Will BRC-20 Help Bitcoin Replace Ethereum?

Bitcoin has always been considered a digital gold – valuable, yet simple in purpose. Ethereum, on the other hand, is a digital oil, a cryptocurrency functioning more like a utility than a commodity. However, with the introduction of BRC-20, as well as previous improvements, Bitcoin is becoming closer to Ethereum than ever before. Let’s analyze what BRC-20 is, how Bitcoin is evolving, and what it could mean for Ethereum.

Bitcoin, released in 2009, was designed as a “peer-to-peer electronic cash” and was the first instance of a blockchain-based cryptocurrency. Like any first iteration of technology, it was simple in its implementation and rudimentary in its function. For years, the only prevalent use case for Bitcoin was to send value across the internet in a trustless and decentralized manner with immutability and no censorship. While this is an incredibly important and revolutionary technology, it has evolved since and left Bitcoin behind. Blockchains like Ethereum have implemented virtual machines and the ability to create and execute smart contracts, allowing for innovations like decentralized finance and fungible and non-fungible tokens. Consequently, many have speculated that Ethereum will one day flip Bitcoin for the most valuable cryptocurrency by market capitalization. However, this may not be so certain anymore.

In early 2023, Ordinal theory was introduced to Bitcoin. This concept individually numbered satoshis, the smallest denomination of Bitcoin equal to one hundred millionths of a coin, or 0.00000001 BTC. This numbering system naturally led to some satoshis being worth more than others, such as those in notable blocks or involved in noteworthy transactions. Ordinal Digital Artifacts took this idea a step further by inscribing data to satoshis, allowing for the creation of Bitcoin NFTs, which have since exploded in popularity and now have a total market capitalization of $200 million. Unlike Ethereum-based NFTs, all digital artifact metadata is stored directly on the Bitcoin blockchain instead of an external file storage service, ensuring that the data is immutable and that the owner of a digital artifact truly owns the piece of data.

In March 2023, the experimental BRC-20 standard was created by anonymous Twitter user @domodata with the goal of bringing fungible tokens to Bitcoin with Ordinal theory. To create a token, data is inscribed on a satoshi to associate it with a token. Then, the token can be permissionlessly transferred without needing an exchange. For the first time, Bitcoin can be used directly as a utility to trade other assets natively on the Bitcoin blockchain, significantly increasing its use cases and potential value. The market capitalization of BRC-20 tokens has increased to over $100 million, and while most are speculative meme coins, the potential and interest have been clearly demonstrated.

Unlike Ethereum tokens, BRC-20 tokens are not created via smart contract and are thus less programmable and have fewer use cases as programmable money. On the other hand, they are secured by Bitcoin and its proof of work network, which has over ten years of proven track record.  Additionally, BRC-20 tokens may be more expensive to send than ERC-20 (Ethereum-based) tokens since Bitcoin can process fewer transactions than Ethereum. While BRC-20 may threaten ETH, it alone will not be enough to render Ethereum and its programmable money capabilities useless.

Bitcoin’s new direction is extremely interesting and could herald a new era for the blockchain. Instead of solely being a store of value, Bitcoin could become a digital oil as well, and the further adoption of the lightning network, Bitcoin’s pseudo-Layer 2 allowing for fee-free transactions, could bring even more adoption to the first blockchain. Bitcoin may be the ultimate settlement layer, where any sort of fungible or non-fungible token can live while being exchanged on other chains through bridges. Given its reputable name, first-mover advantage, and, most importantly, its current recognition as a commodity and not a security, Bitcoin is an enticing choice for developers to innovate upon.

While BRC-20 may not end Ethereum’s reign as the king of smart contracts, it certainly opens up new possibilities for Bitcoin as a settlement layer and token medium. There are still several issues to solve, and innovating upon an old technology instead of building something new is always difficult, but dedicated Bitcoin developers appear to be up for the challenge to keep Bitcoin as the #1 cryptocurrency.

By Lincoln Murr

Related Articles