Decentralized Finance has long been synonymous with the Ethereum -Blockchain, but the world’s first smart contract network no longer has the market in such an iron grip. In recent years, a new generation of faster, more high -performance block chains such as Solana, Radix and Sui has emerged with competing Defi platforms, which leads to the rise of a more lively ecosystem.
However, the biggest challenge of Ethereum in Defi may not come from those pretenders, but a much older steadfast in the blockchain industry. That would be none other than Bitcoin, who cherishes a still small but fast -growing Defi industry.
Bitcoin-based Defi has already enjoyed considerable growth, in which Defilama estimated that the total value locked in BTC-friendly protocols increased to a peak of $ 6.6 billion at the end of February, an increase of only $ 307 million in January 2024.
Where did Bitcoin Defi come from?
For a long time it was thought that Bitcoin-Native Defi was simply not possible, due to the lack of a suitable architecture to support smart contracts. To use Bitcoin in Defi, was the only way to deposit BTC with a custodian such as Bitgo to be called another active, called “Wrapped Bitcoin” or WBTC, on the Ethereum -Blockchain.
The value of WBTC is linked to that of Bitcoin, and it is compatible with every Defi protocol on Ethereum, but the dependence on a custodian was a deal-breaker for many people, because Bitcoin all runs over decentralization.
That is why innovators such as Rootstock, Stacks and Liquid Network urge to create an alternative, to develop Layer-2 networks that offer advanced, smart contract options for Bitcoin-Native Activa. These networks make Ethereum-like Defi possible for BTC holders, which extends its usefulness of a simple payment mechanism and value storage in a programmable and yield-generating active, just like Altcoins such as Eth, Sol and Dot.
For example, protocols such as Babylon enable users to use BTC, so that their coins are locked in a smart contract. The idea is to use the BTC used as collateral to secure block-of-stake block chains of third parties, and in exchange, deposits can earn rewards in the native assets of those networks.
What is special about Bitcoin Defi?
Bitcoin Defi has enormous potential for two important reasons: first of all, it promises to unleash enormous liquidity in the Defi Ecosystem, in contrast to everything we have seen so far. That is because Bitcoin remains by far the most valuable digital active, with a total market capitalization of more than $ 2 trillion, making it more valuable than any other cryptocurrency combined.
If Bitcoin Defi rises, this opens the locks for billions of dollars in value to flow into the Defi -Ecosystem, creating incredible opportunities for Bitcoin holders.
Secondly, people are enthusiastic about Bitcoin Defi because of the security benefits. Simply put, Bitcoin is the most safe blockchain protocol that is there, and in his 16-year history it has never been hacked or taken offline. In contrast to other Defi networks, such as Solana, who suffer famous suffering from five hours in February 2024, frustrates thousands of Defi users and miss many opportunities.
The very resilient network of Bitcoin can offer a Rock-Solid Foundation to build Defi applications, making it very attractive for institutions.
One way to do this is to use Satlayer’s Bitcoin validated services, which expand the protection of Bitcoin in a similar way to how actively validated services developers enable to use Ethereum’s security.
With Satlayer, developers can use BTC as collateral for a series of Dapps and Services, including data or-sakes that offer priceFeeds to Bitcoin-based Defi protocols, cross-chain-bruggen, which provide compatibility between Bitcoin and other networks that have an efficiency way, which can be used to use it to be visited,-modify-modifying,
Traditionally, such DAPPs should build their network of validators, but with Satlayer’s BVS they can use a ready-made validator set. Every BVS is protected by repeated capital of Satlayer users, who can earn significant rewards for depositing collateral.
Satlayer uses a combination of online and off-chain mechanisms to stimulate good behavior of validators and to punish those who misbehave. One is cutting, so that protocols can remove the repeated collateral if the validator tries to cheat. This acts as a strong deterrent that promotes fair behavior, and there are further stimuli for validators to keep an eye on each other.
With his BVS -based security for DAPPS, Satlayer builds a new economic layer on Bitcoin that unlocks programmability for the world’s best -known digital assets. It builds a system where Bitcoin can arise as an important primitive for Defi and Real-World assets, flooding of liquidity in the ecosystem and offers enormous value for Bitcoin holders.
Why does Bitcoin Defi leave?
Bitcoin has received a lot of renewed interest from traditional financial institutions in the past year, with the approval of the first Bitcoin exchange-bound funds that help stimulate a sharp rise in the price of BTC. Last December the value of Bitcoin was $ 100,000 for the first time, generating even more excitement and encouraged many more people to invest.
We have also seen that a number of popular cryptocurrency -fairs Bitcoin -Defi -Services are starting to offer, including people like Binance and OKX, who have integrated Bitcoin deployment.
Add the growing variety of Defi chances to Bitcoin. There are various Bitcoin Defi ecosystems, with one of the leading piles, a separate blockchain that controls transactions on Bitcoin using the proof-of-transfer consensus mechanism. Stacks supports smart contracts and serves as a platform on which developers can build daps, just like Ethereum. Users can exchange BTC for SBTC, a token that is linked to the price of Bitcoin but does not use preservators. With SBTC they can perform a series of yield-generating activities, such as offering liquidity for crypto exchanges and collateral for loans.
Rootstock is a side that uses Merge-Mining to link itself to Bitcoin. It uses an Ethereum-compatible virtual machine to support DAPP development, and BTC can be locked in smart contracts to Mint RBTC, another Bitcoin-Pegged Activum. Another popular Bitcoin Defi protocol is Sovryn, so that native BTC can be used in activities such as margin trade and loans. It has also launched Bitcoin-Stridden Stablecoins, such as DLLR and DOC.
Even more Bitcoin Defi platforms are Liquid Network, Merlin Chain, Alex, Taproot activa and BitVM.
Perhaps Bitcoin Defi’s largest sales argument is the fact that Bitcoin remains the undisputed king of Crypto. There is never a shortage of demand for Bitcoin, and it remains head and shoulders above all other digital assets. Bitcoin-based Defi protocols can offer their users the opportunity to earn real BTC as a proceeds, so that investors want exactly what they want to be more Bitcoin.
What does the future hold?
Bitcoin is still a very small part of the general Defi eco system, but it is also very quickly mature. The first bitcoin-based defi-protocols were only experiments by developers who saw whether it was even possible, but those ideas are metamorphosed in a robust ecosystem consisting of layer-2’s, sidechains and dapps.
Thanks to Defi, Bitcoin now has usefulness that many said it would never be possible, and although challenges continue to exist in terms of scaling the ecosystem, rapid progress continues to make.
For Bitcoin-based Defi to catch and surpass Ethereum and Solana, there is a big task, but Crypto is an industry that rarely deteriorates. As more innovation takes place and more users jump into it, Defi will continue to expand the usefulness of the world’s best crypto activum.
