Bitcoin, the world’s first blockchain network, is set to become a more versatile asset with the introduction of decentralized finance (DeFi), according to Andre Serrano, the product and partnership manager at Stacks. This new development, known as Bitcoin-native DeFi or BTCFi, aims to bring DeFi capabilities to Bitcoin. Serrano predicts that the market for Bitcoin layer-2 networks could surpass the market for Ethereum layer-2s due to the rapid pace of adoption and development.
This prediction comes just days before the highly anticipated Bitcoin halving event. As of 8:30 am UTC, Bitcoin was trading above $63,500, following a 7.9% weekly decline. Investor demand for BTCFi is evident as decentralized exchange MerlinSwap raised 6,599 Bitcoin worth $480 million during its initial DEX offering on April 5, attracting over 52,000 participants.
Bitcoin layer-2 networks play a significant role in BTCFi by enabling lower transaction costs and expanding the use cases of the Bitcoin network. For example, Stacks’ L2 network allows for the creation of smart contracts on the Bitcoin network. Serrano argues that L2s for Bitcoin are even more crucial than for Ethereum, as Ethereum already has inherent smart contract capabilities. He believes L2s are necessary for scaling the Bitcoin network beyond its current transaction limitations.
Serrano highlights the importance of creating yield-generating capabilities and lending protocols around Bitcoin to make it a more productive asset. This, along with the current adoption rate, could lead BTCFi to match the innovation of Ethereum DeFi, according to Nash Lee, co-founder of MerlinSwap.
Overall, BTCFi is poised to revolutionize the capabilities of Bitcoin and make it a more versatile and valuable asset in the world of decentralized finance.