Welcome to Slate Sunday, CryptoSlate’s weekly column featuring in-depth interviews, expert analysis, and thought-provoking opinion pieces that go beyond the headlines and explore the ideas and voices shaping the future of crypto.
I’m balanced on a box with a poor WIFI connection and a glitchy computer. A move disrupts literally every aspect of your life, yet I am determined to maintain an uninterrupted workflow.
It lends itself to crypto anyway. The number of meetings I’ve held from an airport, amusement park, or other random location is increasing.
In the spirit of building the plane as we fly, I expect that Alexei Zamyatin, the brains behind the BTCFi project Build on Bitcoin (BOB), has done the same. He doesn’t seem to mind because I get kicked out of our conversation halfway through our chat and have to reconnect.
One quick connection from my phone and we’re back in business. I want to pick his brain about one of the most misunderstood concepts in crypto: Bitcoin DeFi. What is it, what’s wrong with it, and does it even matter if Bitcoin holders are still silently clutching their keys?
“Blockchain, not Bitcoin,” and back again
Alexei got into Bitcoin through a back door, “like a lot of people did.” With a background in computer science, he went to work at an IT research center in Austria, where his colleagues were “very enthusiastic about privacy and censorship resistance.” That, of course, led him to Bitcoin.
Fascinated by blockchain technology, he quickly turned his attention from Bitcoin to other altcoins and their functionality. Besides stacking and holding, Alexei saw a world of possibilities:
“I got really excited about what else we can do with the technology. So I think early on I was in the blockchain camp, not the Bitcoin camp.”
He admits that his position changed quite quickly once he understood the true value of BTC as an asset, and he started finding ways to combine the technology of smart contract platforms like Ethereum with Bitcoin as an asset.
Alexei then fell down the rabbit hole of merge mining and cross-chain bridges, and co-authored early work on Ethereum rollups, before founding BOB:
“We were on a mission to truly build a platform that acts as a gateway to Bitcoin DeFi, allowing Bitcoin holders to stake their BTC into the DeFi ecosystem in a secure and transparent manner and access these DeFi opportunities with a single click.”
Finding the pain points
Yet the world of BTCFi is still nascent, and it all feels somewhat stuck in first gear compared to glitzy Ethereum L2s and dApps. Why is that? Alexei doesn’t hide it:
“If you want to use Bitcoin in DeFi today, you have to link it to other chains and you have to choose from more than fifty providers that are fragmented and not super transparent.”
Wrapping, bridging, risk: these are the sticky realities, and don’t forget the users themselves. According to a recent study by GoMining, 77% of Bitcoin holders have never tried Bitcoin DeFi, and 65% cannot name a single BTCFi project.
GoMining CEO Mark Zalan (who is about as old-school banking as they come and manages IT for major commercial banks) confirms that it’s not just Bitcoin users who are getting lost. He told me:
“Crypto in general, Bitcoin in particular, is still very complicated in terms of usability. It’s still far from the kind of intuitive, user-centric experience that the best products like Apple can provide… That’s not unique to crypto. It’s not unique to Bitcoin. This is a challenge that every startup development environment faces.”
Not all users will jump through hoops
Mark says there will always be initial adopters who are technical in nature, focused on the product and able to “jump through a certain number of hoops because that’s what early adopters do.” But to attract a broader base, BTCFi needs to meet the rest of its user base where it is at. He shares:
“What the research told us is that it feels like that’s where we’re at with Bitcoin, and the next hurdle to overall broader adoption is making it much more user-friendly, both in terms of concepts and usability.”
For Alexei it is a double dilemma. He admits that UX is “mainly for experts,” and is better navigated by those with a computer science degree. But the incentives to own Bitcoin also need to be improved.
“Bitcoin doesn’t have native returns… It’s not the same as holding Bitcoin as an asset, or staking it and getting more of it, like you have with Ethereum or Solana. So it’s a very different risk profile here. The second problem is, with Bitcoin and DeFi, it’s not native yet.”
Build something different
What does BOB actually offer? Alexei claims to offer the easiest and safest way to earn with Bitcoin. BOB Gateway leverages the best of both Bitcoin and Ethereum, allowing cross-chain Bitcoin yields and swaps on any chain with just one click.
