2023 marked a transformative year for the cryptocurrency ecosystem—a pivotal transition from bear to bull market and a surge in technological innovation across major blockchains. While Bitcoin broke free from its long-held image as a static store of value, Ethereum advanced steadily along its roadmap, and new Layer 1 (L1) blockchains emerged with compelling use cases. This article explores the key developments across Bitcoin, Ethereum and its Layer 2 (L2) networks, and other L1 ecosystems that defined the year.
Bitcoin’s Innovation Awakening
For over a decade, Bitcoin was seen primarily as digital gold—secure, decentralized, and resistant to change. Its community prioritized stability over experimentation, rejecting early attempts at smart contracts or tokenization like Colored Coins and Mastercoin. However, 2023 shattered this status quo.
With the rise of Ordinals, Inscriptions, and BRC20 tokens, Bitcoin became a platform for digital ownership and experimentation. As Outlier Ventures put it, the "Slumbering Titan" has awakened.
👉 Discover how Bitcoin evolved beyond payments in 2023.
This wave of innovation introduced new protocols and assets built directly on Bitcoin’s base layer or leveraging its security:
Ordinals & BRC20 Tokens
The Ordinals protocol assigns unique identifiers to individual satoshis, enabling users to "inscribe" data—images, text, audio—onto them using SegWit and Taproot upgrades. These Inscriptions are stored within Taproot script paths, making them immutable and transferable.
Building on this, the BRC20 standard emerged in March 2023, created by Twitter user @domodata. Inspired by Ethereum’s ERC-20, BRC20 allows for fungible tokens on Bitcoin through JSON-based deployments. Unlike traditional token standards, BRC20 relies on off-chain indexers to track mints and transfers.
- ORDI, the first BRC20 token, saw explosive growth, listing on major exchanges like Binance and OKX.
- Other notable BRC20 tokens include SATS, .COM, RATS, MICE, and PEPE.
An entire ecosystem formed around BRC20:
- Unisat: All-in-one wallet, marketplace, and inscribing tool
- Ordiscan: Block explorer for Inscriptions
- MultiBit Bridge: Cross-chain bridge connecting BRC20 to EVM chains
- BitStable: A MakerDAO-style protocol issuing stablecoin DAII backed by ORDI and BTC
Taproot Assets & Taro Protocol
Launched by Lightning Labs in October 2023, Taproot Assets enables the issuance of native assets on Bitcoin without bloating the blockchain. Built atop Taproot (activated in 2021), it uses Schnorr signatures and Merkleized Abstract Syntax Trees (MAST) to enhance privacy and efficiency.
Similarly, the Taro protocol allows asset creation on Bitcoin and instant transfers via the Lightning Network. It supports both fungible and non-fungible assets and integrates seamlessly with multi-hop payments.
Both protocols aim to bring scalable, low-cost asset issuance to Bitcoin while preserving its security model.
RGB Protocol
RGB (short for Really Good Bitcoin) is a smart contract and privacy layer operating off-chain but anchored to Bitcoin via UTXO commitments. It uses client-side validation—users verify state transitions themselves—while leveraging Bitcoin’s consensus for finality.
The release of RGB v0.10 in April 2023 brought full smart contract support for Bitcoin and Lightning, including standardized libraries and developer tools.
BitVM: Turing-Complete Computation on Bitcoin?
In October 2023, ZeroSync’s Robin Linus introduced BitVM, a proposal to run arbitrary computations on Bitcoin by moving logic off-chain and using hash locks and NAND gates for verification.
While still theoretical, BitVM could enable complex smart contracts on Bitcoin without altering its base layer—though challenges remain around efficiency and multi-party participation.
Other Notable Protocols
- Atomicals & ARC20: Uses UTXO-based digital objects; ARC20 tokens are directly tied to individual satoshis, offering full on-chain ownership without reliance on indexers.
- Rune & PIPE: Proposed by Ordinals creator Casey Rodarmor as a cleaner alternative to BRC20; PIPE implements Rune-like functionality with better scalability.
- BTC Stamps & SRC20: Stores inscription data in transaction outputs (not SegWit), making it permanent but more expensive than BRC20.
Ethereum: Steady Progression in 2023
While Bitcoin surged with novelty, Ethereum continued its methodical evolution toward scalability and usability.
