Cryptocurrency: Bitcoin over altcoins
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First Satoshi created Bitcoin BTC. And he said, “Let's introduce blockchain,” and blockchain was born.
A decade has been an era in technology, and a lot has changed in the world of cryptocurrencies since the birth of the Bitcoin network. From the Cambrian-like explosion of altcoins to smart contracts and decentralized finance, on-chain innovations are making Bitcoin look obsolete.
Back to Bitcoin
Ironically, during bull markets where Bitcoin prices reach record highs, it underperforms compared to other markets. If you had bought Bitcoin in 2017 or early 2020, you certainly would have made a profit on your investment, but if you had bought other native protocol tokens like ETH, BNB, or ADA, you would have made even more money. You would have made double the profit.
Conversely, if the market starts to cool down and bearish conditions return, Bitcoin will overwhelm the competition. With altcoins shedding triple-digit gains almost as quickly as they occurred, there will be a flight to high-quality assets, with the biggest beneficiaries being Bitcoin, Ethereum, and of course stablecoins.
Lauren Stefanian, Partner at Pantera Capital, said: Bitcoin is the longest stored decentralized digital asset and is felt by many to be a more secure store of value. ”
But Bitcoin really starts to turn when the market bottoms out and the long, slow road to recovery begins. As BTC enters the accumulation phase, attention returns to the crypto asset that started it all, with renewed focus on building a product ecosystem to expand Bitcoin's utility and ultimately expand its market power. The focus is on.
In 2013, Bitcoin's dominance (the percentage of virtual currency market capitalization controlled by Bitcoin) reached 95%. By the end of 2017, this number had fallen to 32 percent and currently stands at 42 percent.
Build on top of the base layer
Over the past five years, hundreds of millions of dollars have been invested in building the base layer of Bitcoin. Projects such as Lightning Network and his RSK have aimed to extend Bitcoin's functionality through the creation of a secondary layer that supports subtokens, smart contracts, and microtransactions. The goal is to leverage Bitcoin's unparalleled security to create decentralized financial products built on the most liquid and trusted crypto network.
Portal, on the other hand, is building a full-fledged DEX and self-hosted wallet as a layer on top of the Bitcoin network. We aim to realize the promise of self-sovereignty for everyone by providing DeFi services such as asset issuance, swaps, staking, liquidity, and derivatives while maintaining Bitcoin's robust security.
Assessing the relationship between Bitcoin and DeFi, Stefanian highlighted the differences between the two, saying, “Bitcoin is a store of value, especially when you look at its volatility compared to most other assets in the space. It is believed that DeFi enables access to a variety of modular financial primitives, including global lending and trading.”
Stefanian said that Bitcoin DeFi is not yet widespread, as “the Bitcoin ecosystem does not offer the same developer tools and standards that other layers of the ecosystem offer.” I believe.
What is DeFi-enabled Bitcoin similar to?
A recent report commissioned by Trust Machines, “Bitcoin: Beyond the Base Layer,” outlines this vision. The authors acknowledge that extending Bitcoin's utility is a “multifaceted effort” that requires further funding and development to match the developer and user experience of EVM chains such as Ethereum. .
Trust Machines aims to use Bitcoin as the final payment layer for applications developed using Bitcoin's programming layer, Stack. The idea of trading NFTs on a Bitcoin-anchored network may seem novel, but this proof of concept brings the number of smart contracts deployed on the stack into the thousands. did. However, as the report points out, it is easier for developers to clone their Solidity contracts on the EVM chain than it is to code anew using his Clarity programming language on Stacks. is.
Dan Held, former director of growth at the Kraken exchange, is one who bought into the DeFi narrative around Bitcoin. Now, leveraging the Trust Machine, Bitcoin proponents are backing the original cryptocurrency to prove its doubters wrong, reinventing itself as a playground for decentralized finance and It is claimed that At this point, DeFi is not synonymous with Bitcoin, and most people believe that the two words are not actually linked. ”
Examples of construction based on Bitcoin
For years, blockchain developers have flocked to new networks aimed at hosting decentralized applications (dApps) for trading, lending, and savings. Such dApps rely heavily on smart contracts to interact with the blockchain, and Bitcoin in its raw state is completely unsuitable for this. Many of these so-called “next generation” blockchains simply replicate Ethereum down to the virtual machine, only with faster block times and modified consensus mechanisms for differentiation.
U-Zyn Chua, lead researcher at DeFiChain, believes that EVM is ideal for experimentation, especially new DeFi protocols, stating: His DeFi for Bitcoin is just that. The mature EVM-based HeFi will strengthen DeFi at the consensus level. ”
Despite the lack of originality exhibited by many post-Ethereum blockchains, these networks experienced rapid growth during the bull market that peaked in late 2021. Metrics such as total value locked, native token price, and number of wallets created reached record highs across the board. Last year saw the birth of networks like Harmony, Avalanche, and Terra. Then the market started to fall, exposing the fundamental flaws in the multi-chain model.
With the collapse of Terra's native stablecoin UST, the collateralized native cryptocurrency LUNA was reduced to zero. Billions of dollars have disappeared from the crypto market and thousands of crypto holders have lost their lifetime savings. The fallout caused a domino effect, wiping out crypto savings platform Celsius and crippled BlockFi and Voyager.
Coupled with the hacking of two major blockchain bridges that stole nearly $1 billion from the Ronin and Harmony One ecosystems, the multichain theory was quickly retracted. Chains with high speed and low security no longer look that attractive. The same goes for algorithmic stablecoins. The crypto collapse of 2022 exposed holes in both centralized and decentralized platforms and protocols. But one of the things he has kept true to its underlying promise is Bitcoin.
Has the network powering the next wave of DeFi innovation been hiding in plain sight all along?
trillion dollar opportunity
So far, no one has completely cracked the concept of “Bitcoin with a bell.” An all-singing, all-dancing ecosystem powered by BTC’s Proof-of-Work consensus and unparalleled decentralization remains a utopia for now. But that didn't stop imaginative people from dreaming big. Like the mythical city of El Dorado, there is a metropolis of digital gold just beyond the reach of maximalists who believe all roads lead to Bitcoin.
Billed as a trillion-dollar opportunity, the prospects for Bitcoin DeFi remain attractive.
“Imagine how powerful Bitcoin could be if more developers were actively building within its ecosystem,” said Hiro, creator of developer tools for Stacks. I think about it. “The capital is already in the ecosystem. The earliest cryptocurrency adopters own Bitcoin…By building compelling Bitcoin projects across DeFi, NFTs, DAOs, and other Web3 applications, A new flow will be created where the wealth hidden in Bitcoin can flow into it.”
Bitcoin may be the world's most powerful decentralized network, but is it the best candidate to host decentralized finance? Bear markets are built to build, and the crypto community has an obligation to this All eyes are currently on Merge. By the time the market rebounds and begins to regain its 2021 highs, we will know whether DeFi and Bitcoin have a common future or are doomed to remain estranged forever.
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