Bitcoin DeFi Continues To Grow But Not On The BTC Network

It is a well-known fact that most people will not look at bitcoin for DeFi purposes. The network has a few DeFi solutions, although its TVL remains minimal compared to other networks. Even so, there are a few good opportunities to earn yield with BTC and without dealing with custodians.

Bitcoin DeFi A Real Thing

It may seem somewhat unusual to leverage the world’s largest cryptocurrency in a decentralized finance setting. To date, there have only been a handful of projects exploring passive returns for BTC. None of these protocols is very successful compared to Ethereum or other networks, but that is to be expected. Even so, earning passive income on one’s BTC holdings without intermediaries remains an appealing prospect.

Noteworthy options to explore include Sovryn, BiFi – cross-chain protocol with BTC support – and Money on Chain. All of these solutions help users put their BTC to work without too much friction or unnecessary intermediaries. Unfortunately, these options do not seem to gain much traction, even though users can expect a decent return. 

One must wonder what would make Bitcoin holders explore decentralized finance opportunities. It is unfavorable to lock up funds for long periods, given the price volatility. Markets can change on a dime, and most people see bitcoin as a get-rich-quick scheme, even though it is far from one. However, those who firmly believe in the future potential of BTC may want to keep stacking sats through passive income streams. 

Exploring decentralized finance opportunities would be a natural fit for long-term holders. Earning more BTC while keeping one’s portfolio intact seems like a no-brainer. However, the parting with a BTC balance – either temporarily or for a specific duration – seems to negate the appeal of future gains. Therefore, one must wonder what it will take to ensure Bitcoin DeFi takes off for good and rivals decentralized finance on networks like BNB Chain and Ethereum. 

More BTC Support Rolls Out

One curious development is how other networks try to integrate bitcoin into their DeFi offerings. Thorswap Finance, for instance, has over $100 million in BTC locked up. Those users earn a passive 15% APY, which is a  more than decent amount. The platform offers similar rathers for Ethereum and Luna, with other assets earning up to 43%.

As these solutions – which do not reside on the Bitcoin network – gain more BTC TVL, it seems unlikely Bitcoin DeFi will become more prominent. An unfortunate turn of events, as the Bitcoin network has the highest security of all public blockchains. Moreover, it continues to attract miners willing to secure the ecosystem and process transactions. 

Unfortunately, the Bitcoin network has severe technical constraints. It is slow to use due to low throughput. People exploring decentralized finance want fast transactions, which Bitcoin does not offer today. Improvements are possible through the Lightning Network, although there is work to do on that front too. The future of DeFi has a place for BTC, but it will seemingly not happen on the Bitcoin network just yet. 

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JP Buntinx

JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.

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JP Buntinx

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