Bitcoin's decentralized finance (DeFi) sector, known as BTCFi, aims to provide DeFi functions on the original blockchain network. Nash Lee, co-founder of MerlinSwap, believes that if BTCFi continues to be adopted at its current pace, it could match the level of innovation found in Ethereum’s DeFi ecosystem in the future.

MerlinSwap, a decentralized exchange (DEX), recently raised 6,599 Bitcoin during its initial DEX offering (IDO) on April 5, attracting over 52,000 participants. This significant fundraising success showed strong investor demand for Bitcoin-native DeFi applications.

MerlinSwap operates on the Bitcoin layer-2 network, Merlin Chain, and reached a total value locked (TVL) of over $100 million on April 4.

BTCFi emerged with the introduction of the BRC-20 token standard, allowing the creation of non-fungible tokens (NFTs) on the Bitcoin network known as Ordinals. These NFTs are directly linked to satoshis (sats) on the Bitcoin blockchain, offering them permanent placement within the network.

Since the first Ordinal was inscribed in December 2022, the network has seen over 64.1 million Ordinal inscriptions within a relatively short time span, showcasing the interest in Bitcoin-native NFTs.

The development of Bitcoin layer-2 solutions is another key aspect of BTCFi, expanding the potential use cases for Bitcoin assets beyond being solely a digital store of value.

Lee emphasized that Bitcoin layer-2 technologies have opened up numerous new possibilities for BTC assets, beyond what was previously possible.