What is BTC20? Between promise and doubts of a pale imitation of Bitcoin

The world of cryptocurrencies is constantly evolving, and Bitcoin (BTC) still remains the pioneer and iconic symbol of this industry. For some bitcoin fans, it represents a revolutionary means of payment as well as a safe haven.

However, some people are looking to other cryptocurrencies and blockchains to explore new usage possibilities. This is particularly the case for those who use altcoins in decentralized finance protocols. At the forefront of this use, we find the Ethereum blockchain and its cryptocurrency ETH, which has been emulated since its launch in 2015.

To bridge the gap that exists between the two cryptocurrencies, certain initiatives are emerging. This is particularly the case of the BTC20 project which has been getting a lot of attention recently.

The main idea of ​​BTC20 is to bring "bitcoin into Ethereum" and allow, among other things, to generate income from staking with this token.

What do you think of this project? Should we consider performance promises? In this article you will find some answers that can guide you in your understanding of this project.

Overview of BTC 20

At first glance, the BTC20 proposal may seem paradoxical given that Bitcoin and Ethereum are two blockchains different in their operation and principle. However, this is what BTC 20 is offering by creating a token that would represent bitcoin, while being hosted on the Ethereum blockchain.

Thus, this opens new opportunities for people who want to participate in decentralized finance while using a token representing bitcoin. The project offers a staking mechanism allowing token holders to generate passive income by securing the network.

The BTC20 project follows a fair launch model by providing for a gradual distribution of tokens. Only 3 million tokens will be available for presale, then an additional 3 million will be made available. Finally, the remaining tokens will be distributed as staking rewards over a total period of 120 years. This period follows that of the issuance of bitcoin which will end after the 21 million bitcoins are mined, period estimated to occur in 120 years.

Concerning the authors of the BTC20 project, we were unable to access the profiles of the founders. We do know, however, that the company is based in Belgium.

What are the tokenomics of BTC20?

• As with bitcoin, there can only be $21 million BTC20. Additionally, BTC20 will follow a gradual token unlock schedule.
• Throughout the presale, all investors can purchase BTC20 for $1. However, once the token is listed in exchange platforms as bitget or Binance, the price will be determined by theOffer and demand.
• Initially, 3 tokens will be available for presale. Once sold, an additional 000 will be available. Then, the remaining BTC000 tokens will be gradually unlocked as staking rewards.

As we can see, the idea of ​​BTC20 is to imitate the money creation principles of bitcoin. The contribution of BTC20 is to create a token on the Ethereum blockchain in order to be able to expand its uses subsequently. The project indeed plans partnerships with other DeFi protocols.

What would be the benefits of BTC 20?

The advantages of BTC20 are based on the fact that the token is hosted on Ethereum and that it then allows the use of smart contacts and to be used on different decentralized finance (DeFi) protocols. Thus, the token can be stored on a web wallet like MetaMask, for example and used for staking. This then allows holders to generate BTC 20 rewards on a regular basis.

What are the limits of BTC20?

By reading the presentation of BTC 20 you might be interested. This is understandable given the project's promises to reward holders. However, we must ask ourselves whether there is any point in receiving tokens that lose value over time. This is indeed a possibility that can perfectly well happen.

Here are our explanations.

The first risk is based on the valuation of the token. BTC20 is not backed by bitcoin directly as, for example, Wrapped Bitcoin (wBTC) is not. Thus, the value of BTC20 is essentially based on the total supply which is limited and which imitates that of Bitcoin. It is certainly a good thing to have a deflationary currency with a fixed ceiling, but this in no way guarantees the future validation of the currency. For there to be an increase in the price, there must necessarily be demand for this token. This is not something that we can anticipate for this type of token. Reading the white paper of the BTC20 project does not indicate any other possible valuation.

If bitcoin has gained so much value over time, this can be explained by all the inherent functionalities that it presents and not just by its limited token supply. If it were that simple, it would be enough to create tokens with a limited supply for their price to explode. However, reality shows us that this is not enough. The token needs a certain utility, and obviously, BTC 20 does not have any. It only serves to generate returns for those who stake. This is not enough to make it a useful token.

Is BTC20 a pale imitation of Bitcoin?

BTC20 is not bitcoin even if it claims to be. It is a project which more or less imitates the offers and emissions of bitcoin but which does not have the fundamentals. The reason people are looking to own bitcoin is because it has different uses and revolutionary uses. Bitcoin is sought after, for example, by unbanked people or by people living in authoritarian regimes for its ability to be censorship resistant. Bitcoin has also been operating without interruption for years and has shown its resilience over time. The valuation is not trivial and the value of bitcoin has several internal elements that can explain it.

Read the article : Bitcoin: A currency like any other or superior?

Final word on BTC20

It is understandable that some investors are interested in this new token which promises attractive and regular returns. There publicity that the project received also contributes to this craze but this should not be the only factor to consider.

The project can indeed prove to be a good investment in the short term, taking advantage of influencer shilling and publicity, but there is no guarantee that the project will hold up in the long term. Although BTC20 has many advantages, it is important not to be blinded by yield promises. Indeed, there are several elements that can raise doubts about the viability of the project in the long term.

When we carry out a fundamental analysis of the project, we quickly see the limits of the project. However, we are not saying that this project is a scam but we can say that it has no real use, like unfortunately many tokens on the market, such as memes corners for example or recently the bogus project SatoshiVM.

If some people are interested in putting their bitcoins to work in decentralized finance, you should know that there are already numerous options to do so.

You can consult our guide on how to use bitcoin in DeFi, in a less risky way, it seems to us, than with the BTC20 project. Likewise, the wBTC option seems to be preferable because you can always sell them for bitcoin, at a 1:1 ratio, which is not guaranteed with BTC20.

Finally, continue your research before investing and carefully consult the information on the website This is clearly the best advice we can give you.

See also:

• Bitcoin in DeFi: How to make your BTC grow? (The Ultimate Guide)
• What is wrapped BTC (wBTC) and how does it work?