The Breakdown - Why Bitcoin Will Drive the Next DeFi Summer

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Sunday, April 28th, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link of the show notes or go to bit.ly slash breakdown pod. All right, friends, well, for this LRS, we have what is a very interesting topic. It's an argument from Brandon Sedo that Bitcoin will power the next DFI summer. Now, there's a lot of conversation around Bitcoin and the changing nature of the tech

Starting point is 00:00:52 stack around Bitcoin as we have been around the halving, and this is related to that conversation. Let's read the piece and then we will come back and discuss it. Brandon writes, in 2023, we said goodbye to Crypto Winter. Now it's time to say hello to a new era of DFI. summer, this time centering on the most buzzworthy yet also durable trends. Bitcoin. With ordinal's proving demand, exchange-traded funds, providing access, and Bitcoin-scaling solutions emerging, 2024 is set to unlock the $1 trillion asset class in ways previously unseen. The initial defy revolution in 2020 centered around smart contracts unleashing blockchain

Starting point is 00:01:27 utility beyond the simple maintenance of a ledger and asset. It transformed the technology into a platform for vast interoperable financial ecosystems. On the Ethereum virtual machine, people worldwide could essentially become their own banks, accessing hundreds of interoperable financial applications. This evolution offered a promising look into a future of finance governed by immutable code rather than fickle human beings. As Defy Summer unfolded, the technology and enthusiasm fueling Defy extended to non-financial blockchain applications, notably NFTs. Blockchains demonstrated their versatility by hosting not only financial systems, but also becoming hubs for art, culture, and gaming. Spurred by the constant inquiry of what's next,

Starting point is 00:02:05 blockchain technology seemingly expanded into every conceivable use case, often stretching beyond its core utility and practicality at the height of the craze. Ultimately, the initial buzz about NFTs and blockchain's expansion turned to fear during the 2022 crypto winter, although this wouldn't be the end for NFTs. 2023 witnessed a revival in the blockchain enthusiasm thanks in part to NFTs making a strong comeback, this time taking the form of ordinals on Bitcoin. Similar to how Deepi Summer revealed new blockchain capabilities, Ordinals and BRC 20 tokens showcased Bitcoin's potential, sparking excitement about the future possibilities of blockchain technology. The question arose if Bitcoin could support NFTs and tokens,

Starting point is 00:02:41 what other applications could its unparalleled security and popularity uncover? Section Unlocking BTCFi. In retrospect, the NFT craze of 2021 can be interpreted as the fading out of a hype cycle, while valuable the technology was more a reverberation from DeFi's big technological splash. In contrast, the current enthusiasm around Ordinals feels like the fading in of a new cycle, representing newly discovered demand that will undoubtedly have downstream effects. This isn't merely a repetition of past utility. It's an intriguing development whose potential is just beginning to unfold. Prior to the advent of ordinals in BRC20, there was a widespread belief that Bitcoin served a solely passive role within the blockchain ecosystem, offering

Starting point is 00:03:19 little beyond basic asset functionality. This perception has shifted dramatically, thanks to a number of significant advancements from a usability standpoint, Bitcoin is emerging as a critical security provider for Defi and as an asset with newfound utility and interoperability. The future of Bitcoin Defi involves bringing the Bitcoin network security to EVM-compatible smart contracts. Leading EVM-compatible Bitcoin scaling solutions are innovating methods to incentivize Bitcoin miners to secure both the Bitcoin asset and smart contracts simultaneously, but independently. Ensuring miners and consequently Bitcoin itself gain value is essential for expanding the Bitcoin network beyond safeguarding just the BTC asset.

Starting point is 00:03:55 Hello Breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best practices, and of course, to help all the new folks do the same. Ledger is the global platform for securing Bitcoin and other crypto. Ledger combines both hardware wallets and the Ledger Live app to offer the best way to buy, sell, swap, and stake without sacrificing on security or self-custody. Ledger features cutting-edge technology in the form of a certified secure chip and a proprietary operating system, but also brings ease of use.

Starting point is 00:04:30 This makes Ledger a safe and secure way to manage your digital assets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes. 5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. All right, breakers, consensus 2024 marks the 10th gathering of the biggest event that's devoted to all sides of the crypto, blockchain, and Web3 ecosystems. join pioneering fingers and builders as they delve into the future of Defi and explore game-changing tech from AI to ZK Proofs and everything in between.

