Bitcoin defi grows to $1.07B with new innovations in 2024

A new report from Coinmarketcap (CMC) Research and Footprint Analytics reveals that Bitcoin's (CRYPTO:BTC) role in decentralised finance (defi) is rapidly evolving, with the total value locked (TVL) in Bitcoin-based defi projects reaching $1.07 billion as of September 2024. 

This marks a 5.7x increase from January, highlighting Bitcoin's growing significance in the defi space, traditionally dominated by Ethereum (CRYPTO:ETH).

The report details how innovations like Rootstock and Taproot are transforming Bitcoin from its original purpose as a peer-to-peer currency into a significant defi player. 

“Through Merklized Alternative Script Trees (MAST), Taproot condenses complex transactions into a single hash, reducing transaction fees and minimizing memory usage,” the researchers explain. 

Although not a defi solution itself, Taproot's upgrade has enhanced Bitcoin’s smart contract capabilities, making it more efficient to execute complex transactions and setting the stage for future defi advancements.

Bitcoin’s security and decentralisation make it an attractive platform for defi, despite challenges like scalability and transaction speed. 

According to the report, "Bitcoin’s unparalleled security framework is the foundation upon which the BTCFi ecosystem is constructed, ensuring that all developments remain true to these core values." 

This security advantage has driven increased interest in Bitcoin-based defi platforms, which are now competing with Ethereum's established ecosystem.

Layer two (L2) solutions and sidechains, such as the Lightning Network, Core, and Merlin Chain, are helping Bitcoin handle defi activities while preserving its core principles. 

Data from CMC Research and Footprint Analytics shows that Core is the leading Bitcoin-based defi platform, accounting for 27.6% of TVL across all Bitcoin L2 solutions. 

Other notable platforms include Rootstock, Merlin Chain, and Sovryn, which are providing new opportunities for BTC holders to participate in defi activities like lending, borrowing, and yield farming.

Wrapped assets like WBTC are also enabling BTC holders to access Ethereum’s larger defi ecosystem. 

The report emphasises that innovations such as Discreet Log Contracts (DLCs) and improved interoperability with Ethereum will be crucial for expanding Bitcoin’s role in defi.

At the time of reporting, the Bitcoin (BTC) price was $59,810.41.