Exploring DeFi as Bitcoin's Growth Catalyst: Unlocking a New Phase of Bitcoin Expansion?

2024-05-30, 04:01

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![](https://gimg2.gateimg.com/image/article/1717041257sdfx.jpeg)
## [TL; DR]
Bitcoin developers are working on several projects to enhance the blockchain’s programmability.

Within the last three years the Lightning layer-2 blockchain, the ordinals protocol and the Runes protocol were major developments on the <a href="/uk/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> network.

If bitcoin attains a certain level of programmability it will likely become the biggest DeFi ecosystem.

## Introduction 
There are many innovations taking place on the bitcoin blockchain which may transform it into a fully-fledged DeFi ecosystem that competes with the <a href="/uk/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network. The launch of the lightning network and the ordinals protocol have shown many developers that they can improve the blockchain in several ways to enhance its utility and sustainability. Today, we focus on various initiatives which may lead to a flourishing bitcoin DeFi ecosystem.

## The Potential of DeFi to Transform Bitcoin into a Dynamic, Programmable Platform
Despite bitcoin being the number one cryptocurrency by market capitalization Ethereum is more progressive in terms of DeFi as it supports many decentralized applications and smart contracts. Now, many bitcoin developers are working hard to come up with solutions that will enable bitcoin to host decentralized applications.

A robust bitcoin DeFi ecosystem will transform the cryptocurrency from being just a digital gold into a programmable and dynamic platform that supports many functionalities. Toby Lewis, the co-founder of the OrdinalsBot - a project based on the Ordinals protocol - thinks that bitcoin has the capacity to become the leading DeFi protocol, outpacing Ethereum.

Historically, people have viewed bitcoin as a store of value and a digital currency, with limited functionality. This has been very different from Ethereum (ETH) that supports a large ecosystem of DeFi applications and other smart contracts. However, [recent developments on the network](https://www.gate.io/learn/articles/summary-of-new-technological-developments-that-led-to-bitcoins-resurgence/2711 "recent developments on the network") indicate that bitcoin may become a strong DeFi growth catalyst.

Several developments that have taken place on the bitcoin blockchain including the ordinals protocol, the Runes protocol and other bitcoin layer-2 networks like lightning have created hope among the developers that they will be able to increase blockchain programmability. However, the major role of the bitcoin layer-2 networks is to improve the blockchain’s scalability and usefulness of decentralized applications.

Now, the developers are looking for ways to integrate new functions on the original network. This is because they believe that adding programmability to the blockchain will attract new investments, which will become a new catalyst for a BTC price rally. In the past, the main focus of developers had been to rectify the blockchain’s design flaws such as scalability challenges. Sadly, some of the innovations became flawed. For example, the bridges are prone to hacks.

Currently, there are several innovations which are on the way. For example, some developers are working on OP_CAT, a software that will make programmability possible to implement. This initiative has received much support from the community of bitcoin developers.

Another innovation on the cards is ARC, a software that runs on top of the bitcoin blockchain which will enable the integration of applications from the <a href="/uk/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> network. Yahoo News quoted [Kyle Samani, co-founder of Multicoin](https://ca.news.yahoo.com/keep-eye-creeps-hidden-camera-145649497.html "Kyle Samani, co-founder of Multicoin"), as saying, “It’s a huge unlock for Bitcoin. It’s really good for users.”  Already, Multicoin Capital has helped ARC to raise $7 million for the project.

In a related move, Layer 1 Foundation is developing a programmable module suitable for the BRC-20 metaprotocol which will enable the storage of messages in code layered on the Bitcoin blockchain. With that, an indexer will be able to find the messages and run computations on smart contracts that exist on the network. Since the blockchain has a longer block confirmation time than Ethereum it will likely perform that function in a better way than the later.

It is also important to realize that more than 20 teams of bitcoin developers are working on various initiatives to enhance bitcoin programmability.

## Toby Lewis on Bitcoin's DeFi Potential: How Bitcoin's DeFi Ecosystem could become the Largest in the Crypto World
Bitcoin programmability will lead to many benefits which include an influx of decentralized finance (DeFi) applications. This, in turn, may result in higher capital inflows in the ecosystem as well as greater adoption and utility. In a recent [publication, Bloomberg reported that the Bitcoin TVL has exceeded $1.1 billion](https://www.bloomberg.com/news/newsletters/2024-02-20/bitcoin-s-latest-buzz-and-risks-sound-a-lot-like-ethereum-s "publication, Bloomberg reported that the Bitcoin TVL has exceeded $1.1 billion"). With such a development, Toby Lewis believes that the Bitcoin DeFi ecosystem will become the biggest within the next few years.

Posting on his X profile [Lewis said](https://twitter.com/ordinalsbot/status/1792277675366609036 "Lewis said"), “Bitcoin's DeFi ecosystem could grow to the largest in all of crypto. It is possible that the Bitcoin DeFi ecosystem could grow to trillions of dollars of market cap over the next few years, and it appears to be one of the major drivers of growth in crypto this cycle."

