Bitcoin Defi Coins: 5 Tokens that are built on Bitcoin Blockchain
With the release of Bitcoin Ordinals NFT, we are now seeing Bitcoin Defi tokens become the talk of the town, and this could be one of the latest crypto trends to watch out for in 2023. Before talking about top 5 Bitcoin Defi blockchain projects, let’s look at how it all started with Bitcoin and Defi and when.
Since the inception of Bitcoin in 2009, the world of cryptocurrencies and digital assets has witnessed a plethora of new developments. With each passing year, innovative and exciting projects continue to emerge in the industry, pushing the boundaries of what’s possible.
One area that experienced exponential growth in 2020 was Decentralized Finance or DeFi for short. DeFi refers to a new type of economic system that operates on decentralized blockchain networks and allows for peer-to-peer transactions without the need for intermediaries like banks.
The majority of DeFi protocols and products were built on the Ethereum blockchain, which was the dominant force in the DeFi ecosystem until recently. In 2021 and 2022, however, a new wave of change hit the market with the emergence of so-called “Ethereum killers.” These blockchain networks aim to address the current shortcomings of Ethereum and offer more scalable, efficient, and secure solutions for decentralized applications and smart contracts.
In addition to the rise of Ethereum killers, there has also been a surge in the number of DeFi projects being built on top of the Bitcoin blockchain network. This Bitcoin DeFi ecosystem is still in its early stages, but it shows promising potential for growth and innovation.
In this article, we will explore the Bitcoin DeFi ecosystem and introduce you to the top 5 DeFi coins that are built on the Bitcoin network. As the cryptocurrency and digital asset space continue to evolve, it’s important to keep an eye on the latest developments and explore the opportunities they present.
What we are going to learn?
Learning the basics
Defi and Bitcoin
While Ethereum is still the king of DeFi with a huge bulk of DeFi projects currently being deployed/created on the Ethereum ecosystem, there is a growing demand for Bitcoin holders to participate in this rapidly growing sector. To meet this demand, a spectrum of resolutions have emerged that allow users who hold Bitcoin to take part in DeFi, a concept known as Bitcoin DeFi.
Bitcoin DeFi involves the ingenious decentralized application creation accomplished efficiently on the Bitcoin blockchain network. This movement was previously limited by the scalability issues that were prevalent when it came to transactions.
However, with the recent Taproot upgrade, the entryway to DeFi has been unlocked for the world’s very first cryptocurrency. This advancement has been credited to pave the way for exciting new developments in the Bitcoin DeFi ecosystem.
What did the Taproot Upgrade do?
With the introduction of the Taproot upgrade, the Bitcoin blockchain can now bunch together multiple digital signatures and verify them all in one go, resulting in significantly faster transaction processing times. This upgrade has enabled it with the ability to sustain the expansion of DeFi applications by reducing the space required for all the blocks and allowing for more efficient processing of digital signatures.
Now that we have learnt about Bitcoin Defi and what Taproot upgrade changed for Bitcoin blockchain, let us look at top 5 cryptocurrency projects that are building on Bitcoin Blockchain.
Top 5 DeFi coins building on Bitcoin Blockchain
With the rise of DeFi on the Bitcoin network, there is now a growing number of Bitcoin DeFi coins that offer exciting new opportunities for decentralized finance.
Here are the top 5 Bitcoin DeFi coins that are making waves in the industry:
- Stacks (STX)
- Threshold (T)
- RSK Infrastructure Framework (RIF)
- Sovryn (SOV)
- pNetwork (PNT)
Earlier called Blockstack, Stacks claims to be a leading Bitcoin Defi product that is working towards enabling the onset of DApps and smart contracts in the Bitcoin ecosystem. The best part about it is that it does so without altering any core characteristics of the contracts, retaining its power, privacy, stability and safety.
After it was remodelled as Stacks in the fourth quarter of 2020, it also launched a mainnet of Stacks 2.0 in January 2021. According to the team, the idea behind the entire rebranding was to “separate the ecosystem and open source project from Blockstack PBC”.
The token STX is responsible for supporting the platform. STX has many use cases but is primarily used for the following functionalities
- To power the implementation of features like smart contracts
- Managing and operating financial dealings
- Enlisting even more novel virtual tokens and assets on the blockchain network of Stacks 2.0
Stacks makes good use of Bitcoin when it comes to employing a base layer. All transactions and activities that take place on Stacks are then resolved on the Bitcoin network which is considered to be one of the most secure entities in the industry. Developers are allowed to create these dApps one on top of the other, giving them a modular characteristic. Due to this, they are able to provide many features that regular applications cannot offer.
