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 the Bitcoin network. Serrano predicts that the market for Bitcoin layer-2 networks could surpass that of Ethereum layer-2s in terms of adoption and development.
Serrano’s remarks come just days before the anticipated Bitcoin halving, as the cryptocurrency was trading above $63,500 at the time of writing, following a 7.9% decline over the previous week.
To demonstrate the demand for BTCFi, the decentralized exchange MerlinSwap raised 6,599 Bitcoin, equivalent to $480 million, during its initial DEX offering on April 5. This offering attracted over 52,000 participants.
Bitcoin layer-2 networks play a crucial role in BTCFi by enabling lower transaction costs and expanding the potential use cases of the blockchain network. For example, the Stacks L2 network allows for the creation of smart contracts on the Bitcoin network.
Serrano argues that L2s are more important for Bitcoin than for Ethereum because Ethereum already has built-in smart contract capabilities. He believes that L2s are necessary to overcome the current transaction limitations of the Bitcoin network and scale it further.
Serrano also emphasizes the need to create yield-generating capabilities and lending protocols around Bitcoin to make it a more productive asset.
Nash Lee, the co-founder of MerlinSwap, shares this optimism about BTCFi. He believes that with the current rate of adoption, BTCFi could match the innovation seen in Ethereum DeFi.
In conclusion, BTCFi has the potential to enhance the versatility and productivity of Bitcoin by bringing DeFi capabilities to the blockchain network. With the increasing adoption and development of Bitcoin layer-2 networks, the market for BTCFi could outpace that of Ethereum layer-2s.