Bitcoin – originally just a digital currency and store-of-value – is seeing a surge of innovation to enable asset tokenization on and around its network. Recent developments now allow non-fungible tokens (NFTs) and fungible tokens to be created using Bitcoin’s security, via new layers and protocols . Below we survey the major tokenization technologies on Bitcoin, how Bitcoin can host NFTs and other assets, comparisons to Ethereum/Solana/Polygon/Avalanche, and practical limitations and adoption trends.
Bitcoin Tokenization Protocols
- Ordinals and BRC-20 tokens (2023) – Ordinals leverage Bitcoin’s Taproot upgrade (2021) that introduced a “witness” data field. This lets users number individual satoshis and inscribe arbitrary data on them . In effect, each inscribed satoshi can carry text, images or code. This gave rise to Ordinals NFTs (on-chain art, collectibles) and to BRC-20 fungible tokens. BRC-20 (mar 2023) is an experimental token standard built on Ordinal inscriptions: it encodes token minting data in on-chain JSON. This caused a “meme coin” boom (e.g. the $ORDI token) early 2023. Runes (2024) is a newer fungible-token protocol for Bitcoin that also uses UTXOs, but packs many tokens into a single UTXO for efficiency . In sum, Ordinals and BRC-20 let Bitcoin directly host NFTs and memetokens, though they bloat blocks (average block size rose to ~3–3.5MB in late 2023, near the 4MB SegWit limit ) and incur high fees per inscription.
- Taproot Assets (Lightning Labs “Taro”) (2024) – This is a multi-asset protocol layered on Bitcoin’s Lightning Network. Launched July 2024, Taproot Assets lets users mint fungible and non-fungible tokens as special Taproot UTXOs, then transfer them over Lightning. For example, one can issue a USD-pegged stablecoin or an NFT on Bitcoin and spend it via instant Lightning channels . By summer 2024 developers had already minted ~170,000 Taproot Assets in testing . Key features: issuers use a Taproot transaction to create any assets, and Lightning handles rapid transfers at low fees . Lightning’s existing liquidity (≈5,400 BTC capacity) is reused for routing, so Taproot Assets instantly become multi-asset Lightning channels . Lightning Labs envisions this for stablecoins (e.g. USD tokens on Lightning), enabling merchants to price in dollars and users to transact in dollars via Bitcoin’s network .
- RGB Protocol (2016–now) – RGB is a client-side smart-contract system for Bitcoin and Lightning, initiated by LNP/BP Association. It keeps contract data off-chain (on user devices), using Bitcoin only to notarize state commitments . In practice, RGB can issue fungible tokens, NFTs, or even domain names, and run customizable smart contracts. It achieves greater scalability and privacy than on-chain scripts by sharing proofs peer-to-peer rather than broadcasting all state . RGB’s 2024 updates include the “RGB 20” standard for tokens, supporting transparent issuance, proof-of-reserves, splits, etc. . Early RGB tokens exist (USDN and BTCN, pegged to USDT and BTC) and trade on new platforms like KaleidoSwap . Transfers of RGB tokens can also route over Lightning channels for efficiency . In short, RGB brings Bitcoin-level security to token issuance and private smart contracts.
- Stacks (Bitcoin Layer-1) – Stacks is a separate blockchain that anchors to Bitcoin via Proof-of-Transfer (PoX). It enables native smart contracts (written in Clarity) and token issuance, but ties its consensus security to Bitcoin. Notable Stacks features include sBTC – a 1:1 BTC-backed token that lets users move Bitcoin into and out of Stacks – and upcoming stablecoins like sUSDT (via cross-chain bridges). The Stacks ecosystem has grown rapidly: by March 2023 it had ~60k smart contracts and ~3.5M transactions . Stacks hosts NFT marketplaces (Gamma, which also launched a trustless Ordinals marketplace ) and DeFi (e.g. ALEX DEX). In essence, Stacks offers Ethereum-like tokenization (ERC-20/721 analogs) with Bitcoin security, but its assets and activity are distinct from Bitcoin’s mainchain.
- RSK (Rootstock) (2018) – RSK is a merge-mined Bitcoin sidechain that runs an Ethereum-compatible VM. It’s essentially Bitcoin with smart contracts and its own token, RBTC (pegged 1:1 to BTC via a bridge). On RSK one can issue ERC-20-style tokens (called RRC-20). A prominent use is Money on Chain, a DeFi suite on RSK that issues stablecoins such as DOC (Dollar on Chain), a USD token collateralized by BTC . RSK thus brings stablecoins and DeFi to Bitcoin holders. (RSK can also support NFTs via ERC-721.) RSK’s security is provided by Bitcoin miners (via merged mining) . Its adoption has been strongest in Latin America (e.g. the Sovryn DEX), but overall smaller than Ethereum’s ecosystem.
- Omni Layer and Counterparty (legacy) – Omni (launched 2013) was the original Bitcoin asset layer. It encodes token balances in Bitcoin transactions’ OP_RETURN fields. It powered early tokens like Tether (USDT originally used Omni) and dozens of others. Omni allows custom currencies on Bitcoin and even blockchain-based crowdfunding via smart sends . However, Omni activity has mostly faded as Ethereum took over token issuance. Counterparty (2014) was another early layer (creator of the first “rare pepe” NFTs) but is now niche. These show Bitcoin-based tokens have long roots, even if they’re now eclipsed by newer tech.
- Liquid Network (2018) – Liquid is a federated Bitcoin sidechain designed for fast, confidential transactions. Its native asset is L-BTC (liquid bitcoin, pegged to BTC) and it supports issuing other assets. Several exchanges use Liquid for quick transfers and issuing tokens. For example, USDT and other assets exist on Liquid. Liquid has grown to >$3 billion total value locked, including ~$36 M in USDT . While Liquid isn’t strictly “token issuance on Bitcoin’s base layer,” it’s a popular Bitcoin-linked network for assets and is often cited in tokenization discussions.
Bitcoin as a Platform for NFTs, RW Assets, and Fungible Tokens
- NFTs on Bitcoin: The leading approach is Ordinals – on-chain inscriptions of art/data on satoshis . Collections (e.g. 3D art, memes) have been minted and traded; marketplaces like Gamma (Stacks) and direct RPC indexers serve these NFTs. Stacks also supports NFTs (e.g. via Emblem Vault support ). RSK can host NFTs via its EVM (ERC-721 equivalents), but this is rare. In practice, NFT art volumes remain much higher on Ethereum, but Bitcoin NFTs have attracted notable attention and record-breaking blocks (a single 3.9 MB block containing one massive Ordinal image ).
- Real-World Assets (RWAs): Tokenizing real estate, art, commodities, etc., has mostly happened on Ethereum and specialized chains, where legal frameworks and oracles exist. On Bitcoin, protocols could in principle issue tokens representing physical assets (e.g. a token redeemable for real estate shares), but we see few high-profile examples. Taproot Assets explicitly targets stablecoins and dollar tokenization (which could underlie asset-backed tokens) . In general, Bitcoin-based RWAs are still theoretical or small-scale: the focus so far is on digital assets (crypto-stablecoins, NFTs). If real assets are tokenized on Bitcoin, they would rely on off-chain processes (custody, legal compliance) as with other chains.
- Fungible Tokens (stablecoins, altcoins): Several Bitcoin-based networks host fungible tokens. Examples include:
- Stablecoins: On RSK, the Money-on-Chain suite issues DOC (USD stable) and BitPro (BTC pegged) as RRC-20 tokens . On Stacks, the ALEX bridge enables sUSDT (USDT minted on Stacks) . Lightning/Taproot Assets will allow issuing stablecoins on Bitcoin/LN (e.g. USD-pegged Taproot Assets), and indeed Lightning Labs sees stablecoins as a key use . Historically, Omni hosted the original USDT.
- Altcoins: Bitcoin sidechains and layers have their own coins (STX on Stacks, RBTC on RSK, L-BTC on Liquid). Fungible token standards abound: BRC-20 (experimental on Bitcoin main), RGB 20 (client-side on Bitcoin), RRC-20 (on RSK), and ERC-20 analogs on Stacks, etc. There are Bitcoin-based governance tokens and memecoins too. But total supply of such tokens on Bitcoin networks is tiny compared to the Ethereum ecosystem.
