Bitcoin, also known as decentralized finance (DeFi) or BTCFi, is a revolutionary concept aiming to bring DeFi capabilities to the world’s original blockchain network. Nash Lee, co-founder of MerlinSwap, believes that if the current adoption rate continues, BTCFi could rival the innovation of DeFi on the Ethereum network in the future.
To demonstrate the demand for Bitcoin-native DeFi applications, MerlinSwap, a decentralized exchange (DEX), raised a staggering 6,599 Bitcoin (BTC), equivalent to $480 million, during its initial DEX offering (IDO) on April 5. This IDO attracted over 52,000 participants, highlighting the market’s confidence in and desire for Bitcoin-native DeFi applications.
MerlinSwap operates on Merlin Chain, a Bitcoin layer-2 network, and it achieved over $100 million in total value locked (TVL) on April 4. This milestone further solidifies the demand and trust in Bitcoin-native DeFi applications.
The birth of BTCFi can be traced back to the introduction of the BRC-20 token standard, which allowed for the creation of non-fungible tokens (NFTs) on the Bitcoin blockchain for the first time. These Bitcoin-native NFTs, known as Ordinals, are directly engraved on satoshis (sats), ensuring their permanent residence on the Bitcoin network. Unlike most NFT collections, where images and metadata are stored on centralized servers, Ordinals eliminate potential vulnerabilities.
The interest in Bitcoin-native NFTs is evident, with over 64.1 million Ordinal inscriptions recorded in less than a year and a half since the first Ordinal was created in December 2022, according to Dune.
In addition to Ordinals, the emergence of Bitcoin layer-2 networks plays a crucial role in BTCFi, as they expand the range of use cases for Bitcoin. Lee expressed his belief that these layer-2 solutions will contribute to the growth and development of BTCFi.
Looking ahead, historical data suggests that Bitcoin’s halving in 2028 could potentially drive the price to reach $435,000, further fueling the growth and potential of BTCFi.
Overall, BTCFi represents a promising and innovative frontier for Bitcoin, with the potential to rival Ethereum-based DeFi. The recent success of MerlinSwap’s IDO and the increasing interest in Bitcoin-native NFTs demonstrate the growing demand and confidence in BTCFi’s capabilities.