A report by Coinmarketcap and Footprint Analytics reveals Bitcoin’s growing role in decentralized finance (defi), with $1.07 billion locked and innovations like Taproot and Rootstock driving expansion.
Bollywoodfever: A recent report from Coinmarketcap (CMC) Research and Footprint Analytics delves into the rapid growth of decentralized finance (defi) on the Bitcoin blockchain.
Once seen primarily as a peer-to-peer currency, Bitcoin is now emerging as a key player in the defi space, thanks to recent technological innovations that are expanding its capabilities.
Bitcoin’s Defi Ecosystem Grows to $1.07 Billion
According to the study, Bitcoin’s role in defi has significantly evolved, with advanced features like Rootstock and Taproot enabling more complex financial applications such as decentralized exchanges and smart contracts.
As of September 2024, the total value locked (TVL) in Bitcoin-based defi projects has reached $1.07 billion, marking a 5.7x increase since January of the same year.
The Taproot upgrade, while not a defi solution in itself, has greatly enhanced Bitcoin’s smart contract capabilities by condensing complex transactions into a single hash, reducing transaction fees, and minimizing memory usage. This improvement has laid a strong foundation for future defi developments on Bitcoin.
Bitcoin Gains Ground in Defi
Traditionally, Ethereum has dominated the defi ecosystem, but Bitcoin is quickly gaining ground.
The report attributes Bitcoin’s rise in defi to its unparalleled security and decentralized nature, which provide a solid foundation for the burgeoning Bitcoin-based finance (BTCFi) ecosystem.
However, challenges like scalability and transaction speed remain hurdles to further adoption.
The report highlights that layer two (L2) solutions such as the Lightning Network, along with sidechains like Core and Merlin Chain, are helping Bitcoin handle defi activities without compromising its core values of security and decentralization.
Data from the study shows that Core is the leading Bitcoin-based defi platform, accounting for 27.6% of TVL across all Bitcoin L2 solutions. Other notable platforms include Rootstock, Merlin Chain, and Sovryn.
Opportunities for Bitcoin in Defi
Platforms are continuously developing new ways for Bitcoin holders to engage in defi activities, including lending, borrowing, and yield farming.
Additionally, wrapped Bitcoin (WBTC) allows Bitcoin holders to access Ethereum’s defi ecosystem, even as native Bitcoin defi continues to gain traction.
The researchers are optimistic about Bitcoin’s future in defi, anticipating further growth as technical obstacles are addressed and the regulatory landscape evolves.
Innovations like Discreet Log Contracts (DLCs) and improved interoperability with Ethereum are expected to play a key role in expanding Bitcoin’s defi footprint.
As the Bitcoin defi ecosystem matures, it’s likely to draw more attention from retail and institutional investors, potentially reshaping the broader cryptocurrency market.
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