Threshold is a new network that offers users with a wide range of cryptographic primitives that they can employ for many decentralised applications. It was created as a result of the merger between Keep and NuCypher, which became the “first ever on-chain merge between two existing networks and communities”. This incorporation was first ideated in February 2021 and finally reached fruition on 1st January 2022 along with the release of the T token.
According to the team, “Threshold cryptography is a revolutionary technology that uses cryptography to unlock greater utility and usability for digital assets without needing to trust a centralized party. Threshold cryptography distributes sensitive operations across multiple independent entities – like nodes in a network – and requires a threshold, or minimum number of those entities to cooperate for the operation to be successful.”
The T token serves a dual purpose as a utility token and a governance token for the Threshold Network and the Threshold DAO, respectively. On the utility forefront, the T token is mainly utilized for staking a node. Basically, a fixed transaction fee is sent from numerous app sources to the node operators. These applications employ the cryptographic primitives offered by Threshold to power their working. Additionally, as a governance coin, the T token is utilized by individuals primarily to earn extra profits. Users are allowed to close the token in pools called coverage pools which can then get them a little income.
RIF (Rootstock Infrastructure Framework) is a revolutionary technology stack that enables individuals to communicate in a decentralized, peer-to-peer marketplace, facilitating the sharing of knowledge, value, and functionality. It enables users to perform all these activities with the assurance of clarity and authority. Built as a layer 3 protocol over the Bitcoin blockchain, RIF offers a broad range of ideas and resolutions.
These innovative services including and not limited to domain management, paying on different levels, storing information etc, are based on the blockchain and can be accessed only by using the $RIF token. Holding RIF tokens authorises users to access the functions created on the RIF ecosystem and profit from the growth of the protocol.
What sets this platform apart is that RIF is committed to equipping individuals with various instruments and mechanics that are both open-sourced and decentralized. These tools are really useful and can enable developers to come up with new, innovative and unrestricted projects under the decentralized finance realm.
The team claims that users can “Use RIF tokens and participate in a network providing the tools for builders to create a future global economy that is fair and accessible for all.”
Sovryn is a relatively novel technology that is based on bitcoin and offers a secure and stable platform. Sovryn enables users to retain ownership over their funds and investments and simultaneously use these bitcoin funds to explore new positions. It offers “Bitcoin-backed stablecoins, 0% interest loans, trading, and more with no middlemen” and claims to be “The fastest-growing Bitcoin DeFi ecosystem with over $1.5 billion in trades after launching only in 2021”.
Since it is created on a truly decentralized network, called the Rootstock Network, Sovryn allows users to loan assets to both margin traders and those individuals who wish to borrow these assets directly. They integrate DeFi seamlessly with Bitocin whilst harnessing all the powers of the Bitcoin blockchain really well.
According to the team, their SOV isn’t really a coin at all. It is instead a powerful tool that enables users to actively participate in the development and governance of Sovryn. It functions as a tokenized representation of a user’s actual position in the platform’s future and also offers them voting control.
SOV holders are part of the Sovryn Bitocracy, where their wins are linked to the success of the system as a whole. The Bitocracy incentivizes active participation and cooperation, with each participant working towards the interest of the platform. This innovative approach to governance creates a truly decentralized platform that is transparent, secure, and constantly evolving with the help of its community.
In 2019 we saw the launch of pTokens, which was a cross-chain product that aimed at linking different networks and currencies. On 5th March 2020, they launched their first cross-chain bridge between Ethereum and Bitcoin. The platform was later rebranded to give birth to pNetwork, which became an “open-source multi-chain routing protocol for providing interoperability across a variety of independent blockchains”.
The platform has a native token called the pNetwork Token (PNT) which offers various functionalities. Firstly it can be used as a governance token when it comes to interacting on the pNetwork DAO. Secondly, it is also useful as a form of staking currency while utilizing the network nodes, additionally, it is also employed by the platform to reward nodes who provide these services.
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The integration of Bitcoin and Defi is a very optimistic new narrative making rounds in the industry. As a result, we are now seeing the emergence of a range of exciting Bitcoin-based DeFi applications, including decentralized exchanges, lending platforms, and more.
As the DeFi landscape continues to evolve, we can expect to see further growth and development in the Bitcoin DeFi space. With the backing of Bitcoin’s established network and the growing demand for decentralized financial products, it is likely that Bitcoin DeFi will continue to expand and innovate, driving the future of finance towards a more decentralized and accessible future.
Bitcoin Defi is new, and 2023 could just be the beginning of really exciting Bitcoin ecosystem. We could potentially see a lot of Bitcoin NFT marketplaces, lending network, layer 2’s on Bitcoin and so much more.