Bitcoin DeFi: A Collision of Reality and Fantasy

In recent years, "Bitcoin DeFi" has become a hot topic in the cryptocurrency field. However, upon deeper research, it is found that this concept is more of a fantasy than a reality. Multiple projects claim to be able to realize decentralized finance on Bitcoin, but in reality, they all face serious technical limitations and centralization issues.

! Opinion: "Bitcoin DeFi" is just nonsense and investment trap due to technical limitations

The Fundamental Limitations of Bitcoin

Bitcoin can't support true DeFi, mainly because it lacks a Turing-complete virtual machine. This means that Bitcoin can't support complex smart contracts like other blockchains, which is a core capability necessary for DeFi.

Major Project Analysis

BitVM

BitVM attempts to implement smart contracts on Bitcoin through "optimistic two-party computation". However, its system is highly centralized and relies on two computers running by a trusted party. While there are plans for decentralization, current deployments are still highly centralized. In addition, due to the limitations of the Bitcoin programming language, BitVM is extremely inefficient and difficult to scale.

Rootstock

Rootstock is a sidechain connected to Bitcoin that provides smart contract functionality. However, it relies on a permissioned consortium to maintain a two-way peg, which means that the consortium can review or even control user assets. While it has a high degree of centralization, Rootstock at least acknowledges this in its project introduction.

Sovryn

Sovryn is built on Rootstock, thus inheriting its centralized characteristics. However, Sovryn claims to be "decentralized" and offers "Bitcoin native trading" in its promotions, which is clearly misleading.

BitcoinOS

The promotion of BitcoinOS is the most exaggerated, claiming to solve many problems that Ethereum has failed to address. However, its white paper lacks key information, especially regarding the description of the "off-chain execution" section. The project adopts a structure similar to BitVM but does not specify how to achieve the decentralization of validators. In addition, its claimed advanced Rollup system is technically difficult to implement and has very low efficiency.

Limitations of L2 extensions

Many Bitcoin DeFi projects are based on the concept of "layer 2 scaling". However, this approach rarely actually increases the capacity of the original chain. Instead, it can lead to a decrease in the usage of the sourcechain and distort the incentives of the sourcechain through L2 tokens. For Bitcoin, L2 scaling can make large-scale self-custody impractical, defeating the original purpose of Bitcoin.

! Opinion: "Bitcoin DeFi" is just nonsense and investment trap due to technical limitations

The Technological Stagnation of Bitcoin

The governance mechanism of the Bitcoin community makes protocol upgrades extremely difficult. Even minor changes are often blocked, let alone significant changes such as the introduction of a Turing-complete virtual machine. This means that the possibility of Bitcoin adapting to Decentralized Finance is very low.

Conclusion

The so-called "Bitcoin DeFi" projects have created a cycle: every few years, new projects emerge, raising large amounts of funds, but ultimately fail due to technical limitations. These projects exploit people's fantasy that Bitcoin can achieve DeFi, but the reality is that there has been almost no significant technological advancement in the Bitcoin protocol over the past decade.

Bitcoin DeFi is still a collective fantasy at the moment, fueled by greed and misunderstanding. Instead of indulging in such fantasies, focus on the real DeFi economy that is already running on other blockchains. These systems generate billions of dollars in revenue each year and represent a true revolution in the cryptocurrency space.