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The Layered Architecture of Bitcoin

Getting your first bitcoins

The Layered Architecture of Bitcoin

  • Bitcoin extension with additional layers
  • Merchant Tools for Accepting Bitcoin
  • My personal Perspective
Bitcoin is an open system designed to be minimalist, robust and secure from the outset. To add functionality without altering its foundations, evolutions are generally made by adding protocol layers and complementary applications that enrich the ecosystem without compromising the decentralization and resilience of the main system. This flexibility has enabled numerous companies and independent developers to build an infrastructure around Bitcoin, adding innovations adapted to different use cases.

Bitcoin extension with additional layers

The layered approach allows Bitcoin to be improved without changing its core protocol, guaranteeing the stability and security of the main system. This method is similar to how the Internet works, where multiple protocols build on each other to offer distinct functionalities while maintaining smooth interoperability.
Among the main overlay systems enriching the Bitcoin ecosystem are:
  • Lightning Network:
The Lightning Network, created by Thaddeus Dryja and Joseph Poon in 2016, is a second-layer solution designed to enable instant and low-cost payments. Two users can open a private channel where they can transact with the balance only being updated on the blockchain when the channel is opened or closed. Transactions within the channel occur off-chain, which means they don't need to be recorded individually on the Bitcoin blockchain. This structure enables instantaneous transactions and minimal fees, making it ideal for low-value transactions that require quick confirmation.
Let's say you're buying a coffee with Bitcoin using the base layer. For the payment to be confirmed (and for the café to be sure you've actually paid) the transaction needs to be included in a block. That can take several minutes, depending on the fee you've chosen. Technically, the merchant should wait for six confirmations (about an hour) to be fully confident the payment is final. Obviously, that kind of wait doesn't work when you're standing at the counter. With the Lightning Network, the payment goes through in just a few seconds; so your coffee is paid for and served before it even has time to get cool.
If you're interested in learning more about how Lightning works, we offer an excellent second-year course dedicated to this topic:
  • Sidechains:
Sidechains are blockchains that run in parallel with Bitcoin's main blockchain. They're connected via a two-way peg, which ensures that the asset moving between the chains retains the same value; meaning a bitcoin on the sidechain is still worth one bitcoin on the main chain. Each sidechain has its own consensus mechanism, which may be entirely separate or partially dependent on Bitcoin's.
The main advantage of sidechains is that they can offer features not available on the Bitcoin base layer; or offer them in improved ways. This includes more flexibility for developers, faster and/or more private transactions, and greater transaction throughput. However, to provide these benefits, sidechains often make different trade-offs compared to Bitcoin's main chain.
The concept of sidechains was introduced in 2014 by Adam Back, Matt Corallo, Luke Dashjr, Mark Friedenbach, Gregory Maxwell, Andrew Miller, Andrew Poelstra, Jorge Timon, and Pieter Wuille. As of 2025, the most well-known sidechains in the Bitcoin ecosystem are Liquid and RSK (Rootstock).
If you'd like to explore Liquid in more detail, we offer an advanced third-year course on the topic:
  • RGB:
RGB is a decentralized and privacy-focused smart contract system designed to work on top of Bitcoin and the Lightning Network. Unlike traditional smart contract platforms, RGB uses a client-side validation model (meaning that the full contract state is stored off-chain, and only cryptographic commitments are published to the Bitcoin blockchain). This design improves both scalability and privacy. With RGB, users can create advanced smart contracts for issuing tokens, NFTs, decentralized identities, or even DeFi applications, directly on Bitcoin or Lightning.
A key feature of RGB is its protection against double-spending, achieved using a cryptographic technique called Single-use Seals. This mechanism relies on the fact that Bitcoin's UTXOs (Unspent Transaction Outputs) can only be spent once. The authenticity of tokens is ensured by the user-side validation of the contract's entire history (from its creation to its current state).
To deepen your knowledge of RGB, we offer a fourth-year training course (please note that it is highly technical):
RGB is just one of many protocols built on top of Bitcoin. While some are more widely adopted than others, new ones continue to emerge. The common thread is the idea of optimizing each layer for a specific task, while preserving the integrity and immutability of Bitcoin's base protocol.
This layered design stands in contrast to much of the broader crypto industry, which often seeks to bundle many features into a single protocol. By keeping Bitcoin simple and narrowly focused, we reduce its attack surface; which means greater security. A lean protocol is easier to secure, maintain, and scale. Bitcoin is designed to do one thing extremely well: provide sound, decentralized money. Everything else (smart contracts, tokens, payments, and more) can be layered on top, allowing innovation without compromising the core.
Did you know?The Internet wasn't built all at once; it evolved as a stack of interoperable protocols. For example, TCP/IP handles network communication, HTTP powers the web, and many other layers serve specific functions. Each layer is optimized for its job, creating a robust and modular system. Bitcoin follows this same philosophy. Its base layer is strong and minimal, and additional functionality is added through layered protocols like Lightning, Liquid, or RGB; each focused on solving different user needs while keeping the foundation intact.