Comparison with Ethereum, Solana, Polygon, Avalanche
| Feature | Bitcoin (with L2/sidechains) | Ethereum | Solana | Polygon (PoS) | Avalanche |
| Smart Contracts | No native SVM. Enabled only via sidechains (RSK, Stacks) or off-chain schemes (RGB). | Yes – native Turing-complete (EVM) | Yes – native (Rust/C) | Yes – native EVM (Ethereum-compatible) | Yes – native EVM on C-Chain |
| Token Standards | No single standard. Multiple: BRC-20, Runes (UTXO-based); RGB tokens; RRC-20 (RSK); STX/Clarity tokens (Stacks) etc. | ERC-20 (FTs), ERC-721/1155 (NFTs), many others | SPL tokens for fungible & NFT (Metaplex) | ERC-20/721 via sidechains, EVM L2s | ERC-20/721 (C-Chain); ARC standards |
| Throughput (TPS) | Low on main chain (~8.6 TPS ; peak ~~11 TPS ). Can use Lightning for hundreds/sec, sidechains for thousands. | Moderate (~11.8 TPS ; up to ~60 peak). Layer-2s (Arbitrum, etc.) raise throughput to hundreds or more. | Very high (real ~896 TPS , theoretically 50K) | High (claimed ~65,000; actual ~44 TPS ) | High (claimed ~4500; real ~2.4 TPS ) |
| Latency / Finality | ~10 min block time (1 confirmation). | ~12–15 sec block (final after ~1–2 min) | ~400ms block (practically instant) | ~2 sec blocks, quick finality | ~2 sec finality |
| Fees | Higher per on-chain tx (currently $1–$50+); Lightning/L2 fees are very low. | Can be high (tens of dollars in congestion); L2s much lower. | Very low (~$0.0001–$0.001) | Very low (<$0.001) | Low (~$0.01 or less) |
| Security Model | Bitcoin PoW (extremely high security). Sidechains (RSK) use merged-mining; others (Liquid federated; Lightning relies on Bitcoin’s security for channel settlement). | PoS (decentralized, large validator set) | PoS (solana’s tower BFT) | PoS (Ethereum PoS security via Plasma/PoS) | PoS (Avalanche consensus) |
| Major Use-Cases | Store-of-value, Lightning payments. New tokenization via L2s/sidechains (stablecoins on Lightning, Bitcoin-anchored smart contracts). | DeFi, NFTs, DAOs, token issuance (market leader in tokens). | DeFi, NFTs, gaming, high-frequency/trading. | Scalable Ethereum L2 (DeFi, games, tokens). | DeFi (high-throughput), tokenized assets. |
This comparison shows Bitcoin’s main chain lags in native token features versus blockchains built for asset issuance. Ethereum pioneered token/NFT standards and has massive ecosystem support. Solana and Polygon prioritize throughput and low cost. Avalanche combines high performance with EVM compatibility. Bitcoin’s strategy has been different: rely on its secure base layer, and bolt on token capability via layers and protocols . For example, Taproot Assets uses Bitcoin/LN as a settlement for stablecoins, essentially “bitcoinizing the dollar” by leveraging Bitcoin liquidity . In short, Bitcoin trades speed/flexibility for security, whereas the others trade some security to gain performance and richer token capabilities.
Limitations, Scalability, and Adoption
- On-chain Limitations: Bitcoin’s 10-minute blocks and limited size mean it can’t natively support thousands of token transfers cheaply. Expanding block size (beyond 4MB) is contentious; larger blocks risk centralization . The recent Ordinals boom drove block sizes to record highs – the largest block (3.9 MB) contained one Ordinal image with 63 transactions . This “bloat” has re-ignited debates about Bitcoin’s capacity. High on-chain fees during inscription waves also priced out many ordinary users.
- Scalability Solutions: Token issuers mitigate on-chain limits by using Lightning or sidechains. Lightning (capable of hundreds–thousands TPS) can handle tokens via Taproot Assets or RGB transfers. Stacks and RSK carry throughput independent of Bitcoin’s rate. However, these add trust/trade-offs: e.g. Lightning requires off-chain channel management (though multi-asset LN is now live), and sidechains (Liquid’s federation, RSK’s merge-mining) alter the security model. As of 2025, Lightning has modest capacity (≈5,400 BTC locked in channels ) and Stacks has grown (hundreds of thousands of users ), but mass scale token adoption awaits more liquidity and user wallets.
- Protocol Maturity: Many Bitcoin token protocols are very new. Taproot Assets only launched mainnet in July 2024 ; RGB is actively developing but still early; Runes debuted around the 2024 halving . Tooling (wallets, explorers, exchanges) is still emerging. For example, the first RGB DEX (KaleidoSwap) and Lightning wallets supporting Taproot Assets only appeared in 2024 . By contrast, Ethereum’s standards and infrastructure have years of production use. This means Bitcoin-based tokens often rely on niche applications or experimental projects so far.