Starting point is 00:05:02 The event is three days of jam-packed content, networking, and so much more. Some of the speakers at the event include Chris Dixon, the founder and managing partner at A16Z Crypto, Sergey Nazaroff, the co-founder of Chainlink, Kathy Wood, the CEO of Arc, Hester Perce, commissioner, of course, from the U.S. SEC, and Tom Emmer, Republican Majority whip for the U.S. House of Representatives. Visit Consensus-20204.com to learn more and save 15% on registration with the code breakdown. That is 15% on registration with the code breakdown. Section. Unlocking the BTC asset.

Starting point is 00:05:37 Historically, Bitcoin is served mainly as a passive store of value, not actively involved in defy security or commerce. Yet, much like ETH's dual role in securing Ethereum and serving as currency, Bitcoin has the potential to evolve into a versatile asset beyond the base Bitcoin chain. The introduction of Bitcoin staking in 2024 is set to transform Bitcoin from a passive to a reward-generating asset, marking a significant shift in its utility. Once DPI ecosystems become massively aligned with both Bitcoin miners and Bitcoin holders, those ecosystems become the greatest and safest platforms for BTCFi. As advancements such as Htlc Atomic Swaps and innovative bridging solutions overcome technical hurdles,

Starting point is 00:06:12 Bitcoin is set to pour into DeFi protocols. This influx will unlock extraordinary utility for the world's premier and most trusted blockchain-based asset. Section, Building Bitcoin Defi Together. Bitcoin is leading the creative front of blockchain innovation for the first time in years. Now that the Bitcoin base layer is widely recognized as permanently secure, it's time to build solutions to bring it to new heights. Given that the Bitcoin asset is the definitive self-sovereign asset, it only makes sense that Bitcoin network should be the core protector of the future of self-sovereign decentralized finance. We, the Bitcoin community, are acutely aware of the vast potential lying dormant within our network and its

Starting point is 00:06:46 currency. It's time to step forward and unlock this potential fostering innovations that empower Bitcoin, defy, and the pursuit of financial independence worldwide. Now, these are themes that you will have been unable to avoid at this point. And if you need an example, just look at what happened in the lead-up to the halving. Fees got extremely high as people competed to get SATs from the halving block. This had never been a thing in the past. Yes, there had been some competition and excitement as a vanity sort of thing to say we mine the halving block, but there was nothing like what we saw this time around. That's only because we have this idea of ordinals, in which each sat has a unique identifier, with certain sats being more rare or coveted than others. Now, the interesting

Starting point is 00:07:27 thing about this is that to some, this definitionally breaks the fungibility of Bitcoin. If the first sat of the having block, for example, is worth a million dollars to someone, versus the first sat of the next block, which is worth one sat to people, doesn't that mean that Bitcoin is no longer fungible? Well, the interesting set of the having to someone, well, the The interesting thing is that, as has been the case before with crypto, different audiences value things completely differently. Bitcoin itself, used as an asset for storing value, remains completely fungible. It's just that there's a subset of the community that's looking for specific sats within that larger context that they do find more valuable. Now, there are a lot of debates

Starting point is 00:08:03 to be had here. Fees spikes are seen by some as positive, an indication that in the long term, fees will be able to support Bitcoin security. For others, they block out what they perceive to be more valuable or more important use cases. People who really need Bitcoin to transact because they live in an unstable monetary regime without alternatives can't necessarily pay $10 fees, $20 fees. And yet that's ultimately all a market question. I think the excitement that Brendan is capturing here is that for the first time in a very long time, these things are debates. And there are big swaths of the Bitcoin community who are actively experimenting with all the different stuff that Bitcoin can be and do. I think that we are still towards the beginning of a real flowering period for Bitcoin technological

Starting point is 00:08:45 exploration. It's not to say it won't be contentious, and it's not to say that every experiment will be a priori good. But it's certainly bringing more energy and excitement to the field than we've seen in quite some time. What this all means is that it may be the case that Bitcoin does power the next Defi summer, but it's going to do it in its own way, with its own controversies, its own battles, and its own excitement. I will certainly be here to tell you all about it as it But for now, that is going to do it for The Breakdown. Big thanks to my sponsor for today's show. Check out the Ledger Orange Bitcoin Nano.

Starting point is 00:09:17 5% of sales will go to support Bitcoin Development. Until next time, be safe and take care of each other. Peace.

The Breakdown - Why Bitcoin Will Drive the Next DeFi Summer

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