Bitcoin Is Looking To Copy The Best Parts of Ethereum

NFTs and DeFi on Bitcoin are inevitable, said Trevor Owens

By: André Beganski

February 23, 2024

Ethereum’s flashiest features are emerging on Bitcoin amid crypto’s comeback.

While some Bitcoiners may look down on NFTs and DeFi today, the assets and technology are bolstering crypto’s oldest network, according to Trevor Owens, general partner at the Bitcoin Frontier Fund, formerly known as Stacks Ventures.

“It would be foolish of us not to take the best things from Ethereum and try to do them on Bitcoin,” Owens said in a Thursday interview with Coinage. “I'm not someone who thinks Bitcoin is a perfect miracle and there's nothing that it can do better, [or] that it's guaranteed to succeed.”

When it comes to innovation and Bitcoin, developers have been met with pushback in the past for wanting to tinker with the chain, Owens said. Yet he believes technology like layer-2 networks can help Bitcoin adapt to the future and unlock what asset manager Pantera Capital sees as an “untapped half-trillion dollar opportunity.

“Bitcoin is a trillion dollar asset … Bitcoin DeFi has the potential to be bigger than Ethereum in some respects,” Owens said. “I think it’s going to happen at a speed that no one is prepared for.” 

A major shift took place last year following the release of Ordinals, Owens said. The protocol that allows individuals to create NFT-like assets on Bitcoin by assigning data to individual satoshi — equal to 1/100,000,000 of a whole Bitcoin — reignited interest in developing technology around Bitcoin and snuffed the stigma of experimentation.

“It's been a night and day transformation over the past year,” Owens said. “Ordinals not only showed us a new way to build applications … It also changed the culture, and I think that was the more important thing.”

The buzz that Ordinals generated last year swiftly manifested in a new market for Bitcoin-based art and experimental memecoins. In December, the storied auction house Sotheby’s held its first Ordinals auction for the collection Bitcoin Shrooms — and, using Ordinals, the classic video game Doom now lives on Bitcoin.

As a layer-2 companion chain for Bitcoin, Stacks’ support of smart contracts allows developers to write programs with data stored on a separate ledger than Bitcoin’s blockchain — providing technical flexibility. As of this writing, Stacks’ most popular application is a decentralized exchange called ALEX, with assets deposited in it that are worth $67 million, according to DefiLlama data.

Ordinals may have less functionality than Ethereum, Owens said, but the value is there, and its use has driven Bitcoin’s transaction fees sky high in the past. Aside from applications, layer-2s are beneficial for users because of the reduced transaction fees associated with using them, Owens said. 

“Scalability is probably the key thing,” he said. “There is a point where the network fees get too high, and it just becomes so painful [that it] just eats from too much of the value creation” on Bitcoin’s network.

Over the past year, the price of Stacks’ native token — used to keep the network secure and pay for transaction fees — has surged 189% to $2.47, outpacing Bitcoin’s 114% rise over the same period, according to CoinMarketCap. Still, Stacks' token remains 32% below its all-time high of $3.61 in 2021. 

Crypto market intelligence provider Messari described Stacks as “the leading Bitcoin layer” in a February report, highlighting the network’s so-called Nakamoto upgrade in April as an opportunity for Stacks to further cement its leadership.

Still, Stacks is small compared to Ethereum’s layer-2 incumbents. Arbitrum, for example, has a total value locked (TVL) of $2.9 billion compared to Stacks’ TVL of $113 million, according to DefiLlama data.

Despite what Bitcoin purists may think, Ethereum and Bitcoin aren’t necessarily in competition with each other, Owens said. Describing it as “more of a co-opetition,” his view is that layer-2s — much in the same way Ethereum’s community embraced them — are an inevitable aspect of Bitcoin’s future.

“There will very quickly be a tipping point in the future where the majority of the users are going to be using layer-2s,” Owens said. “But we're not in that phase yet.”

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