Lightning Network (LN), Ethereum (ETH), Ethereum Classic (ETC), EOS (EOS), Tron (TRX), NEO (NEO) and others.

Sidechains are connected to the main blockchain via something called a “two-way peg”. It’s a concept that enables interchangeability through smart contracts between the main blockchain (Bitcoin, for example) and the sidechain.

The value of Bitcoin 2.0

The apparent value of Bitcoin 2.0 lies in its capacity to help realize the creation of autonomous corporations. These corporations would operate outside of the main blockchain, in fields like finance and retail banking, title registry, digital certificates, and smart contracts.

While it isn’t the only option, the Bitcoin blockchain provides several advantages to any would-be need to create a sidechain that interoperates with it. Its impenetrable security, for one, means that the new blockchain can benefit from a truly decentralized and open network without compromise.

The explosive growth of Ethereum (ETH) demonstrates the importance of sidechains and Bitcoin 2.0.

Bitcoin 2.0 efforts are on-going, though much of the work done has been to make the Bitcoin blockchain scalable and cheaper via upgrades like Lightning Network and SegWit. But work remains with regard to achieving the goals envisioned by earlier blockchain experts.

Improvements in sidechains functionality have long been thought of as the gateway to unlocking tremendous potential and capabilities of current blockchains.

Examples of Bitcoin 2.0 Platforms

For quite some time now, a number of ventures have sought to actualize the ideas espoused as early as 2014 concerning interoperability and sidechains. As a result, we have seen a few projects emerge, promising to deliver these concepts.

You must have come across the Lightning Network (LN)  as envisioned by Blockstream. It intends to take transactions off the main Bitcoin chain, bringing about huge improvements in scalability and cost. The same concept is being explored on other platforms, including Stellar (XLM).

Bitcoin Hivemind (developed by Paul Sztorc), is a bitcoin sidechain that is designed to offer decentralized prediction market services. It will allow bitcoin users to access and hold any asset of value around the world. What’s more, they’ll do so over the same Bitcoin network that is censorship-resistant and secure.

One other good example of a sidechain project is Rootstock (RSK). RSK utilizes sidechains that interconnect with Bitcoin’s blockchain via a two-way peg. It’s merge-mined with BTC and aims at making the bitcoin blockchain offer smart contracts.

Ardor (ARDR) is an example of a sidechain that doesn’t to the bitcoin network. Ardor is an exciting Blockchain-as-a-Service (BaaS) platform. It utilizes what is called Childchains that talk to the main chain. Any institution can create a childchain and enjoy the security provided by the parent chain.

Sidechains vs. childchains

The following table summarizes the differences between the two types:

What is Bitcoin 2.0?

Source: Jelurida (the devs behind Nxt (NXT) and Ardor (ARDR)


Bitcoin 2.0 is already making waves within blockchain technology and could see a complete transformation of the cryptocurrency industry. The magnitude and sheer volume of what sidechains can achieve make it even more appealing to developers who wish to see the blockchain applied in other areas other than as currencies. For Bitcoin, a realization of sidechains will be a real game-changer, potentially pushing a few altcoins to the graveyard.

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