BTCFi is an ‘enormous opportunity’ to make Bitcoin a productive asset — Stacks

Apr 17, 202409:09 UTC

Bitcoin decentralized finance (DeFi) will make Bitcoin BTCUSD a more versatile asset with yield-generating capabilities, Andre Serrano, product and partnership manager at Stacks, told Cointelegraph in an exclusive interview:

“The vision is simple: Bitcoin is a $1.2 trillion asset class with very little on-chain activity. So there’s an enormous opportunity for protocols and layer-2s to make Bitcoin a productive asset.”

Bitcoin-native DeFi, or BTCFi, is a recent development seeking to bring DeFi capabilities to the world’s first blockchain network. With the current pace of adoption and development, the market for Bitcoin layer-2 networks could overtake the market for Ethereum layer-2s, according to Serrano:

“L2s just open up the design space for what’s possible with Bitcoin… Over the next few years, I fully expect the market for Bitcoin L2s to likely meet and exceed that of Ethereum L2s.”

Serrano’s predictions come days ahead of the anticipated Bitcoin halving, as Bitcoin was trading above the $63,500 mark as of 8:30 am UTC, following a 7.9% weekly decline, according to data from CoinMarketCap.

Showcasing investor demand for BTCFi, decentralized exchange (DEX) MerlinSwap raised 6,599 Bitcoin worth $480 million during its initial DEX offering (IDO) on April 5. The IDO attracted over 52,000 participants.

Bitcoin L2 networks are a significant element of BTCFi, enabling lower transaction costs and additional use cases for the world’s first blockchain network. For instance, L2 network Stacks enable the creation of smart contracts on the Bitcoin network.

Stacks’ Serrano argued that L2s for Bitcoin are more important than for Ethereum, which already comes with inherent smart contract capabilities. He added that L2s are necessary to scale the Bitcoin network beyond its current transaction limitations.Andre Serrano interview with Cointelegraph. Source: Cointelegraph

He noted that some of the “low-hanging fruits” for making Bitcoin a more productive asset involved the creation of yield-generating capabilities and lending protocols around Bitcoin.

Other market participants are also optimistic about Bitcoin-native DeFi. With the current adoption rate, BTCFi could match the innovation of Ethereum DeFi, according to Nash Lee, co-founder of MerlinSwap. He told Cointelegraph:

“[Market appetite] is seeking expansive platforms capable of accommodating the surging volumes and expectations. DeFi stands out as the only sector with the potential to leverage this narrative, providing a sustainable ecosystem for Bitcoin’s evolving use cases. This dynamic sets the stage for Bitcoin DeFi to potentially match, if not exceed, the innovation and complexity seen in Ethereum’s DeFi ecosystem.”

Related: 'China is about to start bidding' — Will Hong Kong Bitcoin ETFs spark the halving rally?