Over the past year, the Bitcoin renaissance has brought a lot of attention to BTCfi, or “Bitcoin DeFi” applications. Despite the hype, very few of these applications have been able to deliver on their promises or retain a significant number of “real” users.
To put things into perspective, Liquidium, the leading lending platform for Bitcoin assets, allows users to borrow against their Runes, Ordinals, and BRC-20 assets. Where does the yield come from? Like any other loan, the borrower pays interest to the lender in exchange for Bitcoin. Additionally, to ensure the safety of the loan, the loan is always overcollateralized by the Bitcoin asset itself.
How big is Bitcoin DeFi right now? It depends on your perspective.
In approximately 12 months, Liquidium has made over 75,000 loans, totaling over $360 million in loans, and paid out over $6.3 million in native BTC interest to lenders.
I would argue that for BTCfi to be considered “real” these numbers need to grow exponentially and become comparable to numbers on other chains like Ethereum and Solana. (That said, I strongly believe that over time, all economic activity will eventually settle on Bitcoin and the comparison will become moot.)
That said, these achievements are impressive for a protocol that is only a year old and operates on-chain, where the slightest mention of DeFi is often met with extreme skepticism. Impressive. For additional context, Liquidium is already outperforming altcoin competitors such as NFTfi, Arcade, and Sharky in trading volume.
Bitcoin evolves in real time without requiring changes to the underlying protocol. I'm here for that.
After a rocky start, Rune now accounts for the majority of loans made in Liquidium, outpacing both Ordinal and BRC-20. Runes is a significantly more efficient protocol that reduces the load on the Bitcoin blockchain and slightly improves the user experience. The enhanced user experience provided by Runes not only simplifies the process for existing users, but also attracts a significant number of new users who want to get involved on-chain in a more complex way. In contrast, BRC-20 struggled to attract new users due to its complexity and non-intuitive design. Therefore, having additional financial infrastructure like P2P loans would be a step forward in the usability and adoption of Rune and, in the future, other Bitcoin-backed assets.
Loan volume on Liquidium has increased consistently over the past year, with Runes now accounting for the majority of activity on the platform.
Now, Rune is currently the primary asset backing Bitcoin native loans, so why should I care? Is this good for Bitcoin?
Regardless of your personal opinion about runes or the on-chain degen games happening right now, the fact that real people trust the Bitcoin blockchain to take advantage of Bitcoin-denominated decentralized loans. I would argue that freedom loving people should stand up and cheer.
we are winning.
Bitcoiners have always maintained that no other blockchain can match Bitcoin's security guarantees. Now others are starting to realize this too, bringing new forms of economic activity on-chain. This is definitely bullish.
Additionally, all transactions are natively secured on the Bitcoin blockchain, with no wrapping or bridging, and only with Bitcoin. We need to encourage and support those who are building in this way.
This article is take. The opinions expressed are solely those of the author and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
