Decentralized Finance May Revolutionize Financial Sector – And Bitcoin
Without question, the DeFi movement is revolutionizing the financial sector. Decentralized finance is well on its way to changing the world of finance as we know it by transforming traditional financial components into open, transparent protocols across a decentralized network.
In fact, the total value locked in DeFi assets stands at a phenomenal $54.56 billion, and it appears that this figure is only going up. From making basic financial services like loans and insurance readily available for all, to promoting financial inclusion for the larger population, DeFi use cases are many.
While DeFi is still in its infancy stage and regulation is almost absent, several DeFi applications are already making big waves across various sectors. Bitcoin in DeFi is one concept that has been gaining a lot of traction recently.
Typically, most DeFi applications are built on Ethereum (ETH) due to its advanced smart contract functionality. However, there has been a noticeable rise in the number of DeFi applications built on top of Bitcoin. According to DeFi Prime, an analytics firm, out of the 223 DeFi projects that they have listed, at least 26 of them are active Bitcoin-based.
With a specific focus on DeFi on Bitcoin, discreet log contracts (DLCs) is another area that has seen a lot of progress recently. Essentially, a DLC is a type of Bitcoin transaction that executes a smart contract using an oracle. As a result, DLCs enable the formation of smart contracts and a variety of other financial contracts, including options and futures.
Recently, Jack Dorsey, CEO and co-founder of Twitter, announced that his mobile payments company Square will be launching a platform that will allow developers to create ‘decentralized finance’ projects built on Bitcoin. In an attempt to make the creation of non-custodial, permissionless and decentralized financial services much easier, this is expected to be one of the first big projects of its kind in the nascent market.
Another reason why DeFi on Bitcoin is becoming immensely popular is that Bitcoin is the best type of collateral in the entire world. Bitcoin is highly secure, transactions are super quick, the markets never close and Bitcoin is high in liquidity. This has been the primary driver behind the case for adopting DeFi on Bitcoin.
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