Growing interest in Bitcoin-native decentralized finance (DeFi) has led to an all-time high in active users for leading Bitcoin layer-2 (L2) network Stacks.
In April, Stacks hit a new record-breaking high of 122,497 active accounts. As per the May 2 X post by Bitcoin BTC data provider Signal 21, active accounts are those addresses that have completed at least one transaction.
More than a week has passed since the introduction of Runes, a new protocol for producing fungible tokens on the Bitcoin network, and the 2024 Bitcoin halving, which both point to a growing interest in Bitcoin DeFi, or BTCFi.
Andre Serrano, the product and relationship manager at Stacks, believes that Bitcoin Runes and Ordinals have the potential to increase activity on Bitcoin L2 networks since they will drive away smaller transactions due to rising network fees.
As a result of the high transaction costs caused by the anticipated volume of asset issuance on [Bitcoin] L1, many users and activity will be priced out. In the end, moving more of this activity to L2s will become essential.
Because of the Bitcoin halving, the median transaction fees for Bitcoin dropped from an all-time high of nearly $92 on April 20 to $1.72 on May 1.
The evolution of Bitcoin DeFi depends on Bitcoin L2s
A key component of BTCFi are Bitcoin L2s like Stacks, which allow for more use cases and reduced transaction costs for the first blockchain network in history. On the Bitcoin network, for example, L2 network Stacks allow smart contracts to be created.
According to Stacks’ Serrano, L2s are more crucial for Bitcoin than Ethereum because the latter has built-in smart contract functionality. In order to scale the Bitcoin network beyond its existing transaction limits, he continued, L2s are required.
There was a lot of excitement about BTCFi in the cryptocurrency world. Co-founder of MerlinSwap Nash Lee believes that with the current development, BTCFi could catch up to the innovation on Ethereum-native DeFi.
May 2024, Cryptoniteuae