Some developers contend that bitcoin programmability will lead to the next bitcoin revolution and bull run. The next caption confirms the sentiment among developers and other bitcoiners
![](https://gimg2.gateimg.com/image/article/1717041477a.jpeg)
Source: [x.com](https://twitter.com/ordinalsbot/status/1792277675366609036/photo/1 "x.com")

## The Rise of Bitcoin TVL: Examining the current state of Bitcoin's total value locked in DeFi
As said, the bitcoin total value locked (TVL) has been growing consistently over the years. At the moment, the bitcoin TVL stands at $1.137 billion as DeFiLlama indicates. 
![](https://gimg2.gateimg.com/image/article/1717041498b.jpeg)
Bitcoin TVL: [DeFiLlama](https://defillama.com/chain/Bitcoin "DeFiLlama")

Commenting on this Lewis said, “It is possible that the Bitcoin DeFi ecosystem could grow to trillions of dollars of market cap over the next few years, and it appears to be one of the major drivers of growth in crypto this cycle.” Programmability will likely lead to an increase in BTC TVL.

Read also: [Panoramic Analysis of The BTC Ecosystem](https://www.gate.io/learn/articles/panoramic-analysis-of-the-btc-ecosystem-reshaping-history-or-starting-the-next-bull-market/1804 "Panoramic Analysis of The BTC Ecosystem")

## The Runes Protocol: Analyzing the Initial Surge and Subsequent Decline in Network Activity
The bitcoin Runes protocol, launched on 20 April, has increased bitcoin’s vibrancy. However, the market is not yet sure of the direction the Runes will take. The reason is that after their launch their transactions spiked to 56,372 by 19 May. However after that peak their activity plunged by over 50% leading to low bitcoin fees. For example only about 5,000 Runes were created since 1 May, generating only about $100,000 in fees. The following graph shows the changes that occurred in bitcoin transactions after the launch of the Runes Protocol.
![](https://gimg2.gateimg.com/image/article/1717041539c.jpeg)
Bitcoin Runes Transaction: [Dune ](https://dune.com/cryptokoryo/runes "Dune ")

As <a href="/uk/price/the-graph-grt" target="_blank" class="blog_inner_link">The Graph</a> indicates, bitcoin transactions increased significantly after the launch of the Runes protocol. However, by 19 May the Runes activity had decreased to a very low level.

Basically, the Runes protocol bitcoin enables the creation and management of fungible tokens on the blockchain. It is vital to realize that the Runes are different from traditional standards such as BRC-20 since they have adopted the Unspent Transaction Output (UTXO) based model which increases scalability, efficiency and security.

## Bitcoin Ordinals and BRC-20 tokens in Bitcoin ecosystem
Apart from the Runes the other bitcoin standards are BRC-20 and Ordinals In_script_ions which have increased the network’s utility. The ordinals protocol made it possible for creators to mint non-fungible tokens on the bitcoin blockchain. Later, Domo, an unidentified developer, devised a system of creating BRC-20 tokens [using the bitcoin Ordinals protocol](https://www.gate.io/blog_detail/3136/ordinals-transformed-bitcoin "using the bitcoin Ordinals protocol"). Therefore, these two developments have enhanced bitcoin programmability.

## How Bitcoin is Closing the Functionality Gap with Ethereum
The various developments that occurred on the bitcoin blockchain within the last two years, [including the launch of layer-2 networks](https://www.gate.io/learn/articles/comprehensive-overview-of-btc-layer-2-leader-bevm-ecosystem-with-20-projects/1709 "including the launch of layer-2 networks"), the Runes as well as the BRC-20 tokens, have positioned the network as a strong Ethereum competitor. The on-going efforts and development initiatives will make bitcoin a competitive DeFi crypto, with much utility and investment potential. To illustrate, in the past two months [bitcoin based NFTs outperformed the Ethereum ones](https://www.gate.io/learn/articles/understanding-the-top-10-bitcoin-nfts-in-one-article/1895 "bitcoin based NFTs outperformed the Ethereum ones"). 
## Conclusion
The developments that occurred on the bitcoin blockchain in the past two years have increased its utility and enhanced its leadership position. For example, BRC-20 tokens, [Ordinal in_script_ions and Runes](https://www.gate.io/learn/articles/introduction-to-runes/2786 "Ordinal in_script_ions and Runes") have enhanced bitcoin programmability and attracted further investments to the leading crypto asset. In the meantime, developers are working on other initiatives like ARC and OP-CAT bitcoin to make the blockchain more competitive than ever before. 
## FAQs about Bitcoin
### Who are the biggest holders of bitcoin?
The biggest holders of bitcoin include Satoshi Nakamoto, Cameron and Tyler Winklevoss, Changpeng Zhao (CZ), Tim Draper, Michael J. Saylor. Bitcoin mining firms such as Marathon Digital Holdings and Hut 8 Mining Corp also own large amounts of bitcoin. Recently, [spot bitcoin ETF issuers](https://www.gate.io/learn/articles/bitcoin-efts-have-been-trading-around-the-world-for-years/2801 "spot bitcoin ETF issuers") like Grayscale Bitcoin Trust also [acquired much bitcoin](https://www.gate.io/blog_detail/158/the-1st-cryptocurrency-investments-grayscale-what-is-gbtc "acquired much bitcoin").
### Who dominates bitcoin mining?
AntPool, Foundry USA, Marathon, Riot, Hut 8 Mining Corp, CleanSpark and Canaan Inc. dominate the bitcoin mining sector. The reason why a few mining firms are dominating the sector is the high cost of operations.
### How long does it take to mine 1 bitcoin?
The shortest time it takes to mine 1 bitcoin is 10 minutes. This is because 10 minutes is the shortest time a block is added to the bitcoin blockchain. Currently, a miner that adds a block to the bitcoin blockchain gets a reward of 3.125 BTC.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
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