Jeff, the founder of Merlin Chain, argues that Ethereum can handle most of the innovations built on layer-2 networks, but Bitcoin cannot, making layer-2s more important for the Bitcoin ecosystem.
Bitcoin decentralized finance (DeFi), or BTC Fi, a new movement seeking to bring DeFi to the Bitcoin network, has grown in popularity since the advent of Ordinals and BRC-20 tokens. In episode 47 Hashing It Out podcast,
Jeff breaks down the difference between BRC-420 and BRC-20, explaining that BRC-20 allows developers to create and mint tokens, whereas BRC-420 is about modulized data and tokenized modules. He cites an example of how an artist could use BRC-420 to distribute an album on-chain.
Jeff says that an artist can inscribe five songs separately and then put all of the songs together as one inscription by using BRC-420. The artist can then tokenize the album into multiple shares, allowing fans to purchase the album on-chain.
Jeff adds that layer-2 networks are more important for Bitcoin than for Ethereum because they give the Bitcoin ecosystem use cases that cannot be built on layer-1, unlike Ethereum, which can host most of the innovations built on layer-2 networks. He highlights the inability to deploy smart contracts on the Bitcoin network without building a layer 2, which is not the case for Ethereum.
The founder of Merlin Chain also points out that most Bitcoin layer-2 platforms are not building ecosystems that support the specific needs of the Bitcoin community that already engages with Ordinals and other innovations built on the network. Instead, they are simply taking concepts from Ethereum layer-2s and bringing them over, making it difficult to get the community excited.