- Adoption and Use: As of 2025, Bitcoin-based token ecosystems are niche compared to Ethereum. NFTs: Ethereum still dominates NFT trading volume. Bitcoin Ordinals drew huge media attention (and mining fees), but total NFT sales on Bitcoin are small relative to Ethereum’s billions. Stablecoins: Virtually all global stablecoin volume ($11 trillion in 2023 ) is on other chains (Ethereum, Tron, etc.), though Lightning Labs is betting on bringing stablecoins to Bitcoin payments . DeFi: Only small DeFi exists on Bitcoin (e.g. Sovryn on RSK, ALEX on Stacks). Traditional token projects have not widely ported to Bitcoin layers. Notable data: Liquid’s TVL is ~$3B (much of it BTC funds and token holdings), but Ethereum has tens of billions in TVL. Lightning’s capacity (BTC locked) is in the low thousands.
- Community and Ecosystem: Interest in Bitcoin tokenization is strong among some developers and investors. Conferences like the 2024 Lightning Summit and Bitcoin community outlets often highlight Ordinals, Taproot Assets, RGB, etc. . Investments (e.g. $70M raised for Taproot Assets development ) and grants (Stacks’ Bitcoin Frontier Fund) are flowing. However, the broader Bitcoin community is mixed: many value Bitcoin strictly as money/savings and view tokenization as off-mission. Still, crypto markets have given Bitcoin token protocols a moment in the spotlight (BRC-20 tokens had market caps in the tens of millions at peak).
Notable Projects & Trends
- BRC-20 Tokens: Early 2023 saw thousands of BRC-20 tokens minted via Ordinals, mostly speculative memecoins (e.g. $ORDI). They briefly drove massive inscription activity. This “tokenization mania” on Bitcoin highlighted demand for Bitcoin-based assets, even if usage is transient.
- NFT Collections: Various art/collectible projects launched on Bitcoin: for example, “Blockchain Heroes” and “Bitcoin Brawlers” are Ordinal NFT series. Some experiment with hybrid models (e.g. Stacks NFTs linked to Bitcoin security). Ordinal marketplaces (e.g. OrdinalsBot Explorer) and Stacks’ Gamma reflect growing infrastructure.
- Stablecoin Experiments: Lightning Labs and others are promoting stablecoins on Bitcoin. For instance, Lightning’s move to multi-asset channels is explicitly to onboard USD stablecoins . In parallel, projects like Money on Chain on RSK and ALEX’s sUSDT on Stacks (in development) show momentum for Bitcoin-centric stable tokens .
- Block Size Debate: The record-breaking Bitcoin blocks caused by Ordinals (notably a 3.9 MB block containing a full-image inscription ) have renewed discussion of whether to raise Bitcoin’s blocksize. Some argue bigger blocks fund mining via fees; others fear it compromises decentralization . This debate, which led to forks in the past (Bitcoin Cash), has resurfaced in 2024.
- Ecosystem Growth: Stacks’ recent upgrades (Stacks 2.1) and wallet growth (100k+ Hiro wallet installs ) indicate user interest. RGB development (RGB 0.11 release with Liquid support) and Taproot Assets mainnet suggest developer progress . On the other hand, some Bitcoin “classicists” remain skeptical, so widespread adoption may take time.
Summary: In summary, Bitcoin’s network is now capable of hosting tokens – NFTs, stablecoins, and custom assets – thanks to innovative protocols (Ordinals/BRC-20, RGB, Taproot Assets, Stacks, RSK, etc.). These offer bitcoin-native tokenization that inherits Bitcoin’s security, albeit often at the cost of speed or trust assumptions. Comparatively, chains like Ethereum, Solana, Polygon and Avalanche remain far more developed for tokens (higher throughput, standardized toolchains). Bitcoin tokenization is a rapidly evolving field (especially since 2023): stablecoins and NFTs on Bitcoin are technically feasible and seeing pilot projects , but practical throughput, fees, and community consensus still limit mass adoption. The coming years (2024–2025) will show whether Bitcoin’s layers can grow into a significant token economy or remain niche.
Sources: Recent research and technical blogs (2023–2025) on Bitcoin tokenization inform this overview . These include developer releases (Lightning Labs, RGB), ecosystem reports (Stacks monthly), and analyses of ordinals and sidechains. They illustrate the cutting-edge of “Programmable Bitcoin.”