A momentous upgrade to Bitcoin took place on September 1 with the launch of “BRC20” which embeds Ethereum Virtual Machine (EVM) functionality on Bitcoin’s base layer. The BRC-20 token protocol has added Ethereum-like features of EVM, opening the door to dApps or decentralized apps and DeFi on Bitcoin.
BRC-20 enables smart contracts on Bitcoin, bringing one of the most distinctive use cases of Ethereum to Bitcoin.
The upshot: Bitcoin is no longer just “digital gold;” it’s now a programmable financial layer, and developers will no longer need to rely on bridges, oracles, or other middlemen to make it work. It’s like if they built an app store inside the BTC vault.
This crucial upgrade will position the BRC-20 protocol as the foundation for a financial architecture on top of the Bitcoin blockchain, including dApps like DEXes, yield protocols, and NFT platforms.
The workarounds like bridges and wrapped assets used currently to buy/sell BTC value via dApps on the Ethereum or Solana chain may become unnecessary in the long run. Or, that’s what the creators of BRC-20 would have us infer.
The reality is more complicated, but it seems nobody is investigating that part of the story amidst the happy announcements of EVM functionality on Bitcoin. More on that later.
The Men Behind The Curtain
Best In Slot (or BIS) and DOMO are behind the move. BIS created the Ordinals ecosystem and contributed the idea of using Ordinals inscriptions as a way to create fungible tokens on Bitcoin. DOMO created Layer1 Foundation to govern the project, going forward. BIS will contribute day-to-day engineering.
In other words, Domo is the inventor. Layer1 is the governor, and BIS is the software developer / maintenance entity.
Eril Binari Ezerel, CEO of Best In Slot, described it as “bringing Ethereum’s flexibility to Bitcoin’s robustness.”
Domo, the creator of BRC20, said, “The holy grail is combining the two gold standards: Bitcoin as the most decentralized and secure network, and the EVM as the most proven virtual machine […] The aim is to give users the Ethereum experience of composability and programmability, but secured by Bitcoin.”
Keeping up with the Joneses
The upgrade bolsters Bitcoin’s competitiveness against other programmable blockchains like Ethereum and Solana.
What’s not clear is whether BRC-20 balances will be as secure as BTC balances. Unlike BTC balances, BRC-20 balances live in the indexer, BIS, meaning that it depends on BIS developers. The processes of data pruning and chain reorgs introduce risks of inconsistent balances and events across indexers. The Layer1 Foundation White Paper doesn’t spell out state rollback and finality thresholds.
Whereas Bitcoin balances are enforced by consensus of nodes, BRC-20 balances depend on the consensus of indexers, a separate set of programs that read BTC transactions, creating a token ledger.
This potential issue may have necessitated the creation of Layer1 Foundation— to set the rules for handling reorgs, default decimals, and when two indexers disagree on a balance. With BTC, if two nodes disagree, one of them is wrong.
A Bitcoin Affinity Scam?
In an article entitled, “The Dangers of BRC-20 Tokens,” Che Köhler, Author at the Bitcoin Manual and Co-Founder at Nichemarket, wrote, “BRC-20 tokens are a Bitcoin affinity scam,” Köhler mused, “Isn’t it wild that a few years ago, the narrative was Bitcoin was old tech and a boomer coin, and ICOs, DEXs, and DEFI was the future, yet today all those failed ideas are starting to move across to Bitcoin in some way, shape or form?”
It was written in 2023, but that was perhaps never as true as today.
Köhler explained, “First off, BRC-20 tokens have nothing to do with Bitcoin, the asset; it is merely a JSON script file added to the Bitcoin blockchain through the ordinals protocol,” adding, “While technically, BRC-20 tokens exist in the Bitcoin blockchain; they are a secondary market that requires a different set of software to source, categorise and display from the blockchain.”
Theoretically, Domo and Layer1 will take on the challenges that Köhler identifies, being that “BRC-20 tokens are complex to manage,” because they “require a separate wallet, protocol and coin control to manage and additional steps to store and transact.”
Interconnected Failure Points
Many of the vulnerabilities identified by Köhler in 2023 remain the case today, yet crypto presses and exchanges pumped out enthusiastic articles portraying BRC-20 as a breakthrough for Bitcoin, rather than the other way around.
Disruption Banking followed up with Köhler to get his take on BRC-20 in 2025 and the way it has been reported.
Köhler noted, “seems to be the same content syndicated across a bunch of publications, but no one goes into real detail on how it’s working.”
This is a phenomenon Disruption Banking knows only too well.
Köhler continued, “The system depends on several interconnected components – the BRC20 indexer, the programmable module server, Bitcoin RPC nodes, balance servers, and potentially external HTTP services. Each represents a potential failure point.”
This interdependency in DeFi and CEX is sensitive because malicious actors relentlessly identify and exploit the weak points in the system.
BRC-20 is hitching its wagon to Bitcoin, but the Bitcoin blockchain cannot enforce any rules on the token. Layer1 will be handling that. No worries then!
Köhler warned, “By obfuscating the differences between Bitcoin and BRC-20 tokens, new investors may mistakenly believe that they are investing in a secure and well-established network like Bitcoin, only to discover that they have put their funds into a risky and unproven token.”
Same Old Song & Dance
That means BTC is going to the moon, right? Not so fast. These days it sometimes feels like the long-promised future has arrived. Robots will soon be better at break-dancing than humans. Flying cars are going through flight tests. Governments are jumping into digital currencies.
What’s missing in the celebration is a sober map of the risks. Bitcoin’s consensus has never been about speed or flexibility—it’s about immutability. BRC-20 shifts the frame toward programmability, but by outsourcing enforcement to indexers and foundations, it risks diluting what makes Bitcoin unique.
BRC-20 tokens are perfect for this because they are easy to create. Heed the words of cautious Köhler, “The main issue is that this system attempts to add Ethereum-like smart contract functionality to Bitcoin through a complex off-chain execution layer that still depends on centralized indexers and everyone… agreeing to that standard, with no real method of consensus enforcement as we have with Bitcoin and its network of nodes.”
Until someone charts how these moving parts hold up under pressure, like reorgs, exploits, state rollbacks, investors should treat “Ethereum on Bitcoin” as a metaphor, not a guarantee.
On and on, the hype cycle replicates itself: glossy decks, venture rounds, promises of an “app store” on Bitcoin. Yet scratch the surface and you find fragile indexers, centralized governance, and balance sheets that depend on trust, not consensus.
The question is not whether these experiments will work. It’s whether Bitcoin can absorb them without breaking what makes it Bitcoin.
Author: Tim Tolka, Senior Reporter
#Crypto #Blockchain #DigitalAssets #DeFi
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
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