Users essentially become validators on the network and are prevented from performing malicious actions such as double signing, as they can be truncated and have their BTC deleted.
This tamper-proof, validator-slashing approach is more than just a technical pitch; it is a defense against the nightmare scenario:
“If you attack the system, you lose your Bitcoin. And in exchange for securing the system and staking your Bitcoin, you get Bitcoin staking rewards. These are paid from the fees that BOB generates as a chain.”
And best of all? Unlike some other services that allow users to earn rewards in another token, because it is native Bitcoin, the rewards are paid out in BTC.
Who Needs Bitcoin DeFi Anyway?
But is this really for the crowd who bought Bitcoin just to hold and watch? Mark remembers many conversations at the Bitcoin conference in Vegas in May, saying:
“The general feeling is that it is still complicated.”
Yes. If Bitcoin DeFi is complicated for Bitcoiners, who are generally an order of magnitude more tech-savvy than the average consumer, what hope is there for the rest of the world?
Alexei is diplomatic:
‘I wouldn’t say that [Bitcoiners] are not our customers. It is important to accept that there is an acceptance curve and that there are people who are inherently against using financial products. That has nothing to do with Bitcoin itself; those are just people who don’t want to use financial products. The vast majority, especially the younger generation, are very keen on the yield. We use neobanks. We want to make sure we protect ourselves against inflation.”
He points out that the same situation applies to BTC holders. While Bitcoin is widely accepted as a good hedge against inflation, it still doesn’t maximize returns by sitting idle:
“That’s old capital if you don’t do anything with it, and we’re seeing more and more demand for returns on Bitcoin… What people really want is something like Ethereum, where you just stake your Bitcoin and you get more BTC. And actually that’s something we’re working on.”
“There are so many bridges, there are so many hurdles, and the UX is just terrible. That’s why we launched BOB Gateway, which with one click allows you to stake your Bitcoin into all these other DeFi opportunities across these 11 chains.”
Bob Gateway is all about access, allowing users to easily and natively connect to multiple chains and stake their BTC, simplifying some of the bottlenecks of other existing solutions.
What’s next for BTCFi? And what can go wrong?
With every major chain chasing Bitcoin liquidity, BOB is determined to be the “scoop seller” in the next gold rush. And the first results?
“The system is stable. We’re seeing quite a bit of early activity. We’re pretty close with teams at BNB, Base, Unichain, Avalanche… And we’re seeing a lot of interest from networks we don’t support yet, like Aptos, Solana, etc… because a lot of apps are just looking for easier ways to engage users in the protocols, so I think this is a really good first sign.”
Can anything go wrong with Bitcoin DeFi? Alexei admits that there are always “technical risks” associated with open source protocols, but says this is decreasing over time as more people use and verify them. And as for malicious actors? Well, there’s no incentive:
“For example, if you attack the system, you lose your Bitcoin. But if you don’t, you don’t lose your Bitcoin, right? It’s pretty simple.”
As Bitcoin DeFi evolves and its user base becomes more sophisticated, I ask Alexei if anything else worries him, such as the industrialization of space, and the voracious appetite of entities like Strategy and Metaplanet gobbling up the BTC supply.
He’s certainly not blasé about the risks, but points out that the advantage of Bitcoin’s proof-of-work system, as opposed to proof-of-stake, is that owning more Bitcoin doesn’t give you more control over the network. In that respect, Michael Saylor’s strategy is not a threat. However, it is important that we do not simply recreate traditional finance on blockchain rails.
“Owning a large percentage of the supply gives you some leverage, and bad actors will try to use this leverage. But ultimately… the network is so distributed and decentralized that the fact that MicroStrategy is collecting so much BTC won’t break the system… The biggest risk is probably that governments will simply seize these funds.”
Final thoughts
There is a clear sense, even among the founders, that Bitcoin DeFi is still a nascent market; less “Apple Store experience” and more command line.
The gold rush has begun, but there are still plenty of hills to climb: native yield, user experience, an education gap, and the ever-present shadow of centralization.
If the issues are resolved, the next wave of Bitcoiners may never again settle for just HODLing. But for those in the trenches, that’s a pretty tall order for now.
