Exploring the Evolution of Bitcoin Decentralized Finance: From BRC-20 to BRC-420 and Role of Layer-2 Networks
Summary:
This article discusses the evolving Bitcoin decentralized finance (BTCFi) movement, its shift from BRC-20 to BRC-420, and the role of layer-2 networks in the Bitcoin ecosystem. It features insights from Jeff, founder of Merlin Chain, highlighting the importance of these networks in facilitating new uses for Bitcoin and their unique challenges. Challenges include not providing solutions tailored to the specific needs of the Bitcoin community and the limitation of deploying smart contracts on Bitcoin's layer-1.
The evolving Bitcoin decentralized finance (BTCFi) movement, which aims to introduce decentralized finance to the Bitcoin network, has seen a surge in popularity following the introduction of Ordinals and BRC-20 tokens. In a recent episode of Cointelegraph’s Hashing It Out podcast, Jeff, the creator of Merlin Chain - a layer-2 network operating on native Bitcoin - shares insights on the transition of the BTCFi movement from BRC-20 to BRC-420, the challenges facing layer-2 networks and Bitcoin itself, and the encouraging development trajectory of utility building on the network.
Jeff elucidates the distinction between BRC-420 and BRC-20. While BRC-20 lets developers generate and mint tokens, BRC-420 revolves around modulaire data and tokenized modules. He provides an example of how an artist could distribute an album on-chain via BRC-420 - by inscribing each of the five songs separately and then bundling them using BRC-420. The album can then be broken down into multiple tokenized shares for fans to purchase on-chain.
He emphasizes that layer-2 networks are more vital to Bitcoin than to Ethereum as they extend the Bitcoin ecosystem with capabilities that cannot be implemented on layer-1, unlike Ethereum, which can accommodate most of the innovations created on layer-2 networks. Jeff underscores the fact that without building a layer 2, smart contracts cannot be deployed on the Bitcoin network - a limitation Ethereum doesn't face.
He also notes that the problem with most BTC layer-2 networks is that they are not constructing ecosystems that cater to the specific needs of the existing Bitcoin community engaged with Ordinals and other network innovations. Instead, they are merely importing ideas from Ethereum layer-2s, thereby struggling to generate community enthusiasm.
The episode of Hashing It Out can be accessed on Spotify, Apple Podcasts, or TuneIn, and listeners are encouraged to explore Cointelegraph’s full range of other programs.
The latest edition of Hodler’s Digest (Dec. 17-23) reports on the SEC's deferment of Ether ETFs, the approval of Binance settlement, and another legal defeat for SBF.
This article merely presents general information not intended to serve as legal or investment advice. The opinions, ideas, and viewpoints expressed here solely belong to the author and may not reflect or represent the views and opinions of Cointelegraph.
Published At
2/8/2024 4:10:00 PM
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