Decentralized finance (DeFi), while still in its early days, promises to redevelop critical financial services in a way that is trustless, transparent and controlled by the consumer. This has major implications for people across the world with limited access to financial services but also to crypto traders and savvy investors who are looking for new tools and new ways of finding an edge. DeFi covers any conventional financial tools built on a blockchain, but in its present forms, almost all have been built on Ethereum. This has been a major limitation but one which presents interesting opportunities to propel the DeFi industry forward.
Bitcoin: The New Frontier of DeFi
Most DeFi platforms have so far failed to cater to other well-known digital assets, bitcoin among them. Nevertheless, bitcoin remains the most held, popular, recognizable and liquid cryptocurrency in the world, putting it in a strong position to compete for some financial products that would benefit from a more trustless approach — like lending.
According to DeFi Pulse[1], about $446 million is currently locked in decentralized lending, of which approximately $320 million is locked in ETH, $20 million is locked in Maker’s stablecoin, DAI, and a mere $1.1 million is locked in BTC. This can mostly be attributed to two factors: the scarcity of non-Ethereum-based DeFi projects and the lack of secure bitcoin pegs that would allow bitcoin to move onto the Ethereum chain — making it near impossible for bitcoin holders to participate without having to trade their assets first.
Meanwhile, Bitcoin’s market cap is over $130 billion and represents 66 percent[2] of the total crypto market as of November 2019, meaning BTC is still the most popular, mainstream digital asset in the world. Bringing bitcoin to DeFi could, therefore, have a profound impact
