The DeFi trend has been on a rise since the early quarter of this year. Currently the total value locked in DeFi has reached $12 billion, representing an incredible 1,550 percent increase since last year. The DeFi boom has also led to huge growth for Ethereum as most of the DeFi applications are based on ETH blockchain network. However, although Bitcoin is the ruling cryptocurrency yet BTC is yet to make a significant contribution to the DeFi ecosystem. And per the experts, DeFi might not sustain in the long-term if Bitcoin is not involved in the DeFi world.
It’s not that the crypto and blockchain community isn’t trying to involve Bitcoin in the DeFi zone. Mention must be made of Wrapped Bitcoin (WBTC) here which is an ambitious attempt by digital asset custodian BitGo to integrate BTC with the DeFi space. WBTC takes BTC’s value and combines it with the programmability of Ethereum to allow additional yields for investors for their BTC investments and that too without cashing out the coins. Over the last couple of months, around 1 billion USD worth WBTC has been put into ETH network- which eventually hints as the demand for active deployment of Bitcoin in the DeFi space.
While the wrapped representation is a welcome move but a more practical thing would be to build DeFi products directly on Bitcoin – just the way we see with DeFi applications on Ethereum. It’s surprising that despite boasting the largest market capitalization as a digital asset, Bitcoin has not been involved in large scale in the DeFi world. One major reason behind this is , unlike Ethereum which is an “active” asset, Bitcoin is a passive asset. Bitcoin shows scalability concerns and scripting language restrictions which make it challenging to build DeFi products right on Bitcoin blockchain.
It’s to note here building DeFi products on Bitcoin blockchain is any day more secure than the wrapped Bitcoin versions. But, to ensure a conducive environment for that Bitcoin needs to be transformed from a passive asset to a yield-generating active asset. Now, the problem is, unlike the Ethereum community which is open to experimentation and hence welcomes new concepts like DeFi- Bitcoin, the community prefers to play safe and stays away from much of experimentation. Put simply, the BTC community prefers not to take risks out of the fear of losing out on their assets.
But as per the experts, it’s about time that the BTC community gives a nod to transform Bitcoin from a passive to active asset.
“Bitcoin is on a rise and might touch its 2017 ATH level this year only. The way it’s rising exponentially high, Bitcoin shows strong potential to be the largest blockchain in near future. And hence, it’s extremely important to involve BTC in DeFi because without the support of such a huge digital asset, DeFi can’t survive. DeFi is all set to usher in a reformed financial order that would benefit the whole scene of economy worldwide and it must be allowed to grow”, stated Sina Estavi, CTO of rising decentralized oracle Bridge Oracle.
The crypto world is extremely hopeful about a continued bull run in the BTC sphere. Legendary financial authorities like JP Morgan have projected that the asset might cross iits ATH anytime soon.
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