The rapid development of Bitcoin
Bitcoin, as the world's first cryptocurrency, has the highest social consensus and security, and has become digital gold. In this cycle, Bitcoin has achieved rapid development in infrastructure, applications, and consensus.
Infrastructure improvement
The OP_CAT opcodes and BitVM computing paradigms that extend the mainnet programmability are gradually being improved, and many BTC Layer2 and interoperability protocols have been launched one after another.
Application Innovation
The Ordinals and Runes protocols introduced native assets to the Bitcoin ecosystem, the Babylon native interest-bearing scheme injected vitality into the Bitcoin ecosystem, and the BTCFi ecosystem completed a breakthrough from zero to one.
Increased consensus
The Bitcoin mainnet has ushered in its fourth block reward halving, miner rewards have been halved, and mining costs have continued to rise.
Breakthrough in traditional markets
BTC ETFs have been approved by regulators in the United States and Hong Kong, allowing retail and institutional investors to include Bitcoin in their portfolios.
Looking ahead, as the programmability of the Bitcoin network continues to improve and token consensus increases, the total market value of Bitcoin and the market value of the DeFi ecosystem will be far more than this. The rapid development of Bitcoin in the BTCFi field will bring revolutionary changes to the crypto world and even the global financial system.
The bright future of BTCFi
The market prospects of Bitcoin are immeasurable, and its influence in the global financial market continues to expand.
Although the TVL (total locked value) of the Bitcoin protocol is growing year by year, as of the second quarter of 2024, the total TVL of BTCFi (Bitcoin decentralized finance) only accounts for 1% of the total market value of Bitcoin. In contrast, the total TVL of the Ethereum mainnet protocol and Layer2 accounts for 18.6% of ETH FDV (fully diluted valuation). Conservatively estimated, if BTCFi can reach the corresponding scale of the Ethereum DeFi ecosystem, there is at least 20 times of growth space, which will create a blue ocean market of 100 billion US dollars.
The BTCFi ecosystem needs to meet the following three key requirements to fully unleash the potential of this blue ocean market:
Solid base layer character
The BTCFi ecosystem needs to fully unleash the potential of using the Bitcoin mainnet and sidechains as the underlying issuance layer for other tokenized assets, and lay a solid foundation for DeFi applications by providing the most secure and stable technical support.
Bitcoin’s productivity gains
The BTCFi ecosystem needs to meet the market's growing demand for improving the productivity of Bitcoin assets. Users expect Bitcoin to not only be used as a means of storing value, but also to actively participate in various financial activities, making full use of their BTC through mortgage lending, liquidity staking, re-staking, etc. to achieve asset appreciation.
A truly decentralized financial system
The BTCFi ecosystem needs to build a financial system that truly embodies the decentralized principles of Bitcoin, reduce dependence on centralized institutions, and provide more fair and transparent financial services to global users.
With the continuous development of technologies such as mainnet programming code, expansion solutions, zero-knowledge proof, AVS cross-chain communication, etc., these needs will gradually be met and the potential of Bitcoin DeFi will be continuously released.
The potential of DeFi beyond Ethereum
In the field of decentralized finance (DeFi), Ethereum has long been in the lead, mainly due to its powerful smart contract capabilities and rich application ecosystem.
However, in the current market cycle, with the decentralization of the Ethereum consensus mechanism and the emergence of an institutional wave, BTCFi is expected to surpass Ethereum DeFi and dominate the future institutional DeFi market.
ETH/BTC rate continues to decrease
The current market cycle places unprecedented emphasis on compliance, user growth, and a stable profit model. Binance has invested as much as $213 million in compliance in one year; at the same time, Binance continues to launch TON ecosystem tokens such as $NOT and $CATI. Delta neutral on-chain financial products such as Ethena are also widely supported. DeFi is gradually transforming from a speculative tool to the next generation of financial means to promote inclusive finance.
Compared with Ethereum's DeFi, BTCFi is more suitable for future market needs and is expected to fill market gaps and promote the sustainable development of the industry through long-term strategies and solutions.
Bitcoin ecosystem development trends
Growth in the number of developers
As of January 2024, Ethereum has 7,864 monthly active developers, down 25% from the previous year. In contrast, the number of Bitcoin developers is still growing steadily, gradually exceeding 1,000. This trend shows that the Bitcoin ecosystem is gaining more appeal in the developer community, heralding the emergence of more innovative applications.
Left: The number of Ethereum developers has shown a clear downward trend since the end of 2022; Right: The number of Bitcoin developers has steadily increased
Increase in institutional holdings
As Bitcoin is gradually seen as the first choice for digital gold and alternative assets, more and more institutional investors are beginning to allocate Bitcoin assets. These institutional investors usually hold positions for a long period of time and have a strong demand for the risk-free appreciation of BTC. Since the passage of BTC and ETH ETFs, institutional net inflows into Bitcoin have continued to grow, while net inflows into Ethereum have decreased relatively.
Left: Net inflows continued to decline after ETH ETF was approved; Right: Net inflows rose steadily after BTC ETF was approved
Unparalleled network security and token deflation mechanism
The Bitcoin network is known for its high security and has stood the test of time. Its huge computing power and decentralized nature ensure the robustness and anti-attack capabilities of the network. This makes Bitcoin an ideal choice for high-security financial scenarios. Bitcoin's preset deflation and halving mechanism effectively guarantees the stable growth of the token's market value.
Innovative technology expansion
Through expansion solutions such as the Lightning Network and RGB, as well as sidechain technology, Bitcoin is breaking through its limitations in smart contract functionality. These technological innovations enable Bitcoin to support more complex DeFi applications while maintaining the security and stability of the main chain.
Summarize
Since the DeFi Summer of 2020, DeFi has gone through a full 4-year cycle, and the current DeFi service users and product quality are significantly different from those of that year. In this cycle, with the gradual entry of non-circle institutions and the continuous improvement of infrastructure, we will witness the arrival of the next DeFi wave driven by BTCFi, expanding the global consensus on BTC to DeFi scenarios and bringing larger-scale adoption to Web3.
About Uniquid Layer
Uniquid Layer is a liquidity platform designed for the broader community, committed to becoming a gateway starting point for newcomers in the Bitcoin space to maximize Bitcoin returns with the highest security.
Website: https://uniquid.io
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