BTC ecological dilemma: ETF success cannot hide the lack of on-chain innovation.

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The Dilemma of BTC Ecosystem Development: Verification and Reflection

After a year of fierce competition and fluctuations, the Bitcoin ecosystem has finally reached a consensus: the market's demand for BTC is limited to BTC itself, and it is difficult to extend to BTC collateral assets, layer two networks, or BTC-based decentralized finance.

Copying and Failing in Ethereum Mode

Although projects like Babylon are not entirely new, they have long failed to secure funding and have stagnated at the academic research stage. Others, such as Solv and certain BTC layer-two network projects, have mostly only found development opportunities after multiple directional adjustments. Even innovative attempts like Runes( have failed to replicate the success of inscriptions, ultimately leading to disappointment.

The Q1 2025 report shows that only the BTC spot ETF has been successful. Apart from Bitcoin itself, the ETF has become the most reliable investment tool. This stands in stark contrast to the Ethereum ecosystem: the ETH chain is thriving, while BTC is mainly active in off-chain transactions.

It must be admitted that BTC does not need redundant functions such as layer two networks and staking. The lack of smart contracts is not a limitation of the market; rather, it reflects its robustness. Although there are many criticisms of Vitalik and Ethereum at present, most of the innovations of BTC and Solana are actually imitations and improvements of Ethereum.

However, the BTC ecosystem has failed to replicate the success of Ethereum and has instead repeated its failures. Although the price performance of the ETH layer two networks has been poor, they have at least nurtured some promising projects. In contrast, the staking, layer two networks, and DeFi based on BTC have only seen failures and even greater failures.

![There is only BTC in BTCFi, no Fi])https://img-cdn.gateio.im/webp-social/moments-c689085f5a2d3d7fd75fecbf1faaf0a0.webp(

The Dilemma of Mainnet Security Monetization

Some projects are trying to monetize the security space of Ethereum and lease it out to projects in need. However, this model cannot be easily transferred to other public chains, especially BTC.

Public chains tend to adopt asset issuance product models, whether their outer packaging is a second-layer network or a staking/re-staking system. For public chains with a smaller market capitalization, it is difficult to support a complex ecosystem.

BTC also faces a similar situation. The trillion-scale Bitcoin ecosystem actually has only one core product: BTC itself. Although some products that package BTC may enhance BTC's market value, any attempts to transfer BTC's value to their own tokens face huge challenges.

The majority of BTC worldwide is held by exchanges and asset management companies, making it difficult for the staking system on the BTC chain to have a substantial impact. Ultimately, the Bitcoin staking system cannot provide the same sense of security as directly holding BTC, which also leads to the difficulty in truly establishing BTC Layer 2 networks and DeFi.

![There is only BTC in BTCFi, no Fi])https://img-cdn.gateio.im/webp-social/moments-723af2be438dbbb80ac2ff23c7c890bb.webp(

The Two Dragons Fight Without Result

Ethereum L1 congestion has driven the large-scale construction of L2 infrastructure, but ultimately, it has been seized by some emerging projects. This basically summarizes the main storyline of the cryptocurrency market over the past six months.

Recently, if it weren't for the BTC L2 projects starting to hype up token issuance, fast-paced market participants might have forgotten this ancient memory. In my personal opinion, the only winner is a project that quickly issues tokens and continues to operate.

BTC L2 projects face a dilemma: issuing tokens early may harm credibility, while issuing them late makes it difficult to control the market. Since criticism is inevitable, it is better to choose a more profitable approach. This is the true depiction of BTC L2 projects over the past year.

In contrast, ETH requires L2 to share the traffic, and the current game is more like an adjustment of the fiscal relationship between the central and local governments. SVM L2 is also seeking a way to survive, choosing to compete for the cash flow of AMM DEX.

BTC L2 is the most awkward. Compared to the support and guidance of the Ethereum ecosystem, the technical solutions for BTC L2 are chaotic and disordered, with some imitating mainstream L2 routes, some focusing on optimizing existing opcodes, and others being radical factions attempting to improve Bitcoin's scripting capabilities.

In terms of decentralization, BTC L2 seems to be more favored by project parties and venture capitalists than some competing products. Surprisingly, a certain public chain that has long been referred to as "centralized" has shown a higher concept of decentralization in the L2 ecosystem.

![There is only BTC in BTCFi, no Fi])https://img-cdn.gateio.im/webp-social/moments-d58dc5293612c26f0090245cbeb28574.webp(

Conclusion

The Bitcoin ecosystem has nurtured a large number of industries such as wallets, mining, and asset wrapping, laying the foundation for later entrants like Ethereum. However, BTC itself is too special to face the pressure of large-scale adoption and external competition like other projects.

Just like the internal mechanisms of AI, this world can sometimes be difficult to explain. BTC chooses not to explain, while BTCFi attempts to forge a new path, which proves that the traditional route is more resilient.

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fren_with_benefitsvip
· 07-10 18:05
Money should be earned, but don't be impulsive when making money.
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0xLostKeyvip
· 07-10 14:02
BTC is just electronic gold, no more.
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gas_guzzlervip
· 07-10 08:50
When it rises high, it's just air; leave while losing money.
View OriginalReply0
ClassicDumpstervip
· 07-09 10:23
eth is still strong after all.
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gas_fee_therapistvip
· 07-08 21:10
How is it? BTC is just not as good as ETH.
View OriginalReply0
HalfBuddhaMoneyvip
· 07-08 21:10
Safety is the most important thing. Don't be greedy.
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ForeverBuyingDipsvip
· 07-08 21:10
How many projects just started and disappeared?
View OriginalReply0
SpeakWithHatOnvip
· 07-08 21:09
BTC just holds on.
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FOMOSapienvip
· 07-08 20:58
Why is BTC rising so sharply if it doesn't work?
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MetaverseHobovip
· 07-08 20:51
Is Bitcoin old but not dead?
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