The role of Bitcoin (BTC) in decentralized finance (DEFI) increases as the largest cryptocurrency in the world is evolving more than simply a value store, a report said on Thursday.
The Bitcoin network “evolves towards a wider decentralized financial ecosystem with the emergence of Bitcoin Defi”, wrote analyst Moulik Nagesh.
This is a sector that “unlocks the efficiency of Bitcoin capital” with the use of loans -oriented financial applications, stain, stable and decentralized exchanges (DEX), according to the report.
DEFI is an umbrella term used for loans, trade and other financial activities carried out on a blockchain, without the need for traditional intermediaries.
Binance noted that only about 0.8% of Bitcoin supply is currently used in DEFI, and this has a large “unexploited opportunity”. In fact, last year, Julian Love, an analyst of the agreement at Franklin Templeton Digital Assets, said that the opportunity could be up to 1 dollars.
Binance Research Report indicated that Bitcoin needs layer 2 because the network lacks “native programmability”, unlike layer 1 of intelligent contracts. A layer 1 network is the base layer or the underlying infrastructure of a blockchain. Direction 2 refers to a set of out -of -chain systems or separate blockchains built on top of layer 1.
Although there has been progress on the development of Bitcoin Layer-2 networks, these platforms need greater incentive to adopt and liquidity to be able to develop effectively, said research in binance.
The network security model is faced with “long -term sustainability challenges” because block rewards will continue by half, according to the report, thus reducing minors’ incentives.
The long-term viability of Bitcoin DEFI depends on the execution, the subsequent development of the layers-2 and the “ability to align with the single Bitcoin value proposal”, added the report.
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