Merchant Tools for Accepting Bitcoin

Today, there are plenty of tools available for merchants who want to accept Bitcoin as a form of payment. For small businesses looking for a simple setup, using a hot wallet (or even a Lightning wallet) is often enough to start accepting payments directly. Larger businesses that require proper accounting and reporting will usually prefer more advanced payment processing systems. Fortunately, there are several options available depending on your needs.
If you prefer a hands-off solution and want to receive fiat currency directly into your bank account, custodial services like OpenNode offer a streamlined experience:
For merchants who are more technically inclined and want full control over the process, BTCPay Server is a fantastic open-source option. The main downside is that it requires time to set up and maintain, along with some technical knowledge:
Somewhere in between, you'll find Swiss Bitcoin Pay, a user-friendly yet powerful solution that strikes a good balance between ease of use, functionality, and security. It works well for both small retailers and larger businesses:
Accepting Bitcoin can bring several practical and financial benefits to a business. Just like cash, Bitcoin allows for direct payments between the customer and the merchant (no need for a traditional bank). Payments made through the Lightning Network are instant and final, reducing the risk of chargebacks. And when merchants hold their own Bitcoin (self-custody), they gain greater financial autonomy.
It can also help cut costs by eliminating banking fees and the need for traditional payment terminals; a smartphone or laptop is often all you need. Even with payment processors involved, fees are generally lower than those charged by banks.
Unlike traditional currencies that lose value over time due to inflation, Bitcoin has a fixed supply of 21 million coins. This makes it a valuable asset for preserving and diversifying business treasury over the long term.
In day-to-day operations, Bitcoin simplifies payments by removing the need for physical cash, reducing theft risks, and eliminating the possibility of counterfeit money. It's a global currency, making it ideal for international customers since there's no need for currency conversion. For online stores, Bitcoin is especially secure and efficient.
On top of that, accepting Bitcoin can be a smart marketing move. It shows your business is forward-thinking and can attract new customers (especially among younger generations like Gen Z). It's a low-risk, strategic opportunity with minimal costs, mostly limited to the initial setup; which is now easier than ever with the right tools.
If you'd like to explore how Bitcoin can be integrated into your business (whether as a payment method, a treasury asset, or both) we offer a beginner-level course tailored to that need:
Bitcoin is gaining ground as a medium of exchange, with growing adoption across many industries. The Lightning Network has made payments faster and cheaper, further increasing Bitcoin's appeal for merchants.
We've reached a point where anyone can get involved in the Bitcoin ecosystem; whether by using it in everyday life, adopting it in business, contributing to education, helping improve the code, or building new applications. Bitcoin is now unstoppable.

My personal Perspective

I've always found the "Bitcoin highway" metaphor to be one of the most accurate and compelling ways to understand how the ecosystem is evolving; and where it's heading. Bitcoin isn't just digital money; it's a growing alternative financial system, with its own strengths and flaws. While still young and facing challenges, its resilience is undeniable. It's not going away. On the contrary, like a black hole, it will gradually absorb everything around it until it becomes an undeniable monetary standard.
Picture Bitcoin as a road you're driving on. Right now, to take care of everyday essentials (buying groceries, paying for services, or getting your car fixed), you sometimes have to exit this road; meaning you temporarily return to the old financial system. That's because the Bitcoin infrastructure is still under construction, and some parts of daily life still rely on fiat currency and banks.
But over time, this road will become a fully built-out highway.
That's how I see Bitcoin's future playing out. It might not completely replace traditional finance, but it will outperform it in key areas (efficiency, security, and user adoption) until it becomes the standard for most of the world.
If I remember correctly, this metaphor of the Bitcoin highway was first introduced by Andreas Antonopoulos. His vision still holds up today, and with every step forward, we're getting closer to living it.@aantonop
Next up in the course: we'll get practical and help you define your bitcoiner profile based on your personal situation and goals.
Quiz
Quiz1/5
What major advantage does the layered approach offer for Bitcoin?