Bitcoin  decentralized finance (DeFi) , or BTCFi, 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 of Cointelegraph’s Hashing It Out podcast, Jeff, the founder of Merlin Chain — a native Bitcoin layer-2 network — explains how the BTCFi movement is evolving from BRC-20 to BRC-420, the issues faced by layer-2 networks and Bitcoin ( BTC ), and why the rise of building utility on the network is bullish for the entire ecosystem.

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.

Bitcoin needs layer-2 networks more than Ethereum does — Merlin Chain founder image 0

Listen to the full episode of Hashing It Out on Spotify , Apple Podcasts  or TuneIn . And don’t forget to check out Cointelegraph’s full lineup of other shows!

Magazine: SEC delays Ether ETFs, Binance settlement approved and another court loss for SBF: Hodler’s Digest, Dec. 17-23

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.