Apparently Bitcoin DeFi is failing, this isn't the story you'd expect to come to read given that Bitcoin is an asset worth over $1.19 trillion, why on God's green earth (as the saying goes), would people reject decentralized finance on an assets whose network is designed to be decentralized, facilitating peer-to-peer, censorship-resistance financial transactions?
That certainly doesn't make any sense now, does it?
Andre Dragosch, head of research Europe at Bitwise, told Cointelegraph, “Bitcoin is winning decisively as a monetary asset and as pristine collateral, but the case for Bitcoin as a standalone DeFi execution layer was always structurally weaker than the narrative suggested.”
When Botanix announced it was winding down after nearly four years of work and a year of mainnet uptime, the team didn’t blame a hack or a regulatory shock; they blamed demand.
The team concluded that Bitcoin is still viewed as a reserve asset rather than something that has programmable utility.— Cointelegraph report
Misaligned incentives?
The conclusion I am getting from two reads of this report is that this is a case of misaligned incentives, it even directly says so in the article, hence why I am writing this.
It's no news that most people view Bitcoin as a "store of value."
This, in my opinion, is largely because this has been the #1 promotional message for the asset by most investors.
The perception is simply a product of its marketing and the market, over the years, has priced it as such.
This means that when we try to bring things like "DeFi" into the picture, we are effectively testing new waters.
It's crucial to understand that DeFi, to some extent, is "active capital" territory and the Bitcoin community is all about the opposite.
The concept of "store of value" is closely aligned with "hoarding" capital, not deploying it.
So this is a community that wants to buy this asset, put it somewhere safe and forget about it.
They aren't chasing rewards through yields. So DeFi incentives effectively mean nothing to them.
Why try to earn 4-8% on the asset with added custody risks when every four years, the asset's market value more than doubles?
It makes no sense, right?
So the misaligned incentives is a conclusion with a strong base argument.
But of course, not everyone agrees with this.
Personally, I don't wish to argue for it or against it, I just want to point out that this is close to showing how Bitcoin will never lead in payments through any L2 or other scaling solutions.
The people that hold the supply aren't particularly interested in moving it around. The inevitable end here looks like an asset that eventually just moves on balance sheets and not on-chain.
What impact would that have on the network? I have some ideas but only time will reveal what, for sure.
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