The cryptocurrency landscape is witnessing a significant shift as decentralized finance (DeFi) pioneers set their sights on Bitcoin, the original blockchain. At the TOKEN2049 event in Dubai, Alexei Zamyatin, co-founder of the platform Build on Bitcoin, emphasized the untapped potential of Bitcoin DeFi, claiming that the company that effectively launches user-friendly services for Bitcoin’s estimated 300 million users could dominate the market.
Zamyatin’s insights showcase the growing appeal of Bitcoin-based DeFi, particularly in its strong retail user base, which he believes offers a broader reach compared to platforms built on Ethereum and Solana. He stated, “The advantage of Bitcoin DeFi is that the market is much bigger,” highlighting the unique opportunity for growth in products like Bitcoin yield and stablecoins.
“If you manage to win in Bitcoin DeFi, you win the entire market,” Zamyatin stated.
Build on Bitcoin aims to capture this momentum by offering a hybrid layer 2 solution that merges Bitcoin’s robust security with the innovative features often seen on Ethereum, utilizing a platform known as BitVM. This initiative comes at a time when Bitcoin staking has emerged as one of the primary use cases in the DeFi space, following traditional payment systems.
Despite Bitcoin’s potential, it currently holds only a fraction of the total value locked (TVL) in DeFi compared to Ethereum, which stands at around $54.6 billion. Zamyatin pointed out that while interest in Bitcoin-backed stablecoins is surging—due to Bitcoin being viewed as “the best collateral”—the integration of reliable bridge solutions remains a contentious topic within the industry. Many firms are striving to enhance the security of these bridges, which allow the transfer of assets across different blockchain platforms, as previous incidents of hacks have raised concerns.
While competition for market share intensifies, especially in catering to retail investors, institutions appear more cautious. They tend to rely on reputable custodians instead of decentralized solutions, often due to uncertainties surrounding transaction signers. As Bitcoin DeFi continues to evolve, the race to build a user-friendly and secure ecosystem is on, promising exciting developments for the future of the blockchain.
The Future of Decentralized Finance on Bitcoin
Key points regarding the potential impact of decentralized finance (DeFi) on the Bitcoin blockchain, as discussed by co-founder Alexei Zamyatin at TOKEN2049.
- Market Opportunity:
“The advantage of Bitcoin DeFi is that the market is much bigger, you have a much bigger retail user base that you can tap into.”
This highlights an enormous potential audience for DeFi products, which could benefit both providers and users.
- Hybrid Layer 2 Solutions:
Build on Bitcoin offers a hybrid solution combining Bitcoin’s security with Ethereum’s DeFi capabilities.
This innovation can allow users to experience DeFi services in a more secure environment.
- Institutional Demand:
“A lot of institutions that are buying Bitcoin now usually have to find yield on the assets they hold.”
The growing interest from institutional investors could lead to increased liquidity and stability in the market.
- Bitcoin-backed Stablecoins:
Demand for Bitcoin-backed stablecoins is skyrocketing because Bitcoin is the “best collateral.”
This trend could make Bitcoin a central player in stablecoin markets, making transactions easier and more reliable.
- Challenges with Bridges:
Zamyatin noted many institutions hesitate to use bridges due to concerns about transaction signers.
Without solutions, the integration between blockchains may be limited, affecting users’ accessibility to DeFi products.
- Use of Trusted Custodians:
Institutions prefer using custodians like BitGo and Coinbase due to the anonymity of decentralized networks.
This may limit the adoption of decentralized solutions, affecting the overall growth of Bitcoin DeFi.
Bitcoin DeFi: A Game Changer or Just Another Hype?
The landscape of decentralized finance (DeFi) is shifting dramatically, with Bitcoin now in the spotlight. Alexei Zamyatin, co-founder of Build on Bitcoin, argues that the company poised to deliver a seamless suite of DeFi products on Bitcoin could potentially capture a massive market of roughly 300 million users. This marks a pivotal moment where Bitcoin, traditionally seen as a store of value, steps into the arena dominated by Ethereum and Solana.
Competitive Advantage: The most significant advantage that Bitcoin DeFi holds over its competitors is its potential user base. With 300 million users already familiar with Bitcoin, the adoption curve could be flatter compared to Ethereum-based solutions that have yet to appeal to a broader audience. Zamyatin emphasizes that yield and stablecoin products are already driving institutional interest. The burgeoning demand for Bitcoin-backed stablecoins is an indication that Bitcoin might finally be recognized not just as “digital gold,” but as a multifaceted financial instrument. Additionally, Bitcoin’s strong security features could make it a more attractive option for users who prioritize safety in their investments.
Competitive Disadvantages: Despite its advantages, Bitcoin DeFi also faces significant hurdles. The current total value locked (TVL) in Bitcoin-based DeFi pales in comparison to Ethereum’s, with Bitcoin holding a mere fraction of the $54.6 billion in Ethereum. While Zamyatin notes the necessity of developing user-friendly Bitcoin-native bridges, the delayed adoption poses risks and keeps potential users at arm’s length. The lingering hesitancy from institutions regarding unexplored bridge solutions presents a challenge that could slow the growth of Bitcoin DeFi.
Moreover, security issues have marred the reputation of blockchain bridges, making institutions wary of navigating an ecosystem where anonymity can complicate trust. This is particularly damaging when competing against established custodians like BitGo and Coinbase Custody, who have built reputations on trust and reliability.
Who Benefits and Who Faces Challenges? Crypto enthusiasts and early adopters stand to gain the most if Bitcoin DeFi takes off, as they would have unprecedented access to yield and financial products previously confined to Ethereum. These individuals could become the forefront adopters, driving further interest and investment. On the flip side, institutions that remain risk-averse will continue to miss out on potential opportunities for yield and diversification through Bitcoin’s DeFi landscape. Furthermore, should Bitcoin successfully integrate DeFi functionalities to attract institutional players, this could spell trouble for Ethereum and Solana, who may find their dominance in the DeFi space challenged. The competitive balance could shift fundamentally, disrupting established business models and strategies across the sector.
