As most know Bitcoin is 21st century “GOLD” as it has been found to effectively store value. It has been the most profitable asset of the past decade and it is currently trading at $31,768.70.
BTC has been the number 1 cryptocurrency market by capitalization for the last 13 years. This is all due to its use as a digital currency and because of it being one of the 1st cryptocurrencies to be in the race.
However, besides it being a great store of value, there is not a lot of utility to Bitcoin. It’s SHA-256 hashing algorithm is slow by todays standards, not that efficient when compared to other technologies, and it doesn’t have Dapps on the network.
That was until recently when Bitcoin miners agreed upon a new update to the technology called the Taproot. This update will improve the overall efficiency of the transactions conducted on the blockchain and this will bring more utility value to Bitcoin.
So instead of depending on the Ethereum network for smart contracts to support the DEFI applications, we will soon have the option of using Bitcoin technology. The Taproot update is expected to be rolled out this November.
As you can see from the 30 day DeFi chart below DeFi usage is becoming extremely popular and Bitcoin has had to rework their code to avoid being left behind by Ethereum.
Currently, to use bitcoin for transactions on DEFI apps, we would have to convert it into a stable coin that is supported by the blockchain the app resides on.
In the case of Ethereum based DEFI app, we would have to convert Bitcoin (BTC) to a wrapped Bitcoin (WBTC), to effectively use it for transactional purposes on the blockchain.
Now, with the Taproot update, we won’t have to do that, since both, the cryptocurrency (BTC) and the DEFI application will reside on the same Bitcoin blockchain.
That is why many new companies have started to look at Bitcoin technology as a possible alternative to Ethereum for DEFI-based applications.
A recent example is Square headed by Jack Dorsey, co-founder of Twitter, who announced that they will be launching a DEFI platform that will be based on Bitcoin technology. When the news broke out, investment firm ARK Invest bought another 225,937 shares of Square which are worth around $53.6 million.
There are currently 253 DEFI application in existence out of which only 26 are from Bitcoin Technology. This number is bound to increase when companies like Square start to build DEFI apps on Bitcoin Technology.