Transforming Bitcoin into a versatile ecosystem could enable it to achieve the same level of success as Ethereum, potentially increasing its value several times over.
The idea that Bitcoin might draw inspiration from another blockchain may seem surprising, given that Bitcoin started it all. It served as the prototype for cryptocurrencies like Litecoin, Dogecoin, Monero, and Ethereum.
However, much has changed in the past 15 years. While Bitcoin’s dominance has remained steady, the industry has evolved beyond simple “buy and hold” strategies, where profitability relies on others buying in. Today, there are numerous ways to leverage digital assets to earn yield, generate revenue, and have fun.
Much of this innovation has come from Ethereum and the multi-token, multi-chain ecosystem it has created. Yet, the focus is now shifting back to Bitcoin. With its own layer-2 solutions, native tokens, non-fungible tokens (NFTs), and decentralized finance (DeFi) protocols, Bitcoin is poised for significant growth in active users, total value locked (TVL), and active wallets.
Bitcoin could potentially replicate the explosive growth trajectory that Ethereum experienced in 2017 and 2020, driven by the frenzy of initial coin offerings and DeFi. By taking inspiration from Ethereum’s playbook, Bitcoin has the potential for exponential growth in the coming years — provided that Bitcoin developers adopt certain features of Ethereum.
Ethereum’s selling points
One key issue is interoperability. Ethereum’s success with multi-tokenism is largely due to its universal standards. ERC-20 tokens are universally compatible and easily transferable between Ethereum Virtual Machine (EVM) chains. In contrast, Bitcoin faces challenges with various competing token and inscription standards, which are accepted at each platform’s discretion.
Some prefer the BRC-20 standard, while others favor Runes, developed by Ordinals creator Casey Rodarmor. Cursed Inscriptions represent yet another distinct approach. Bitcoin’s token issuance landscape is cluttered with competing and overlapping standards, and its Layer 2 (L2) ecosystem is equally complex.
Stacks is the largest Bitcoin L2, apart from the Lightning Network, but there are now numerous networks vying to become the leading Bitcoin scaling solution, including some EVM implementations. These range from sidechains to L2 solutions, with varying degrees of connection to Bitcoin. The situation is quite confusing.
For Bitcoin to support decentralized finance (DeFi), non-fungible tokens (NFTs), real-world assets (RWAs), and other on-chain applications, it needs to adopt an Ethereum-like approach. This doesn’t mean switching to proof-of-stake or frequently altering its codebase. Instead, Bitcoin needs to embrace universal standards that facilitate seamless value transfer between chains.
If Bitcoin developers collaborate rather than working in isolation, its ecosystem could grow exponentially in terms of daily active users and Total Value Locked (TVL). Achieving this would position Bitcoin as not only the world’s largest cryptocurrency but also the largest multi-token ecosystem by 2025.
Total Value Locked (TVL) refers to the value of assets held within a blockchain protocol for staking and DeFi activities. Despite its potential for “double counting” assets restaked across multiple protocols, TVL remains a useful metric for assessing network activity and overall liquidity, and serves as a good starting point for comparing the ecosystems of Ethereum and Bitcoin.
Bitcoin’s $1.15 billion total value locked (TVL) pales in comparison to Ethereum’s TVL of over $65 billion, not to mention the billions held on other Ethereum Virtual Machine (EVM) chains, which are closely linked to Ethereum’s mainchain. However, taking a broader perspective reveals that Bitcoin’s current TVL is at the same level as Ethereum’s was four years ago, right before the “DeFi summer” sparked a surge of economic activity and led to trends such as yield farming, algorithmic stablecoins, and innovative token and liquidity models like Ampleforth and Ohm.
History doesn’t repeat, but it rhymes
During Ethereum’s ICO craze in 2016, none of the new assets launched that year were on Ethereum. However, within a year, over 50% of new assets were based on Ethereum, accounting for more than 75% of the total value of all crypto assets by mid-2017. The temptation to compare the current growth of Bitcoin assets to Ethereum tokens from that period is overwhelming.
By 2020, Ethereum ICOs had largely diminished as regulators cracked down on token sales. However, Ethereum reinvented itself by pioneering decentralized finance (DeFi) and becoming the preferred network for the burgeoning NFT craze.
In 2024, Ethereum’s NFT sector has significantly declined in value and volume, driven by high network fees and the rise of Layer 2 solutions offering cheaper ecosystems for users. Despite this, NFTs have not disappeared—they’ve merely rebranded. The success of Bitcoin Ordinals illustrates this shift, with the most popular collection, NodeMonkes, boasting a market cap exceeding $150 million. On March 3, the Ordinals sector recorded a yearly high with over $50 million in volume.
For a long time, the crypto community has viewed BRC-20 tokens as less significant compared to Bitcoin. However, with the growing number of these digital assets, network activity is also on the rise. Drawing parallels with Ethereum’s history, we can anticipate a similar increase in transaction demand.
Today’s data on daily BRC-20 token transactions mirrors the statistics and trading activity patterns of ERC-20 tokens in 2018, with an average daily transaction volume of around 300,000. The average ETH price during that period was about five times lower than this year’s average.
The presence of 14,000 tokens built on this technology enhances the perceived value of BTC among users. This aspect might surpass the impact of speculation and significantly increase the wealth of BTC holders.
Bitcoin is on the cusp of a parabolic breakout
Bitcoin may be on the verge of a similar parabolic breakout, according to current on-chain metrics. The market cap for all BRC-20 tokens has surged to over $2 trillion, marking an increase of more than 250,000% in under a year. Additionally, the growth in inscriptions — the method used to create unique assets like Ordinals on the Bitcoin blockchain — has also been meteoric.
Over 66 million inscriptions have been registered on the Bitcoin chain, with over 6.8 BTC spent in fees, totaling over $466 million. The number of inscriptions has doubled since October, drawing parallels to the ICO craze that kickstarted Ethereum’s multi-token era in 2017.
From early 2020, when ETH was below $200, to mid-2021, surpassing $2,000, Ethereum saw a tenfold increase in price, largely fueled by the booming DeFi sector. This growth created a positive feedback loop, with ETH’s rise making DeFi more appealing and driving up demand for the cryptocurrency. Bitcoin now finds itself in a similar position as Ethereum did in 2020, with decentralized finance adopting BRC-20 tokens, which could challenge competitors and boost Bitcoin’s demand.
While Bitcoin’s higher market capitalization suggests it may not experience the same explosive growth as ETH did in 2020, given stricter regulations and the absence of a comparable starting point, even a modest surge could lead to significant value changes. Bitcoin developers would benefit from learning from Ethereum’s innovations, which propelled its blockchain’s development over the past decade.
Read More: Ethereum remains below $3,900, why?
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