The Bitcoin ecosystem has seen a surge of excitement lately, especially with the rise of inscriptions and strong backing from major platforms like OKX and Binance. This renewed interest has sparked widespread debate across the blockchain community: Could Bitcoin’s ecosystem eventually overtake Ethereum’s? Or even surpass the entire EVM (Ethereum Virtual Machine) landscape?
While the idea is tantalizing, the reality — based on current technological constraints — suggests otherwise. As of now, I believe it's highly unlikely that Bitcoin will overtake Ethereum in ecosystem maturity or financial utility.
The Core Limitation: BTC Can’t Be Natively Used in Protocols
The most critical bottleneck lies in Bitcoin’s scripting engine. Unlike Ethereum, Bitcoin does not allow native BTC to be directly utilized within decentralized protocols. This may sound technical, but its implications are profound.
On Ethereum, assets like ETH aren’t just currency — they’re programmable capital. You can use ETH directly in Uniswap for swaps, deposit it into Aave for yield-bearing lending, or stake it in DeFi strategies — all without needing bridges or wrapped tokens. Sure, there’s a technical distinction between ETH and ERC-20 WETH, but the conversion is seamless, decentralized, and invisible to users.
👉 Discover how programmable assets are shaping the future of finance.
This means smart contracts on Ethereum have full control over ETH, enabling complex financial logic: collateralization, liquidation, composability. It’s like a bank being able to accept a house as collateral — because it legally owns the right to seize and sell it if needed.
Now imagine a Chinese bank trying to accept a house in the U.S. as collateral. Legally and logistically, it’s nearly impossible. They can’t enforce claims across borders. Similarly, no Bitcoin-based protocol (except Lightning Network) can truly "own" or manage BTC within its system in a trustless way.
Protocols like BRC20, ARC20, RGB, RSK, Stacks (STX), and Liquid all face this fundamental issue: they can’t create a two-way pegged token that represents native BTC while maintaining full decentralization and security. Without that, BTC remains locked outside the ecosystem — an asset that can’t be productively deployed.
Why Asset Utilization Defines Financial Ecosystems
At its core, a blockchain ecosystem is a financial system. And in finance, assets are everything. The ability to use assets as collateral, trade ownership, and layer financial instruments on top is what drives economic expansion.
As the saying goes: “The people are the decisive force in war.” In finance, assets are the decisive force in economic growth.
Think of it this way:
- A healthy financial system "blows bubbles" by leveraging assets — mortgages, stocks, bonds — through lending, derivatives, and investment.
- When key assets become illiquid or non-mortgageable, the whole system stagnates.
This is exactly what happened in China’s stock market (A-shares) after the real estate sector declined. Real estate was the backbone of wealth — once it weakened, no amount of policy stimulus could revive confidence.
Similarly, in blockchain:
- Ethereum thrives because ETH and ERC-20 tokens can be freely composed. They appear on balance sheets within smart contracts, enabling lending markets, perpetual futures, yield strategies, and more.
- Bitcoin lacks this composability. BTC sits idle on Layer 1. It can’t be natively pledged, swapped, or leveraged within protocols without introducing centralization or trust assumptions.
👉 See how asset composability powers next-gen DeFi platforms.
Even if Bitcoin grows meme coins or NFTs via inscriptions, these remain isolated economic activities. They don’t interact meaningfully with each other or with BTC itself. There’s no way to use a Bored Ape-style NFT as collateral to borrow against your BTC — not in a decentralized way.
In contrast, Ethereum allows full-stack financial engineering:
- Use ETH as collateral to mint stablecoins (e.g., DAI).
- Stake that stablecoin in a yield vault.
- Use LP tokens as collateral for leveraged trading.
Each step builds on the last — creating a flywheel of value creation.
The Exception: Lightning Network Holds Promise
There is one exception — the Lightning Network.
Unlike other Bitcoin layers, Lightning actually enables true bidirectional movement of native BTC between Layer 1 and Layer 2, without relying on centralized custodians or bridges. It’s the only current solution where BTC can be "used" in another environment while preserving decentralization.
But here’s the catch: Lightning is still limited in functionality. It excels at fast, cheap payments — but not complex smart contracts or asset issuance.
However, if Lightning evolves to support richer scripting and asset creation, the potential shifts dramatically. Imagine issuing tokens, running decentralized exchanges, or even building lending protocols — all on Lightning, all backed by native BTC.
In that scenario? Bitcoin could indeed surpass Ethereum.
Until then, efforts based on inscriptions (like BRC20), RGB, sidechains (RSK), or Stacks are building isolated silos — not an integrated financial ecosystem.
Could Bitcoin Ever Change?
Yes — but only with major upgrades.
The key lies in scripting engine improvements, particularly around covenants — a feature that allows conditions to be placed on how BTC can be spent after transfer.
BCH (Bitcoin Cash) developers have long explored covenants. Despite sharing over 99% code similarity with Bitcoin, BCH has already implemented:
- Decentralized swaps
- On-chain derivatives (similar to dYdX)
- Early-stage lending protocols (akin to MakerDAO)
These prove that with better scripting capabilities, Bitcoin-like chains can support advanced DeFi.
But BCH lacks one thing: valuable native assets. Without strong demand for its base token, it can’t fuel a thriving economy.
Bitcoin has that demand — BTC is the most trusted digital asset on Earth — but lacks the tools to unlock its financial potential.
So if Bitcoin ever adopts covenant-style scripting or other advanced features?
It wouldn’t just compete with Ethereum — it could dominate.
FAQ: Your Questions Answered
Can BRC20 tokens be used like ERC-20 tokens in DeFi?
No. BRC20 tokens lack smart contract functionality and cannot interact with decentralized protocols in a trustless way. They’re largely speculative or collectible assets without financial utility.
Is Wrapped BTC (WBTC) a solution?
WBTC brings BTC to Ethereum, but it’s centralized — controlled by custodians. It doesn’t solve Bitcoin’s native composability problem and introduces counterparty risk.
Why can’t Stacks or RSK fix this?
Both rely on sidechains with separate consensus mechanisms. They require trust-minimized bridges that still pose security and liveness risks. Neither allows native BTC to be directly programmed within their smart contracts.
What are covenants in Bitcoin?
Covenants are proposed script upgrades that restrict how BTC can be spent after being transferred — enabling features like non-custodial lending, escrow, and secure asset issuance without full smart contract support.
Could Lightning Network replace Ethereum?
Not today — but potentially in the future. If Lightning adds smart contract capabilities while preserving BTC’s security model, it could become a powerful DeFi platform.
Will Bitcoin ever upgrade its scripting engine?
It’s uncertain. Bitcoin prioritizes stability over innovation. Any major change would require broad consensus — which is difficult to achieve.
👉 Explore how future blockchain upgrades could redefine digital finance.
Final Thoughts
Ethereum’s dominance isn’t due to hype — it’s built on programmable assets and composable finance. Bitcoin has unmatched security and brand value, but its ecosystem remains financially inert without the ability to natively utilize BTC in protocols.
For now, Bitcoin’s ecosystem cannot surpass Ethereum — not because of community size or developer activity, but due to fundamental technical limitations.
But if Bitcoin ever embraces deeper scripting capabilities — especially covenants or Lightning-based smart contracts — everything changes.
Until then, the throne remains occupied.