The concept of Bitcoin (BTC) drawing inspiration from another blockchain may seem absurd considering that Bitcoin was the pioneer of the cryptocurrency movement. However, the landscape of the industry has evolved significantly over the past 15 years. While Bitcoin has maintained its dominance, the market has moved beyond simple “buy and hold” coins that rely on others buying in. Today, there are various ways to utilize digital assets to generate yield, revenue, and entertainment.
Much of the innovation in the sector has originated from Ethereum and its multi-token, multi-chain ecosystem. However, the tide is turning back towards Bitcoin. With its own layer-2 solutions, native tokens, non-fungible tokens (NFTs), and decentralized finance (DeFi) protocols, Bitcoin has the potential to experience explosive growth in terms of active users, total value locked (TVL), and active wallets.
Can Bitcoin replicate the rapid growth trajectory that Ethereum experienced in 2017 and 2020, driven by the hype around initial coin offerings and DeFi? By taking inspiration from Ethereum, Bitcoin has the opportunity to witness exponential growth in the coming years if its developers adopt certain features of Ethereum.
One of Ethereum’s key strengths is interoperability. Ethereum’s success with multi-tokenism is partly due to the use of universal standards like ERC-20. ERC-20 tokens work seamlessly across different platforms and can be easily transferred between Ethereum Virtual Machine (EVM) chains. In contrast, Bitcoin faces challenges with competing token and inscription standards, which are accepted at the discretion of each platform.
To become a hub for DeFi, NFTs, real-world assets (RWAs), and other on-chain use cases, Bitcoin needs to become more like Ethereum. This doesn’t mean abandoning its proof-of-work consensus or constantly changing its underlying codebase. Rather, Bitcoin should adopt sensible universal standards that allow for the free flow of value between different chains.
If Bitcoin developers collaborate instead of working in isolation, the ecosystem has the potential to grow exponentially across all key metrics, from daily active users to TVL. Achieving this would not only make Bitcoin the world’s largest cryptocurrency but also the world’s largest multi-token ecosystem.
Total Value Locked (TVL) is a useful metric for comparing the ecosystems of Ethereum and Bitcoin. TVL represents the value of assets staked and used in DeFi on a blockchain protocol. While it’s not a perfect measure, it provides a baseline for gauging network activity and liquidity.
Bitcoin’s TVL of $1.15 billion is significantly lower than Ethereum’s TVL of over $65 billion. However, when we compare Bitcoin’s current TVL to Ethereum’s TVL four years ago, just before the “DeFi summer” that sparked a wave of economic activity, the similarities are striking. Zooming out, it becomes clear that Bitcoin has the potential to follow a similar growth trajectory.
In 2016, Ethereum was in the midst of its ICO frenzy, but the majority of new assets that launched that year were not on Ethereum. However, within a year, over 50% of new assets were launched on Ethereum, and Ethereum’s network accounted for over 75% of the total value of all crypto assets. The current growth of Bitcoin assets is reminiscent of Ethereum’s token boom during that period.
In 2020, Ethereum’s ICO craze had subsided due to regulatory crackdowns, but Ethereum reinvented itself with the emergence of DeFi and became the go-to network for NFTs. In 2024, Ethereum’s NFT sector has declined, but NFTs are still thriving, rebranded as Bitcoin Ordinals. The success of Bitcoin Ordinals, such as NodeMonkes, demonstrates that NFTs are far from dead.
For a long time, the crypto community has considered BRC-20 tokens insignificant compared to Bitcoin. However, with the increasing number of these tokens, network activity is also rising. We can draw parallels between the current state of BRC-20 tokens and the trading activity patterns of ERC-20 tokens in 2018. This suggests that there may be a surge in transaction demand for BRC-20 tokens.
The existence of 14,000 tokens built on Bitcoin technology adds value to BTC in the eyes of users. This factor may outweigh the speculative component and increase the wealth of BTC holders.
Bitcoin could be on the verge of a parabolic breakout. On-chain metrics make a compelling case for this. The market cap of all BRC-20 tokens has surpassed $2 trillion, a staggering increase of over 250,000% in less than a year. The growth in inscriptions, which create unique assets on the Bitcoin blockchain, has been equally meteoric.
Over 66 million inscriptions have been recorded on the Bitcoin chain, with over 6.8 BTC spent in fees, totaling over $466 million. The number of inscriptions has doubled since October. The similarities between Bitcoin assets and Ethereum tokens during the ICO boom are evident.
While Bitcoin may not experience the same meteoric growth as Ethereum did in 2020, given its higher capitalization and stricter regulatory conditions, even a moderate surge could lead to a significant change in value.
Bitcoin developers can learn from Ethereum’s innovations that drove its growth over the past decade. By adopting certain features and standards, Bitcoin has the potential to become a thriving multi-token ecosystem.