Developers Navigate Challenges to Fuel Bitcoin DeFi Growth and Ecosystem Expansion
Summary:
The 16-year-old blockchain platform has seen significant growth, with developers expecting a potentially prosperous ecosystem despite market corrections. Key challenges for BTCFi's expansion are the lack of base yield and liquidity fragmentation. Yield protocols like SolvBTC are being developed, enabling Bitcoin holders to generate revenue from DeFi. Meanwhile, developers are working on enhancing the Bitcoin blockchain's capacity to improve its DeFi efficiency. There is an emphasis on the fact that Bitcoin, despite being the earliest and lacking smart contracts, remains the preferred choice for web3 applications.
Over the course of the previous 12 months, the original 16-year-old blockchain platform has grown to include new aspects like Ordinals, Runes, and BRC-20 tokens. Despite the market's corrective phase, developers continue to seek progression, anticipating a flourishing ecosystem yet to come. As SolvBTC's co-founder Ryan Chow discussed with Cointelegraph, obstacles to BTCFi's growth currently include a deficiency in base yield and liquidity fragmentation. This situation has resulted in significant amounts of Bitcoin remaining inactive, essentially leaving them out of DeFi's playing field.
The SolvBTC, a yield protocol for Bitcoin, is engineering Liquid Yield Tokens. These enable Bitcoin possessors to deposit their assets and generate revenue from DeFi by using a process similar to Ethereum's liquid staking tokens. Initiated earlier this year, the endeavor has managed to draw a total value locked of $1.3 billion spread over 292,000 participants.
In a bid to elucidate, Chow cited the SolvBTC Ethena Vault as a case study to illustrate how Solv ensures a stable base return and bountiful earning opportunities for Bitcoin users. The explained process involves using Bitcoin as collateral to acquire stablecoins, which are then put into use for minting and staking Ethena's USDe. This routine seizes yield garnered from funding rates procured from delta hedging derivatives positions. Using this method, users might potentially earn a competitive approximate APY of 15%.
Furthermore, both Solv and Ethena offer bonus token incentives for the Vault, potentially escalating the total yield ratio. Simultaneously, Solv is working on extensive DeFi integrations for SolvBTC.ena, expanding avenues for additional yield opportunities across varied networks.
SolvBTC is scheduled to launch on the Ethereum mainnet soon, which would enable its participants to take advantage of the wrapped Bitcoin (wBTC) liquidity and produce yields directly within the Ethereum DeFi ecosystem.
Master Yield Market, yet another yield protocol for Bitcoin, consolidates all yield-generating assets within the Bitcoin ecosystem. This protocol enables users to purchase Bitcoin yield assets derived from native DeFi blockchain protocols using Tether, Ethereum, and wrapped Bitcoin.
On the other hand, some developers are aiming to enhance the basic capacity of the Bitcoin blockchain to bolster its DeFi efficiency.
Sunny Fung, core developer of MetaID, mentions that Bitcoin is incapable of resolving its overcrowding and high fee issues in the near future. However, Layer solutions can alleviate this by combining individual transactions into a single application, promoting efficiency.
Fung further notes that even though Bitcoin was the pioneer and did not incorporate smart contracts, it is still the preferred choice for Web3 applications due to its highest consensus, decentralization, security, and on-chain data storage through satoshis.
Published At
6/24/2024 8:30:00 PM
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