A decentralized economy is a fairly new concept for the common people. At its core, DeFi is a modern global financial system equipped with innovative savings, loans and income opportunities that make it possible to create innovative financial products without central gatekeepers. Since January 1, the promise has been fulfilled with requirements in excess of $ 11 billion in total frozen value, representing an increase of more than 1,550% from year to year.

DeFi applications require smart contract logic. There is a lot of experimentation and early development of DeFi applications in the Ethereum ecosystem today using Solidity, the JavaScript-like language.

Related: Explains the programming language used in the blockchain

While we have seen Ethereum-based projects such as Uniswap, Aave, and Compound win the DeFi space, the community is beginning to show signs of demand for solutions that include Bitcoin (BTC).

Bitcoin is the largest digital asset by market cap, but it is still largely a negative asset. To actively use Bitcoin in DeFi products, managers like BitGo have begun Bitcoin Encoding Encoding (WBTC). Encapsulated Bitcoin takes Bitcoin’s value and combines it with Ethereum programming capability, giving investors the ability to generate additional returns on their Bitcoin investment without paying it. In the past two months alone, more than $ 1 billion WBTC has been deposited onto the Ethereum network, indicating a demand for Bitcoin as an active used financial asset.

Bring Bitcoin to the DeFi Orbit
Bitcoin is the most powerful sovereign blockchain chain and is on its way to becoming the world’s first truly sovereign currency. Bitcoin has the most reliable blockchain security and most popular name recognition. The use of BTC in DeFi is still at a very early stage at present.

Bitcoin can be used in DeFi products in two ways: the encapsulated BTC representation can be used in separate chains (like WBTC on Ethereum), or the original smart contracts can flow to the Bitcoin chain itself. Building DeFi products directly on Bitcoin made practical sense, but was difficult due to the limitations of the Bitcoin programming language and scalability. Bitcoin has been traditionally seen as a medium of exchange and storing value. However, Bitcoin’s recent move to Ethereum as an encapsulated asset shows market demand for BTC at DeFi. In the process, people find unique, albeit unnatural and potentially dangerous ways to do so.

Bitcoin’s limited scripting language has always been seen as an advantage rather than a bug, as it provides security for the underlying blockchain. Smart contract logic can be added to the top of Bitcoin via sidechains like Liquid, linked chains like Stacks, or bulk chains like RSK. Transferring BTC from a major Bitcoin chain to such adjacent chains can be easier and more secure than issuing assets encapsulated on disconnected chains.

Bitcoin as an active capital
To fully bridge this gap, Bitcoin must undergo a transition from a passive asset to an active income-generating asset. The hitch is the tribal nature of cryptocurrency users. Many bitcoins do not recognize encapsulated Bitcoin as Bitcoin. In my opinion, this is because Bitcoin and the Ethereum community share different philosophies.

Ethereum has created a culture that encourages experimentation and testing in production. However, bold experimentation is not an advantage that Bitcoins share. Bitcoin by nature are cautious and healthy skeptics and try very hard not to lose their assets. Bitcoin cryptocurrency is one of DeFi’s many innovations that creates risk by blending the two philosophies. Acquiring a valuable asset like Bitcoin and placing it in a smart contract as an ERC-20 token that shares Ethereum security features can be a difficult concept for Bitcoin owners. There should be a safer solution to get BTC in the DeFi lane.

While I realize the potential for Bitcoin to be used, I believe we can see a future where Bitcoin will continue to be the king of blockchains. As DeFi continues to grow, Bitcoin will likely remain the focus of cryptocurrency, and smart contracts around Bitcoin will initially open up for innovation and $ 250 billion in Bitcoin capital.

Source: CoinTelegraph