DeFi
Why is Bitcoin DeFi flourishing? Developers share their ideas — TradingView News
Over the past year, the 16-year-old namesake blockchain has seen the arrival of new features such as ordinals, runes and BRC-20 tokens. Despite this, developers are undeterred by the sight of a market correction, speaking of a booming ecosystem ahead.
“There are currently two key factors hindering the development of BTCFi, lack of core yield and liquidity fragmentation,” Ryan Chow, co-founder of SolvBTC, told Cointelegraph in an interview. “These factors have led to a significant amount of Bitcoin being left unused, unable to actively participate in the DeFi ecosystem.”Cointelegraph
As a Bitcoin yield protocol, SolvBTC is currently developing liquid yield tokens that would allow Bitcoin holders to stake their assets and earn income through DeFi, analogous to liquid staking tokens on the Ethereum blockchain. Launched earlier this year, the project has since attracted a total value locked of $1.3 billion from 292,000 users.
“I would like to take SolvBTC Ethena Vault as an example to explain how Solv brings stable base yield and rich income opportunities to Bitcoin users,” Chow clarified. “The Vault uses Bitcoin as collateral to borrow stablecoins, which are then used to mint and stake Ethena’s USDe. This process captures the funding rate yield generated by delta hedging derivative positions. Under this strategy, users can earn a competitive APY of around 15% net.”
He added: “Additionally, Solv and Ethena are offering bonus token incentives for this vault, potentially increasing the overall yield even higher. Simultaneously, Solv is developing rich DeFi integrations for SolvBTC.ena, which allow users to explore additional yield opportunities across multiple networks. “.
SolvBTC will soon launch on the Ethereum mainnet, allowing its users to mine Bitcoin (wBTC) wrapped liquidity and generate yields directly on the Ethereum DeFi ecosystem.
Master Yield Market is another Bitcoin yield protocol that was recently launched and consolidates all yield-generating assets within the Bitcoin ecosystem. The protocol allows users to directly purchase Bitcoin yield asset sources from blockchain-native DeFi protocols using Tether, Ethereum, and wrapped Bitcoin.
Meanwhile, other developers are working to increase the underlying capacity of the Bitcoin blockchain in order to improve its DeFi performance.
According to MetaID lead developer Sunny Fung, Bitcoin “cannot solve the problem of congestion and high fees in the foreseeable future.” However, solutions layered on top of Bitcoin can alleviate the problem by consolidating individual transactions into a single application to save time and effort.
“MetaID introduces the concepts of unified UTXO chain and unified Bitcoin address, which effectively solve Bitcoin’s congestion problem and fully unlock the potential of seamless Layer 2 networks with Bitcoin,” Fung told Cointelegraph, “As long as this is a seamless Bitcoin, Layer-2, or even BCH sidechain with Bitcoin, MetaID can theoretically support it seamlessly.
Fung also commented that although Bitcoin was “designed earliest and lacked smart contracts”, it remains the “best support for Web3 applications” due to features such as highest consensus, decentralization, security and on-chain data storage via satoshis.
Related: Bitcoin Layer 2s Aren’t Really L2s: Here’s Why It’s Important