Source: Lightning HSL
(Let me tell you in advance, I am not bearish on Bitcoin)
As Inscription continues to be popular, especially with the strong support from okx and binance, the entire blockchain industry has begun to discuss whether the Bitcoin ecosystem will surpass the Ethereum ecosystem, or even surpass the EVM ecosystem.
As of now, I judge subjectively that I think it is impossible.
There are many reasons, but the fatal and decisive one, I think, is as follows: "The current Bitcoin script engine does not support migrating native BTC coins to various ecological protocols."
At present, I have not seen any protocols based on Bitcoin (except Lightning Network), such as Brc 20 , ARC 20 , RGB, RSK, STX, Liquid and other protocols. It is impossible to use these protocols to issue a currency under the premise of decentralization. A token that is anchored to " L1 native token BTC" in both directions.
First let me tell you a few words about what this means.
In the ETH ecosystem, such as uniswap 's swap and aave's lending, you can directly use Ethereum ETH. There is no need for any bridge or conversion (actually there is a conversion between ETH coins and ETC -erc20 coins, but this is completely It is decentralized and has no user awareness), so smart contracts on the Ethereum network can have direct jurisdiction over the ETH currency itself.
Let me use another metaphor to illustrate that Chinese banks can accept houses in China as collateral to issue loans. This is because once the user fails to repay the loan, the bank can auction the house collateral.
But Chinese banks will not accept American houses as mortgage loans, because Americans will not repay the money. How can your bank auction American houses? If you rebel, the American emperor will not kill you.
If Chinese banks can accept American houses as collateral, in accounting terms, American houses can be included in the balance sheet of Chinese banks as assets. If this is possible, how prosperous China's financial industry will be.
Smart contracts in the Ethereum ecosystem are like banks in your country managing your country’s house collateral, but the current protocols seen in the Bitcoin ecosystem are as unreliable as Chinese banks accepting American houses as collateral. .
Why is "the BTC ecological protocol can truly effectively manage the L1 native token BTC " a decisive factor in determining ecological prosperity?
First of all, I think the blockchain ecosystem is essentially a financial ecosystem, and what everyone is playing in is the financial industry.
And I think "assets" are the core element of finance and the decisive force. The assets themselves are the key to economic prosperity.
Just like the teacher said, the people are the decisive factor in the victory or defeat of the war, and assets are the decisive factor in financial prosperity.
To be more precise, the financial industry can keep blowing bubbles. Essentially, the financial industry can effectively mortgage and trade ownership of various assets. On this basis, more complex finance can be derived and bubbles can be blown. Bigger bubbles. If some assets cannot be effectively mortgaged and traded, then these assets will not promote the entire financial system.
Why has A-shares stopped working since last year, no matter how good the country is? This is because China’s most important asset is real estate, and real estate is no longer working.
Just like Chinese farmers own 1.8 billion acres of land, but the most precious land in the world has no relevant system to ensure that it can be mortgaged and traded, so it has nothing to do with the entire country's financial system.
The decisive force for the prosperity of the Ethereum ecosystem is the many assets on the Ethereum ecosystem, as well as the mortgages and transactions that can be truly effective by smart contracts.
In the Bitcoin ecology, there is currently no similar technology that can realize the effective mortgage and transaction of Bitcoin's native assets under the premise of decentralization.
The largest asset in the Bitcoin ecosystem is BTC, and other assets are junk assets. However, the current protocol cannot utilize BTC. I feel that under such a background, a truly high-quality financial ecosystem cannot be born.
Perhaps we can use accounting knowledge as an example. The Ethereum ecosystem can form a complete balance sheet, but the assets in the Bitcoin ecosystem are isolated from each other and cannot be reflected in one table.
Of course, the Bitcoin ecosystem can give birth to projects with a gaming nature such as NFTs and meme coins, but it is still unclear how to develop a more complex financial ecosystem in the next step, which leads to the economic behavior of these ecological coins. They are all isolated from each other and cannot be relayed and combined with each other.
However, the assets in the Ethereum ecosystem can be combined with each other, and on this basis, a prosperous financial ecosystem has been born.
The Lightning Network can truly realize the deposit and withdrawal of "L 1 native token BTC " in the two networks of L 1-Bitcoin and L2-Lightning , and it is a bridge that truly does not rely on centralization.
If the Lightning Network can develop more complex asset issuance and smart contracts, I think the Bitcoin ecosystem is more likely to explode. But for the Bitcoin ecosystem based on protocols such as inscriptions, RGB, side chains, etc., I subjectively think there is little chance so far.
But does Bitcoin have a chance to develop a protocol that can truly utilize native Bitcoin?
I think there is a chance if the Bitcoin script engine can be significantly modified.
The most important direction should be covenant (restrictions). BCH developers attach great importance to this direction. As BCH is technically more than 99% similar to BTC , it has now implemented something similar to decentralized swap and dydx. Products and functions such as on-chain contracts are also being developed, and stablecoin lending protocols similar to Dai are being developed. These can already allow on-chain assets to be combined with each other to create a financial ecosystem. However, there is a lack of high-quality assets on the BCH chain, so there is little hope of building a prosperous financial ecosystem.
Therefore, I feel that if BTC’s script engine can make more radical improvements, Bitcoin can completely give birth to a super prosperous financial ecosystem.
