According to Alexei Zamyatin, the competition for capturing the DeFi market share on Bitcoin is intensifying, with the blockchain’s 300 million users potentially surpassing Ethereum’s DeFi ecosystem.
It is believed that the first decentralized finance (DeFi) company to introduce a user-friendly suite of products on Bitcoin will “capture the entire market” of the blockchain’s 300 million users, according to one crypto founder.
It was stated by Alexei Zamyatin, co-founder of the Bitcoin layer 2 Build on Bitcoin, at Token2049 in Dubai that “the advantage of Bitcoin DeFi is that the market is much bigger, with a significantly larger retail user base available to tap into.”
“It’s not easy to convert it, but if you manage to win in Bitcoin DeFi, you win the entire market.”
It was stated by Zamyatin that the 300 million Bitcoin users would lead to DeFi services on the blockchain “outgrowing everything seen so far in Ethereum and Solana.”
Market share is being sought by Build on Bitcoin, one of the firms offering a hybrid layer 2 solution that integrates Bitcoin’s security with Ethereum DeFi capabilities through BitVM, a platform that processes Turing-complete Bitcoin contracts.
It was argued by Zamyatin that Bitcoin-native bridges are essential for DeFi on Bitcoin, as the blockchain’s security is robust, but the human talent, tools, and network effects of Ethereum are lacking.
It was stated by Zamyatin that strong demand for Bitcoin-based DeFi is being driven by Bitcoin yield and stablecoin products.
A lot of institutions that are buying Bitcoin now usually have to find yield on the assets they hold. So Bitcoin yield is becoming a very hot and highly sought-after thing.
It was added by Zamyatin that demand for Bitcoin-backed stablecoins is soaring because Bitcoin is considered the “best collateral.”
Bitcoin staking has been established as the primary DeFi use case beyond payments, with Bitcoin holders locking their coins in self-custodial vaults or extractable one-time signatures to earn staking rewards on proof-of-stake blockchains like Ethereum.
The market is currently being led by the Babylon Protocol, with $4.64 billion in value locked, accounting for nearly 80% of the total value locked on Bitcoin, according to DefiLlama data.
Bitcoin’s DeFi total value locked (TVL) remains a small portion of the $54.6 billion in value locked on Ethereum.
Zamyatin acknowledged that numerous blockchain bridge hacks had occurred, but it was argued that most of these incidents were caused by teams failing to manage their private keys, rather than vulnerabilities in smart contracts.
While the retail market remains open to competition, it was noted by Zamyatin that many institutions still hesitate to use bridges that enable users to transfer value between incompatible blockchains.
It was noted by Zamyatin that efforts have been made to increase the number of bridge signers from five to 50 in certain instances.
It has been observed that institutions have been reluctant to adopt these solutions due to the uncertainty surrounding who is signing the transactions.
For example, the Ren Protocol’s RenBTC is operated through a decentralized network of nodes known as Darknodes, which sign transactions to lock BTC and mint RenBTC for use on other chains.
However, these protocols continue to be avoided by institutions due to the level of anonymity involved, with trusted custodians like BitGo and Coinbase Custody being chosen for such activities instead.
