In that future, Bitcoin plays potentially the most important role in DeFi — and not in a triumphalist, maximalist sense. Rather, Bitcoin can complement the rest of crypto as the centerpiece of multichain DeFi. The key to this is connecting it all together so that Bitcoin can interact with Ethereum as seamlessly as iOS and Android do today.
An argument in favor of harmonizing Bitcoin with DeFi may come as a surprise. Commentators often pit the incumbent Bitcoin blockchain against its more agile and functional counterpart, Ethereum. The real “flippening,” however, is connecting DeFi to Bitcoin. Doing so gives users the best of both worlds, combining the dexterity of Ethereum with the purity of Bitcoin. The debate revolves around what a Bitcoin-enabled DeFi industry looks like or if it is even possible to accomplish.
The rocky road to interoperability
The underlying Proof-of-Work (PoW) consensus mechanism of the Bitcoin network offers a rock-solid bedrock for a global payment network separated from any state. The built-in computational guarantees are enough to attract institutional money, illustrating that it’s good enough for the power players of traditional finance. Despite being designed to become the cash of the internet, the intrinsic properties of Bitcoin have inspired less resource-intensive networks like Ethereum.
Despite the arrival of challengers, Ethereum native projects still dominate DeFi, which remains a fragmented ecosystem of smart contract-driven applications facilitating an open peer-to-peer financial system. Global networks of developers work tirelessly to bring this arrangement of decentralized applications (DApps) into cohesion, largely without success, although atomic swaps have emerged as one viable option. Generally, suboptimal solutions like cross-chain bridges proliferate, leaving DeFi users vulnerable to exploits, while other popular solutions such as wrapped tokens come with their own downsides, namely centralization.
Related: Bitcoin will surge in 2023 — but be careful what you wish for
As of yet, the DeFi products have not been brought to on-chain Bitcoin transactions, as the Bitcoin protocol does not facilitate smart contracts. This is a consequence of the design of Bitcoin, which was constructed with a limited script language to optimize security over data storage and programming capacity. Remember, this stuff is only as valuable as the degree to which it is decentralized.
Permissionless multichain finance
So, Bitcoin…
Click Here to Read the Full Original Article at Cointelegraph.com News…
