Before discussing the future prospects of DeFi, it is necessary to simply define what DeFi is. DeFi stands for a decentralized financial system, and it aims to provide traditional financial services (loans, deposits, transactions, etc.) in a decentralized manner based on blockchain technology. In this regard, Julian Love, a cryptocurrency ecosystem analyst at Franklin Templeton, predicted that Bitcoin DeFi could generate more than $1 trillion in value in the next five to 10 years.
Bitcoin has been steadily adopted since its launch in 2009, growing into a huge asset with a current market capitalization of over $1.3 trillion. Bitcoin was designed with decentralized currency and real-time total payment systems, but previously, smart contracts and decentralized financial capabilities were limited. However, this situation has changed with the recent advent of Bitcoin Layers. With various technologies such as meta-protocol, sidechain, and layer 2 being built on the Bitcoin blockchain, the Bitcoin ecosystem has supported various use cases such as fast payments, loans, NFTs, decentralized exchanges, GameFi, and SocialFi.
The main differentiator for Bitcoin DeFi is its underlying asset, or native token, Bitcoin (BTC). While other chains like Ethereum and Solana build a DeFi ecosystem based on their respective technological advantages, Bitcoin DeFi creates its own ecosystem by focusing on increasing productivity of Bitcoin. Demand for using Bitcoin as the base layer already exists, and the rapid growth of Ordinals, a Bitcoin-based NFT marketplace, proves this.
The future value of the Bitcoin DeFi system is based on three assumptions. First, there will be an increasing tendency to prefer the Bitcoin blockchain as the base layer of other tokenized assets. Second, the demand for increased productivity of Bitcoin will increase. Third, the demand for financial systems that reflect the principle of decentralization of Bitcoin will increase.
