Why doesn’t Bitcoin (BTC) find a place in the DeFi frenzy?


Decentralized finance (DeFi) applications have become the focus of the cryptocurrency industry especially recently. Many people see this as a rare opportunity not only for payments but also for lending, with a peer-to-peer arrangement where we can see all the benefits of blockchain technology.

We can say that the increase in volume we have seen in the DeFi market is concrete evidence of the interest in DeFi. For example, Uniswap, which is the most preferred among DeFi exchanges, has around 400 million dollars of transactions per day. On the other hand, DeFi’s total market value is over $ 15 billion.

According to some reports, especially in the third quarter of 2020, while the amount of transactions with Bitcoin decreased, there is a significant increase in the number of transactions with DeFi.

As investors enter the cryptocurrency market, HODL handles transactions such as lending and borrowing. In particular, performing these transactions outside of a central structure can be defined as the biggest reason for investors’ interest in the DeFi market.

Moreover, DeFi platforms have created the opportunity to trade on central exchanges and trading platforms, even as little capital that would not be able to be traded.

However, if you want to trade margin cryptocurrencies with Bitcoin, you cannot do so on the DeFi platform for now. For this, you need to visit central exchanges such as Binance and Coinbase.

Decentralized exchanges like Uniswap support hundreds of cryptocurrencies, while Bitcoin is not one of them. You cannot use Bitcoin as collateral and borrow money to trade on any DeFi exchange and platform.

Why Doesn’t Bitcoin Fulfill All Investors Requests?

The main reason Bitcoin abstracts itself from the ongoing DeFi craze is its infrastructure. For DeFi to work, you need to use smart contracts and more importantly, assets and applications that contain the same or a common infrastructure.

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Transactions on DeFi take place through smart contracts. This should not mean that smart contracts for Bitcoin are not applicable. As a matter of fact, it is compatible with smart contracts in Bitcoin. It is one of the projects dedicated to building smart contract capacity in the Bitcoin blockchain. This means it is possible to do everything that happens on DeFi with Bitcoin.

But right now, all this is done through smart applications built on the Ethereum blockchain. Although Bitcoin was the first cryptocurrency, Ethereum was the first asset to see the potential of smart contracts and be prepared for it.

Unlike Bitcoin, Ethereum was launched as a platform to support and run any application designed by independent developers and companies from the beginning.

This gave Ethereum a significant advantage, and almost 70% of tokens and cryptocurrencies listed on exchanges are on the Ethereum blockchain.

The fact that all these assets work together with DeFi applications to create a basic infrastructure made it easy to work together on the Ethereum blockchain through smart contracts. Of course, in the meantime, it has alienated Bitcoin from the industry.

All tokens traded and processed through the DeFi platform must meet the ERC-20 standards enforced by the Ethereum community. The interesting thing here is that ETH does not meet these standards. At this point, wETH comes into play as Ethereum’s ERC-20 token.


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