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Hype of the Week: Is DeFi moving to Bitcoin?

Decentralized finance (DeFi) projects have been the absolute hype over the past months, yet have consequently crashed. In the wake of this market downturn, on Wednesday, Atomic Finance announced its departure from the Ethereum DeFi ecosystem. Following this announcement, a high-profile twitter storm raged, questioning Ethereum’s validity as a decentralized project. This begs the question, may DeFi be moving to Bitcoin?

Status Quo

At present, 204 out of a total of 250 listed DeFi projects call Ethereum’s blockchain home. The reason for this is due to the ease at which DeFi projects can utilize essential DeFi tools, such as protocols (smart contracts) and technical standards (ERC-20). Over $1billion worth of Bitcoin have been moved to Ethereum as bitcoiners hope to join in the DeFi boom.

The Jenga Tower Nature of ETH …

Atomic Finance (AF), most known for their Atomic Loans protocol announced on Twitter: “We’re leaving behind ETH & our previous cross-chain approach to take a #Bitcoin-native approach to building all of our future products.”

The reason for this decisions stems from the companies conclusion that Bitcoin provides better guarantees of “Censorship- & seizure-resistance, borderless, pseudo-anonymity, auditability, verifiability, and scarcitywhich a financial system requires.

They further whent to emphasized that trust was a key component of Bitcoin and that they wished to integrate the same trust into their financial offerings. Additionally, AF tweeted that “high gas fees, ETH 2.0 uncertainty, lack of consensus of L2’s” were further driving forces for their decision to leave Ethereum’s blockchain.

After having provided an explanation for their decision to leave, AF announced that they would return to old stomping grounds in the form of Bitcoin and try to use the tools available on the origin blockchain to continue creating financial products. AF finished their thread by revealing that their newest project would be Atomic Odds, dubbed “the simplest way to bet on any outcome in a P2P way, settled in Bitcoin.”

Jeff Bezos, Frontends and Decentralization

On the same day that AF accounced their departure, Anthony Pompliano, Bitcoin Evangelist and Co-founder of Morgan Creek Capital kicked off a Twitter storm by tweeting:

He questioned the decentralized nature of Ethereum and subsequently that of Uniswap; the largest decentralized exchange — that recently has seen trading volumes higher than Coinbase and Kraken. To which Hayden Adams, Uniswap’s founder, responded that it is impossible for him to “turn off” the Uniswap smart contract.

Shapeshift CEO Erik Voorhees joined in by noting:

Where to next?

With the set events last night and ever more companies such as MicroStrategy and Square publicly announcing their investment in Bitcoin, the question must be asked if DeFi is going to be moving to Bitcoin? Furthermore, it may have come as a shock for some ardent crypto-believers that neither Ethereum nor Bitcoin is fully as decentralized as one might like to believe. As it stands, Bitcoin is of course by far the most widely held crypto. Thus, it would make perfect sense, in the long-term, to focus on using the existing tools on Bitcoin’s blockchain and begin to develop the DeFi community using crypto’s most popular asset.

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Author: Stephan Eduard Pàl Roth




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