Ethereum has long been the preferred layer-1 for decentralized finance (DeFi), despite its issues with network congestion, security vulnerabilities, and the transition to proof-of-stake (PoS). Other layer-1 alternatives like Solana, Algorand, and Tron have not been able to surpass Ethereum’s dominance in DeFi. However, the changing regulatory landscape in the US is causing projects to seek a more reliable platform that offers the trustless, secure, and decentralized benefits they expect from crypto.
Bitcoin, the original digital currency, has the potential to play a significant role in mainstream DeFi adoption. Over the past fourteen years, Bitcoin has distinguished itself from other blockchains and can complement the DeFi ecosystem across layer-1s, serving as the centerpiece of multichain DeFi. At the time of writing, Bitcoin’s total value locked (TVL) is $158 million, compared to its $513 billion market cap. This is significantly less than the combined $38 billion TVL of all other chains in DeFi, indicating Bitcoin DeFi’s untapped potential.
As the only digital asset recognized as a commodity by the Commodity Futures Trading Commission, Bitcoin is gaining traction in the US regulatory landscape. The real “flippening” is connecting DeFi to Bitcoin, which combines the innovative dexterity of Ethereum with the purity of Bitcoin. The discussion around bringing DeFi to Bitcoin should focus on what Bitcoin-enabled DeFi can unlock for users and developers.
Bitcoin’s underlying proof-of-work (PoW) consensus mechanism provides the foundation for a global payment network independent of any single entity or governing body. This has attracted institutional investors, demonstrating its appeal to traditional finance power players. When projects are given access to Bitcoin’s stability, security, and privacy, they often switch back from alternative blockchains.
Bitcoin’s potential as the safest pathway for new users to enter DeFi is often overlooked due to long-standing narratives about Bitcoin. However, many of these narratives are no longer supported by active Bitcoin builders. Unlike other layer-1s, Bitcoin has the predictability of the halving in 2024, which historically has increased interest and kept network development separate from market fluctuations.
Bitcoin’s extensive user base drives network effects that create a compelling advantage for new users venturing into DeFi. This network effect fosters liquidity, reduces friction, and ensures seamless integration with DeFi platforms. Building Bitcoin DeFi does present challenges due to its simplistic design, but solutions have been created through smart contract capabilities by various layers.
Bitcoin’s robust blockchain, powered by a distributed network of nodes, offers a level of security and censorship resistance unmatched in traditional financial systems. While DeFi offers unparalleled financial freedoms and opportunities, its complexities can be intimidating. In this context, Bitcoin’s status as the safest pathway to DeFi cannot be overstated. Its stability, trust, network effects, security, interoperability, and regulatory compliance make it an ideal starting point for those seeking to explore the DeFi landscape.
Rena Shah, the Head of Operations and Strategy at Trust Machines, a company building the largest ecosystem of applications on Bitcoin, shares these views. Shah is a veteran in the crypto space with previous roles at Ember Fund, a retail-focused app, and with a market maker, Apifiny. She managed a $300M energy portfolio for the Family Office of the Houston Texans NFL team and is currently an Advisor at Tribe Capital.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | positive |
| Relevance Score | 1 |
| People | Rena Shah, Shah |
| Companies | Apifiny, Binance.US, Family Office of the Houston Texans NFL team, Tribe Capital, Ember Fund, Trust Machines |
| Currencies | Algorand, Ethereum, TRON, Bitcoin, Solana |
| Securities | None |