Shanghai Upgrade: The Final PoS Milestone
In April 2023, Ethereum completed the Shanghai upgrade, enabling validators to withdraw staked ETH for the first time since the Merge. This marked the full transition to Proof-of-Stake (PoS), enhancing network security and opening staking to broader participation.
Layer 2 Explosion
Ethereum’s L2 ecosystem expanded dramatically in 2023:
- Arbitrum launched its token (ARB) with a major airdrop.
- New zkEVM chains went live: Polygon zkEVM, Scroll, Linea, Manta Pacific, and Mantle.
- Exchange-backed L2s emerged: Base (by Coinbase) became one of the most anticipated launches.
- Modular frameworks gained traction: Arbitrum Orbit, OP Stack, and early concepts of ZK Stack laid groundwork for “superchains.”
As of year-end, L2Beat reported 34 active L2 networks securing over $30 billion in total value locked (TVL).
👉 See how Ethereum's L2s are reshaping scalability.
What’s Next in 2024?
Key upcoming milestones:
- Cancun-Deneb upgrade (EIP-4844): Introduces proto-danksharding to reduce L2 rollup fees.
- Token launches: Starknet and zkSync expected to issue native tokens.
- Further decentralization of L2 sequencers.
- Expansion of superchain ecosystems across multiple verticals.
The Ongoing L1 Wars
Despite Ethereum and Bitcoin dominating headlines, competition among L1 blockchains remains fierce.
New Entrants Shine
- Sui and Sei launched mainnets in 2023, promoting high-throughput architectures for Web3 applications.
- Kaspa, a novel PoW chain using blockDAG consensus, surged over 20x amid growing interest in scalable alternatives.
Legacy Chains Rebound
- Solana: Recovered from 2022’s collapse, surging over 10x with viral meme coins driving engagement.
- Injective: Achieved nearly 30x growth, fueled by DeFi innovation and institutional adoption.
According to CoinGecko, there are now:
- 88 issued L1 chains
- 20 issued L2 chains
- Over 400 active L1 projects globally
Convergence of Philosophies
Historically, two visions shaped crypto:
- Bitcoin’s vision: Sound money—secure, scarce, censorship-resistant.
- Alternative L1s: General-purpose platforms for decentralized apps.
But 2023 blurred these lines. With BRC20, Ordinals, and Taproot Assets, Bitcoin began embracing programmability. Meanwhile, Ethereum strengthened its monetary properties through staking and deflationary mechanisms.
The core innovation? Blockspace as a commodity—a scarce resource that can power everything from digital art to financial infrastructure.
Frequently Asked Questions
Q: What made Bitcoin so innovative in 2023?
A: The introduction of Ordinals and BRC20 tokens allowed users to inscribe data onto satoshis, transforming Bitcoin into a platform for digital collectibles and token experiments—something previously thought impossible due to its limited scripting language.
Q: How did Ethereum improve in 2023?
A: The Shanghai upgrade enabled ETH withdrawals from staking, completing the shift to Proof-of-Stake. Additionally, the L2 ecosystem exploded with new zkEVM chains and modular frameworks like Base and Arbitrum Orbit driving scalability.
Q: Are BRC20 tokens secure?
A: While BRC20 leverages Bitcoin’s immutability for inscription storage, it depends on centralized indexers to track balances and transactions. This creates potential risks if indexers fail or act maliciously—unlike fully on-chain token standards.
Q: What is Taproot Assets?
A: Taproot Assets is a protocol by Lightning Labs that allows issuing digital assets directly on Bitcoin using Taproot. It supports issuance on both the base chain and Lightning Network, enabling fast, low-cost transfers without bloating the blockchain.
Q: Why are L2s important for Ethereum?
A: L2s scale Ethereum by processing transactions off-chain while inheriting its security. They drastically reduce gas fees and increase throughput—critical for mass adoption of DeFi, NFTs, and Web3 applications.
Q: Will new L1 blockchains overtake Ethereum?
A: While new L1s like Solana and Sui offer high performance, Ethereum maintains dominance through network effects, developer activity, and robust security. Most innovations now occur at the L2 level rather than competing directly at L1.
The crypto landscape in 2023 proved that innovation never sleeps. From Bitcoin’s renaissance to Ethereum’s scaling momentum and the resilience of alternative L1s, the ecosystem matured significantly—setting the stage for broader adoption in 2025 and beyond.