Bitcoin DeFi On The Rise As Jack Dorsey’s Square Enters Into Territory Long Held By Ethereum Currency News | Financial and business news

Square CEO Jack Dorsey announced earlier this week that his payments company is diving into the decentralized financial space. But it doesn’t do this on Ethereum, DeFi’s usual stock-in-trade. Dorsey wants to build his platform with Bitcoin.

DeFi, which some call the “fourth wave” of crypto, is booming. Businesses build it, users buy into it, and regulators worry about it. More than $ 50 billion in assets are stuck in a DeFi exchange, according to DeFi Pulse.

But Ethereum-based apps that have come to dominate DeFi, such as Uniswap and Compound, don’t have to be the only option.

Bitcoin DeFi is rising, albeit slowly, and could see big gains from Square’s entry into the space. From one perspective, there are at least 26 active Bitcoin-related DeFi projects ranging from derivatives trading to payments.

So far, DeFi services have been largely built on ethereum, in part because of the easy use of smart contracts by cryptocurrency, pieces of code that automate agreements between two parties. 80% of the products listed by DeFi Prime, an analytics company, are based on Ethereum.

Smart contracts directly on the bitcoin blockchain could exist in principle, but the technology just didn’t materialize, said Peng Zhong, CEO of Tendermint and developer at Cosmos, a collective trying to bring together independent blockchains.

“I’ve been hearing about smart contracts that can be built directly on bitcoin for a while,” crypto veteran Zhong told Insider. “I feel like development has stalled a bit, so we haven’t seen any real examples of this yet.”

The main attempt to create DeFi bitcoin came from the “Layer 2” network, i.e. protocols built on top of “Layer 1”, the main bitcoin blockchain. But overall, smart contract protocols on Layer 2 have simply received less development energy than smart contracts on Ethereum.

“Ethereum is the network with the most developers,” Tally Greenberg, business development manager at Allnodes, told Insider. “But I think the smart contract idea is coming to bitcoin as well.”

“It will take some time for bitcoin to catch up,” she added, noting that even a very successful DeFi bitcoin ecosystem is unlikely to hurt Ethereum’s development trajectory or price.

As Dorsey’s Square grows its new business, bitcoin DeFi could receive a new boost from Taproot, a protocol upgrade slated for November. Taproot is supported by large swathes of the bitcoin community and will make a number of technical changes to bitcoin that should ease the process of creating Layer 2 smart contracts.

“There are hundreds of projects on DeFi right now,” Greenberg said.

“More the merrier, the merrier!”