I. The narrative of asset issuance and circulation revolves around ETH, which has now become a narrative for BTC as well.
1. ETH’s focus lies in asset issuance and related services.
Whether you acknowledge it or not, the demands that Ethereum solves are centered around the issuance of assets and services related to financial demand.
These assets include ERC20 tokens and ERC721 NFTs with its DeFi applications such as MakerDAO, Uniswap, and OpenSea catering to diverse user demands.
2. BTC has been exploring on-chain asset issuance and management.
When Ethereum was born, BTC had already begun exploring the business demand for asset issuance.
The most well-known example is the Omni Layer protocol, which issued the earliest stablecoin, USDT, on the BTC network.
However, the limited 80-byte space for writing content in BTC’s UTXO outputs hindered the success of the Omni Layer protocol.
After that, with the success of Ethereum’s asset issuance, demonstrated by the thriving Ethereum ecosystem, it became evident that Ethereum’s DeFi was successful.
While Ethereum achieved success, BTC underwent significant upgrades:
- 2009: BTC’s birth, marked the first successful implementation of decentralized applications using blockchain technology.
- 2017: Segregated Witness (SegWit) upgrade, which increased the storage capacity to a maximum of 4MB, resolving BTC’s on-chain storage issue and providing the foundation for current protocols like Omni Layer (asset issuance).
- 2021: Taproot upgrade, which introduced support for the threshold signature algorithm, providing the underlying support for fully decentralized BTC Layer2 technologies.
II. ETH addresses asset settlement, while BTC focuses on asset registration.
1. ETH enables asset settlement.
With its Turing-complete virtual machine (EVM), ETH supports on-chain DEX, derivatives trading, and numerous DeFi applications like UniSwap and Dai.
2. BTC facilitates asset registration.
Although BTC’s SegWit upgrade solved scalability issues, it did not address on-chain computation.
As a result, BTC’s Layer1 can only handle asset registration and cannot support on-chain calculations like ETH, limiting the development of on-chain applications such as AMM DEX.
Despite notable achievements in asset issuance within the BTC ecosystem, with milestones like over 10 million transactions for BRC20 tokens and significant market capitalization for BTC-based NFTs …
BTC Layer1 currently cannot independently handle asset settlement like ETH Layer1. This is the main point of discussion in this article.
III. Why BTC needs Layer2 more than ETH?
The current Layer2 solutions for ETH are mainly copies of ETH Layer1, addressing issues that could also be solved on Layer1.
The main problem ETH Layer2 solves is the high gas fees on Layer1, which has facilitated the growth of applications like GMX on the largest ETH Layer2, Arbitrum.
However, BTC’s Layer2 is not as inconsequential as ETH Layer2.
Since BTC’s Layer1 has a non-Turing-complete virtual machine, it can only handle asset registration, not settlement. Therefore, BTC Layer1 needs a Turing-complete Layer2 solution to address the settlement problem for asset issuance on BTC Layer1.
However, there are many voices that are currently hindering the development of BTC L2:
1. BTC MAXI and dogmatism purists
They have long claimed that BTC can develop native DeFi applications and often mention UniSat/BRC20 as an example of BTC’s native applications.
However, I would like to refute this claim. UniSat is actually BTC’s Layer2, a fully centralized Layer2, and BRC20 tokens rely on centralized Layer2 oracles like UniSat for transaction matching and settlement.
In other words, BRC20 token calculations are settled off-chain, unlike ERC20 tokens, which settle on-chain.
2. Stubborn opposition to building BTC ecosystem.
Some cryptocurrency users have become accustomed to BTC’s limited functionality, focusing solely on its ability to transfer BTC as a digital currency.
They also tend to disregard the potential of BTC’s ecosystem while acknowledging the monopoly of ETH DeFi.
Understanding that ETH’s functionality revolves around the business logic of asset issuance and circulation helps us realize that BTC can indeed create its own ecosystem.
While BTC can perform asset registration on its blockchain, it cannot facilitate asset circulation directly on the BTC network like the current DeFi ecosystem on ETH. However, BTC can achieve asset circulation through its Layer2 solutions.
We have been studying BTC Layer2 for over 5 years. We have previously published technical articles such as how to use BTC’s Taproot technology to make a fully decentralized BTC Layer2 and also achieved EVM compatibility on Layer2.
These experiences all mean that we can make a fully decentralized BTC Layer2. This L2 can be compatible with EVM on ETH and support ecological projects such as Metmask wallet and UniSwap around EVM.
We named Layer2, which is EVM-compatible and fully decentralized using Taproot technology, Bitcoin EVM, or BEVM for short
BEVM-based DEX: BSwap, bridge/swap/withdraw/deposit supporting BRC20 and ERC20 tokens and other functions will be launched on 6.30, so stay tuned!