Key Points
- Bitcoin (BTC) is drawing inspiration from Ethereum (ETH) to foster growth.
- Adopting universal standards and interoperability could boost Bitcoin’s ecosystem.
Bitcoin, the pioneer of cryptocurrencies, is looking at the possibility of borrowing ideas from other blockchains, specifically Ethereum. Bitcoin inspired numerous other cryptocurrencies such as Litecoin (LTC), Dogecoin (DOGE), Monero (XMR), and Ethereum. However, the crypto landscape has evolved significantly in the past 15 years.
Bitcoin’s Potential Growth
Today, digital assets are not just bought and held for profit, but they are also deployed in various ways to generate revenue and yield. Much of this innovation has come from Ethereum and its multi-token, multi-chain landscape. Now, Bitcoin, equipped with its own layer-2s, native tokens, nonfungible tokens (NFTs) and decentralized finance (DeFi) protocols, is poised for potential growth in active users, total value locked (TVL), and active wallets.
By adopting certain features from Ethereum, Bitcoin could potentially replicate the growth Ethereum experienced in 2017 and 2020. The key feature for consideration is interoperability. Ethereum’s multi-tokenism has been successful partly due to universal standards. Bitcoin, however, has various competing token and inscription standards that are accepted at the discretion of each platform.
Interoperability and Universal Standards
If Bitcoin is to become a hub for DeFi, NFTs, and real-world assets (RWAs), it needs to adopt universal standards that allow value to flow freely between chains. If Bitcoin developers collaborate rather than work in isolation, its ecosystem could grow exponentially across every meaningful metric, from daily active users to TVL.
The comparison of Ethereum and Bitcoin’s respective ecosystems can start with Total Value Locked (TVL), which describes the value of assets that exist on a blockchain protocol for staking and DeFi. Bitcoin’s $1.15 billion TVL is significantly smaller than Ethereum’s $65 billion. However, Bitcoin’s TVL is currently at the same level as Ethereum’s was four years ago, just before the explosion of economic activity known as “DeFi summer”.
In 2016, Ethereum was at the peak of its ICO craze, but none of the new assets that launched that year did so on Ethereum. By mid-2017, more than 75% of the value of all crypto assets in existence was based on Ethereum. The current growth of Bitcoin assets is reminiscent of the growth of Ethereum tokens during that period.
By 2020, Ethereum reinvented itself with the conception of decentralized finance (DeFi) and became the network of choice for the emerging NFT craze. In 2024, Ethereum’s NFT sector has declined significantly in value and volume, partly due to high network fees. However, NFTs have rebranded and are not dead, as demonstrated by the success of Bitcoin Ordinals.
The crypto community has long viewed BRC-20 tokens as insignificant compared to Bitcoin. However, with the increasing number of these digital assets, network activity is also rising. Today’s data on daily BRC-20 token transactions is similar to the trading activity patterns of ERC-20 tokens in 2018.
The market cap for all BRC-20 tokens now stands at more than $2 trillion, an increase of more than 250,000% in less than a year. Meanwhile, the growth in inscriptions, the process by which unique assets are created on the Bitcoin blockchain, has also been significant. The total number of inscriptions has doubled since October.
Ethereum experienced a tenfold increase in price from early 2020 to mid-2021 due to the development of the burgeoning DeFi sector. This growth made DeFi more attractive, thereby stimulating demand for Ethereum. Bitcoin is now where Ethereum was in 2020 when it began its active growth. As decentralized finance increasingly adopts BRC-20 tokens, Bitcoin may react positively due to increased demand.
In conclusion, Bitcoin developers could learn from Ethereum’s innovations that served as catalysts for its growth over the last decade.
