Bitcoin’s Mass Adoption Relies on DeFi and Consumer Apps: L2 Developers

The Potential of Bitcoin in the World of Decentralized Finance

For Bitcoin (BTC) to truly reach mass adoption, it must embrace the $57 billion world of decentralized finance (DeFi), according to developers working on Bitcoin layer-2 networks.

While Bitcoin is currently known as a currency, a “digital gold,” and a platform for digital artifacts like Bitcoin Ordinals, developers believe there are many untapped use cases for the blockchain.

“Limiting developers to just peer-to-peer payments restricts innovation and potentially excludes valuable opportunities,” said the founder of Bitcoin Virtual Machine (BVM), known as “punk3700.”

Punk3700 created Bitcoin Virtual Machine in January 2023, which utilizes a modular layer-2 “meta-protocol” architecture that allows anyone to create their own customized layer-2 blockchain on top of Bitcoin. This solution connects the Ethereum Virtual Machine (EVM) with Bitcoin.

The BVM founder emphasized the need for a consumer layer built on top of Bitcoin in order for the network to reach its full potential. They also noted the importance of DeFi applications, even if it means allowing “bad actors” into the ecosystem.

“There will be trial and error, but it’s the only way for Bitcoin to have a chance at mass adoption,” said punk3700.

Last year, Willem Schroé, founder of cross-chain infrastructure firm Botanix Labs, argued that Bitcoin’s potential cannot be fully realized unless it can connect to the larger financial system.

In early 2023, Botanix Labs began developing the Spiderchain, a proof-of-stake layer-2 solution that implements EVM to EVM bridges, enabling Bitcoin to interact with the EVM. The public testnet officially launched on November 29.

Schroé believes that the first step in connecting Bitcoin to the broader financial system is by linking it to Ethereum-based assets, stablecoins, DeFi, and non-fungible tokens (NFTs) through the EVM.

Controversy Surrounds SatoshiVM

In the midst of controversy, a community-driven project known as SatoshiVM has been developing an EVM-compatible layer-2 solution for Bitcoin. This project, powered by zero-knowledge rollups, has faced criticism due to a recent token launch.

Since its launch in 2023, SatoshiVM has gained over 400,000 unique wallets and processed more than 4.2 million transactions. It aims to bridge the gap between the Bitcoin and EVM ecosystems.

However, the highly anticipated launch of the project’s SAVM token on January 19th was met with controversy. One of SatoshiVM’s advisors, “MacnBTC,” was accused by Ape Terminal of profiting from the token launch, which they denied. This controversy caused the SAVM token to drop by 38%.

Despite this, not all projects have the same vision for Bitcoin’s future. On October 9th, a Bitcoin-based virtual machine was launched by ZeroSync project lead Robin Linus. However, its purpose is to improve Bitcoin’s transaction speed rather than implement smart contracts and introduce EVM-like tokens.

One of the developers of this project, “Super Testnet,” explained in an interview with Cointelegraph that they do not want to see everything from the Ethereum ecosystem on Bitcoin, as they believe it is filled with Ponzi schemes. They argue that building a decentralized exchange on Bitcoin would be a “step backward” for the network.

However, others, like “Punk3700,” believe that building a virtual machine on top of Bitcoin is necessary due to its lack of a general-purpose programming language. They argue that Bitcoin’s brand is strong and can attract a variety of use cases, such as GameFi, SocialFi, art, and artificial intelligence applications.

Alex Miller, CEO of Hiro, a company that offers tools for building on Bitcoin layer-2 project Stacks, believes that it is not surprising that developers are making Bitcoin programmable. This aligns with the vision of Satoshi Nakamoto, who created Bitcoin with the intention of making it programmable.