The article examines the current role of Ethereum and Bitcoin in decentralized finance (DeFi), including their contributions and limitations, and discusses which might become the best foundation for future financial innovations.
Ethereum's Contribution and Limitations
Ethereum has played a pivotal role in the creation of DeFi, enabling programmers to create automated lending platforms and sophisticated derivatives thanks to its smart contract capabilities. However, its flexibility also comes with compromises. The drawbacks have manifested in known hacks (The DAO, Wormhole, and Ronin Bridge), which were the result of security issues.
Why Bitcoin?
Bitcoin's design philosophy is fundamentally different: it is not a platform for unlimited experimentation but rather a bastion of stability. Its conservative development approach and proof-of-work consensus make Bitcoin the most secure blockchain network, which is crucial for DeFi applications dealing with billions of dollars.
Characteristics of Bitcoin-Based Projects
Some Bitcoin-based projects claim to be created with its security. However, many are built on multisignature schemes or network bridges, which do not make them truly 'native' to Bitcoin. Paths that might not fully unlock Bitcoin's potential in DeFi are under consideration.
Discussing the future of DeFi, it is crucial to consider the unique opportunities provided by both Ethereum and Bitcoin. While Ethereum remains an essential innovation hub, Bitcoin offers the security and liquidity foundation needed for growth and trust in the financial industry.
