[Promt: Please rewrite the following text while preserving the HTML tags exactly as they are. Focus on rephrasing sentences and using synonyms to enhance the uniqueness of the content without changing the original meaning or adding new information. Ensure the core message and ideas remain intact, and do not alter the structure or purpose of the post.] Binance Research Says Bitcoin's Role in DeFi Is an 'Untapped Opportunity'
The report says the Bitcoin network is transforming into a broader DeFi ecosystem.
Will Canny | Edited by Aoyon Ashraf March 13, 2025 17:48 UTC
What you need to know:
- A study by Binance Research highlights that Bitcoin has become more than just a store of value.
- The report mentions that the network is evolving into a decentralized financial ecosystem.
- The paper points out that only about 0.8% of Bitcoin is currently used in DeFi.
Bitcoin's (BTC) role in decentralized finance (DeFi) is growing as the world's largest cryptocurrency moves away from being solely a store of value, according to a report from Binance Research published on Thursday.
Analyst Mulik Nagesh notes that the Bitcoin network is “transforming into a larger decentralized financial ecosystem with the emergence of Bitcoin DeFi.”
The report says the sector is “unlocking Bitcoin’s capital efficiency” through financial applications focused on lending, staking, stablecoins, and decentralized exchanges (DEXs).
DeFi is a general term used to describe lending, trading, and other financial transactions that take place on the blockchain without the need for traditional intermediaries.
Binance noted that DeFi currently only uses ~0.8% of Bitcoin’s total supply, representing a significant “untapped opportunity.” In fact, Julian Love, a deal analyst at Franklin Templeton Digital Assets, argued last year that the potential could be as much as $1 trillion.
A Binance Research report argues that Bitcoin needs Layer 2 because the network lacks “native programmability,” unlike Layer 1, which is based on smart contracts. Layer 1 is the underlying platform or infrastructure of a blockchain. Layer 2 refers to the set of off-chain systems, or individual blockchains, that are built on top of Layer 1.
Binance Research reports that while there has been some progress in the development of Bitcoin Layer-2 networks, these platforms need greater adoption and liquidity incentives to achieve effective scaling.
The report also notes that the network's security model faces “long-term sustainability issues” as block rewards will continue to decrease, reducing incentives for miners.
The paper also states that the long-term viability of Bitcoin DeFi depends on implementation, further development of Layer 2, and “the ability to meet Bitcoin’s unique value proposition.”
Read More: Ethereum L2 Starknet Aims for Bitcoin's 'DeFi Takeoff Moment' with BTC Xverse Wallet
