January 28, 2021

Cryptheory

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Will DeFi come to BSV?

3 min read


Today, the total value locked in DeFi exceeded $20 billion. To put that into perspective, the total value locked in DeFi is larger than the market cap of BSV which is about $3.4 billion as of press time. 

The most popular DeFi applications allow people to earn interest on their deposits (lend), borrow against their digital currency collateral, trade on a peer-to-peer exchange, as well as trade derivatives, and purchase insurance.

Interestingly, that $20 billion has accumulated on Ethereum-based projects even though Ethereum notoriously can’t handle transaction loads in large quantities. As Joshua Henslee said when he was featured on The Crypto Vigilante, “On ETH, if you succeed you fail, you are going to hit a wall every single time.” That being said, there is definitely an opportunity for individuals to bring DeFi to BSV once tokenization arrives–and in my opinion, those who perfect DeFi on BSV will be very successful.

Legitimate uses of decentralized finance

It’s important to define what I consider legitimate use-cases for decentralized finance. Applications that allow you to earn interest on your deposits, take out loans backed by the digital currency you deposit as collateral, and even Non-Fungible Tokens (NFTs), as well as Security Token Offerings (STOs), are all legitimate ways to capitalize on DeFi. 

What I don’t consider to be legitimate uses of DeFi is the creation of DeFi tokens that merely serve as a way for the founding team to raise capital and then not put that capital to use in any way shape or form. In other words, I don’t think conducting an ICO through DeFi is a legitimate use for it, although it is very possible to do this.

So why don’t we have DeFi on BSV?

I think that the first individuals who can find innovative ways to bring DeFi products to BSV will prosper. Beyond creating businesses that create real value for their end-users, the first people to launch these DeFi products will show the world a few of the unprecedented possibilities of having products that live at the intersection of legacy finance and Bitcoin.

But there are a few obstacles in the way that prevent making DeFi on BSV a reality. In regard to the interest-bearing and digital currency collateral service providers, I don’t believe very many of them exist, and if they do, they are far and few in between and not very popular at the moment.

When it comes to NFTs and STOs, the Bitcoin ecosystem is waiting for the launch of several tokenization services–such as those coming from Fabriik and Run (which has just entered public beta). 

And when it comes to every legitimate service that we discussed in this article, the law is an ever-impeding obstacle that I believe many entrepreneurs in the industry are not quite sure how to navigate best. 

The solution?

We are going to need to wait for the tokenization protocols to hit BSV before any movement happens in regard to token-based DeFi. However, when it comes to the other use-cases, I believe it is ok to move forward with them as long as you proceed with caution. There are a lot of benefits to moving fast and breaking things, but you don’t want to break the law at the same time. Similar to DeFi on ETH, there does appear to be ways to launch tokens and services without breaking the law. From there, we may want to take a look at a few of the projects with the use-cases that we discussed that were able to launch and operate without going to jail. 

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.





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