Bitcoin decentralized finance (DeFi), or BTCFi, is a recent paradigm seeking to bring DeFi capabilities to the world’s first blockchain network. Provided that its current adoption rate continues, BTCFi could match the innovation of Ethereum-based DeFi in the future.
This is the view of Nash Lee, co-founder of MerlinSwap, who told Cointelegraph:
Showcasing investor demand for Bitcoin-native DeFi applications, decentralized exchange (DEX) MerlinSwap raised 6,599 Bitcoin (BTC) worth $480 million during its initial DEX offering (IDO) on April 5. The IDO attracted over 52,000 participants.
The record IDO is a testament to the market’s demand and confidence in Bitcoin-native DeFi applications, says Lee.
MerlinSwap is built on the Bitcoin layer-2 network Merlin Chain. It surpassed the $100 million in total value locked (TVL) on April 4, according to MerlinSwap.
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BTCFi emerged following the introduction of the BRC-20 token standard, which enabled the minting of nonfungible tokens (NFTs) on the Bitcoin blockchain for the first time.
Bitcoin-native NFTs, also known as Ordinals, are inscribed directly on satoshis (sats), giving them a permanent home on the Bitcoin network, unlike most NFT collections, to which the images and metadata are stored on centralized servers, creating potential vulnerabilities.
Showcasing the interest in Bitcoin-native NFTs, the network surpassed 64.1 million Ordinals inscriptions in less than one and a half years since the first Ordinal was inscribed in December 2022, according to Dune.
Beyond Ordinals, the emergence of Bitcoin layer-2s is another significant element of BTCFi, which will ultimately give more use cases to Bitcoin. Lee said: