History of DeFi on Bitcoin

History of DeFi on Bitcoin

Disclaimer: All Information used within this essay has been referenced from public information. Dates, timelines, and graphics may be subject to imprecise information. Bitcoin’s life extends beyond 14 years with some documentation becoming lost due to deactivated servers or mismanagement of historical dialogue. This timeline is a combination of factual public information found on the internet with an addition of commentary and opinion. If you find any information to be solely inaccurate please reach out to Jake Gallen and provide factual evidence that can added into the timeline. For the purpose of narrative and story the entirety of this series will follow the public timeline.

Created by: Jake Gallen
First Published: August 7th, 2023
Last Edit: August 7th, 2023


Well, here we are again, my fellow nerds, degens, geeks, and now BITCOINERS. It’s been a few months since my last blog post, and this one will be the first timeline to extend beyond Historical NFTs. If you haven’t checked them out yet, take a look here: MoonCat Community Buying Guide, MoonCat IP Acquisition Rumors, NFT Archaeology Calendar Part 1, Part 2, Part 3, History of NFT Marketplaces, The Transition of Provenance, and The Capital Flow of Provenance.

I would be lying if I didn’t mention that the last few months have been nothing short of thrilling. Bitcoin Ordinals burst onto the scene in late January and took the crypto world by storm. They not only brought an influx of developer activity that Bitcoin hadn’t seen in years but also ignited a cultural renaissance that many felt was long overdue.

Back on September 1st, 2022, I, along with Leonidas and Adam McBride, had a conversation on Twitter Spaces with Casey Rodarmor, the creator of Ordinal Theory. The concept of “sat hunting” immediately grabbed our attention because, as you can imagine, the collectability of vintage sats” for Historical NFT collectors was incredibly appealing. Looking back now, during the quiet period before the Ordinal explosion, Casey never mentioned the inclusion of inscriptions, which allow individuals to add up to 4MB of arbitrary data inside a single sat. If we had known that, we’d probably own an island by now. Who am I kidding? We probably would have procrastinated and missed out because we were too lazy to spin up a full Bitcoin node.

In the crypto world, it’s impossible to catch every trend, every 10x return, or every lively Twitter Spaces conversation. But here’s the secret: all you need to do is be directionally right, buy the bottom, sit on your hands, and shitpost until the bull market arrives. Easier said than done, though, especially when you have friends making a fortune right in front of you by investing in memecoins and earning six figures in just a few weeks of hard work.

Short-term profits are like a game of musical chairs, but with only one chair and six contestants. The key to success lies in recognizing early-stage megatrends that can make you and your friends wealthy, together. It’s like a game of musical chairs with six contestants and ten chairs. The boat is halfway full, waiting for you to jump on and embark on the orange transatlantic voyage.

Ordinal Theory represents the new paradigm we’ve all been searching for. It’s a pool of $500B in capital, currently sitting idly in cold storage wallets. But here’s the exciting part: Ordinal Theory is building an ecosystem that can put those shiny digital gold rocks to work. NFTs, On-chain Art, DeFi, Rare Sats, Namespaces, and Cursed Inscriptions are just a taste of the emerging economies flourishing in the Bitcoin space. It’s an unprecedented phenomenon that Bitcoin has never natively witnessed… or has it?

Origins of Bitcoin Ecosystems

Bitcoin has a long and storied history, the longest of any blockchain, to put it simply. So why has the concept of DeFi on Bitcoin not materialized until now? I mean, Ethereum, a blockchain that is six years younger, currently boasts over $55 BILLION in total locked value on its decentralized platform. How is it that the number one blockchain by market cap has lagged behind? Well, it’s a complex tale that involves technical limitations, cultural tribalism, monetary incentives, and geopolitical effects. We could go on and on about why Ordinal Theory is the game-changing value unlock and catalyst that Bitcoin has been eagerly awaiting, and we’ll do our best to explain it.

If you took a glance at the cover graphic, you probably noticed that it encompasses not only DeFi platforms but also projects and upgrades that have brought us to where Bitcoin stands today. Proof-of-Work is a beautifully intricate system that intertwines energy, value, culture, and game theory. Each “failed” project brings us one step closer to groundbreaking innovation on Bitcoin.

With that being said, the reason the infographic includes Bitcoin Core upgrades, early token projects, and some technologies that may or may not be considered “DeFi” is to showcase the progression of innovation that has paved the way for Ordinal Theory. While Ordinal Theory is an on-chain Bitcoin protocol, its concept may have drawn inspiration from technologies that emerged on other blockchains. It’s an important point to note because the history of blockchain innovation often incorporates ideas that originated on different chains.

Before we delve into some general definitions, I want to make one final point. While this essay aims to educate and entertain by exploring the history of DeFi on Bitcoin, I am not infallible. There may be some projects inadvertently or unknowingly omitted from recognition. The history of Bitcoin spans 14 years, and historical information is scattered across numerous forums and communication channels. Feel free to criticize me as a “shitcoiner” or a know-it-all, or come up with any other name that comes to mind. However, if you do, please provide information so that it can be included in the version 2 timeline update. I’ve navigated the culture of Historical NFTs for two years, so I’m well aware of the consequences of neglecting your favorite projects or bruising egos. There’s no doubt in my mind that certain Bitcoin communities will express the same disgruntlement or opposition as the extremes of the HNFT community. If you identify an issue, please offer a solution, and in this case, provide links and information! Alright, enough preamble — let’s get on with the show.

What is DeFi?

Decentralized Finance (DeFi) is a dynamic landscape that evolves and contracts based on the specific ecosystem one engages with.

The question of whether Bitcoin is considered DeFi is an interesting one. In 2009, when Bitcoin was introduced, it was seen by some as a form of decentralized finance. However, there are Bitcoin Maxis who do not view Ethereum, and by extension Bitcoin itself, as part of the DeFi realm. Their perspective stems from a maximalist ideology that emphasizes Bitcoin’s unique qualities and dismisses other platforms.

But does the presence of centralization automatically exclude a project from being considered DeFi? For individuals living in authoritarian regimes, the permissionless nature of DeFi can be a lifeline. In such cases, even projects with some degree of centralization may still be regarded as part of the DeFi movement.

It’s important to recognize that opinions on this matter vary greatly depending on a person’s technical knowledge and values. Each individual is likely to provide a different answer based on their unique perspective. However, before we move on, let’s seek a final answer that takes into account a comprehensive understanding of DeFi.

ChatGBT, tell me what DeFi means?

Bitcoin Defi

As with any research paper, you sometimes stumble upon information that highlights ideological differences in terminology. In this case, we encounter two terms: Bitcoin DeFi and DeFi on Bitcoin.

At first glance, they may seem interchangeable, but once you delve into the inner workings and tinker with the combustion system, you realize they are distinctively different entities.

Bitcoin DeFi primarily revolves around two implementations: the utilization of bitcoin as an asset in other ecosystems, and the existence of forks of Bitcoin or blockchains that employ Proof-of-Work consensus.

From a marketing standpoint, it’s understandable why one would want to leverage the Bitcoin brand to enhance their reputation. However, from a technical standpoint, this approach may introduce a certain level of skepticism. The amalgamation of Bitcoin and DeFi is often a catalyst for eye rolls and maximalist behavior. Can we really blame them?

So, let’s explore a few examples of Bitcoin DeFi, shall we?

  • Wrapped Bitcoin (WBTC) — This is a 1:1 redeemable and pegged tokenized version of Bitcoin, presented as an ERC-20 token that can be used as collateral on the Ethereum network. The actual Bitcoin asset is held in a custodial format.
  • Bridged or Synthetic Bitcoin — These are smart contract platforms that implement a “bridge” to bring Bitcoin into their ecosystem, enabling its use as collateral. Such platforms may incorporate synthetic derivatives, vaults, or unique bridge mechanics.
  • Proof-of-Work and Forks- Some projects take Bitcoin’s open-source code, make a few tweaks, and market it as Bitcoin DeFi simply because it originated from the Bitcoin codebase.

Alright, now it’s time to sink our teeth into the main course and explore the heart of our discussion.

DeFi on Bitcoin

Welcome to the realm of possibilities, but with some limitations. Building on Bitcoin is no easy task, and that’s precisely why there are only a handful of Bitcoin DeFi protocols out there. Yes, I used the term “Bitcoin DeFi” here, but now it’s all about technical reasoning rather than marketability. Simply put, DeFi on Bitcoin refers to a protocol that leverages the Bitcoin consensus mechanism and is somehow “attached” to the network. These protocols exist on the Bitcoin network in various ways, and let’s explore them right now:

Bitcoin Layers by Bob Bodily
  • On-chain — These are activities or operations that occur directly on the Bitcoin blockchain. It includes transactions, data storage, and any other actions that are recorded and verified on the blockchain itself.
  • Sidechain — An independent blockchain that operates alongside the main Bitcoin blockchain, allowing for the transfer of assets or data between the two chains. Sidechains enhance the functionality and scalability of the Bitcoin network by enabling additional features and capabilities that may not be practical to implement directly on the main blockchain.
  • Protocol — A set of rules and specifications that extend or enhance the functionality of the Bitcoin network. It utilizes the underlying infrastructure and features of the Bitcoin blockchain while introducing additional capabilities or layers of functionality.
  • Meta-protocol — A layer or framework built on top of a Bitcoin protocol that introduces additional functionality, features, or standards. It extends the capabilities of the base protocol and can be likened to a decentralized application or network.
  • Meta-Layer — An additional layer or framework built within a Meta-protocol that introduces further functionality, features, or standards specifically tailored for the decentralized meta-protocol it exists within.
  • Layer 2 — A secondary framework or protocol built on top of Bitcoin’s base layer. Layer 2 solutions aim to address scalability and efficiency limitations of the underlying blockchain by enabling off-chain or sidechain transactions and computations.
  • Layer 3 — The development of protocols, applications, or infrastructure built on top of existing blockchain networks. It represents an additional layer of functionality or services that leverage the capabilities of the underlying blockchain.

I know, I know. What on earth was that? When discussing builders on Bitcoin, you are simultaneously introduced to Turing-complete and non-Turing-complete functionality. Smart Contracts add complexity but also bring standardization, as the technology used is similar across the board. Unlike Proof-of-Work, which lacks standardized protocols, Bitcoin introduces unique concepts that are typically not replicated elsewhere.

As we delve into the history of DeFi on Bitcoin, you’ll begin to notice patterns and concepts emerging, submerging, and later intertwining with one another. Brace yourself for an exciting journey of exploration and discovery.

Major Bitcoin Core Upgrades

One final stop before we dive into the history of Bitcoin! There have been a few protocol upgrades introduced along the way that have allowed these Bitcoin ecosystems to grow.

  • OP_RETURN (January 2014): The primary use of OP_RETURN is to store arbitrary data on the Bitcoin blockchain. However, it’s important to note that since this data is non-spendable and does not affect the transaction’s value, it cannot be used for financial transactions or payments. The main purpose of OP_RETURN is to enable the storage of metadata or cryptographic proofs on the blockchain.
  • SegWit (August 2017): Segregated Witness was introduced to address several issues within the Bitcoin network, including transaction malleability, scalability, and the potential for increased transaction throughput
  • Taproot (June 2021): The Taproot upgrade aims to enhance the privacy and fungibility of Bitcoin by making complex smart contracts look similar to regular single-signature transactions, reducing the risk of transaction analysis. Additionally, the introduction of Schnorr signatures improves the efficiency and scalability of the network by reducing transaction sizes and transaction fees.
  • Schnorr Signatures (November 2021): The Schnorr upgrade, also known as Schnorr signatures, is a proposed improvement to the Bitcoin protocol that aims to enhance the efficiency, privacy, and security of Bitcoin transactions. The upgrade introduces the use of Schnorr signatures, a more compact and flexible way of representing signatures for Bitcoin transactions.

History of DeFi on Bitcoin

Okay, now that we’ve finally moved past all of that technical mumbojumbo and crypto bro jargon let’s get to why we’re all here, the history of DeFi on Bitcoin. It’s important to remember that Bitcoin was the first cryptocurrency and still remains the largest to this day. It’s preference for security and decentralization has built a robust system that still remains pristine to this day. It’s sacrifice of scalability has caused this non-turing complete blockchain to progress through some non-developmental periods and single use-case eras. Maybe this time it will be different?

Mastercoin / OMNI Layer

The primary goal of Mastercoin was to act as a “meta-protocol” that could enable the creation of new cryptocurrencies and assets, as well as more sophisticated smart contracts. It allowed users to issue their own tokens on the Mastercoin network without the need to create a separate blockchain.

  • White Paper Release: January 2012
  • Mainnet: July 31st, 2013
  • Price of Bitcoin at Launch: $90
  • Creator: J.R. Willett
  • Type: Sidechain
  • DeFi-equivalent Ecosystems: Smart Contracts, Tokens, DEX, Crowdfunding, Decenrtalized Applications, and Stablecoins
  • Top Decentralized Applications: OMNIDEX, Tether, and $MSC
  • Notable Information:
    -First-ever ICO (Raised 4740 BTC, ~$600,000)
    -First Protocol to issue USDT (Tether)
    -First Utility token $MSC
    -Rebranded to OMNI in 2015
    -OMNI allows users to issue tokens to represent customized cryptocurrencies or assets easily and to transact them on the Bitcoin
    -100 $MSC per 1 $BTC raised during ICO
    -One of the first Bitcoin Sidechains


Counterparty is a decentralized platform built on top of the Bitcoin blockchain that allows users to create, issue, and trade custom tokens and assets. It was one of the early projects that aimed to bring more functionality to the Bitcoin network beyond simple cryptocurrency transactions. Counterparty operates using the native Bitcoin currency (BTC) and employs a system of smart contracts to enable its features.

  • White Paper Release: January 29, 2014
  • Mainnet: January 2nd, 2014
  • Price of Bitcoin at Launch: $800
  • Creators: Robby Dermody, Adam Krellenstein, and Ouziel Slama
  • Type: Meta-Protocol
  • DeFi-equivalent Ecosystems: Tokens, DEX, Dispensers, and Decentralized Applications
  • Top Projects: $XCP, Spells of Genesis, Rare Pepe, Fake Rares, and Bitcoin Stamps
  • Notable Information:
    -Proof-of-Burn Mechanism (2140 Bitcoin burned, around $2M)
    -Native Asset: $XCP
    -0.5 XCP burn requirement per token creation.
    -200,000 total assets created.

Colored Coins

Colored coins refer to a method of representing and tracking real-world assets or digital assets on a blockchain, typically using the Bitcoin blockchain as the underlying platform. This concept was first proposed in 2012. Colored coins allow users to “color” or mark specific bitcoins to represent something else, such as a real-world asset, a digital asset, a commodity, a token, or even ownership of a physical item.

  • White Paper Releases: December 2012 and 2013
  • First Implementation: May 2014 (Coinprism Wallet)
  • Price of Bitcoin at Launch: $450
  • Creators: Meni Rosenfeld, Yoni Assia, Vitalik Buterin, Rotem Lev, and Lior Hakim
  • Type: Meta-Protocol
  • DeFi-equivalent Ecosystems: Tokens, NFTs, RWA (Real World Assets)
  • Top Projects: Nilicoins
  • Notable Information:
    -2nd Whitepaper co-authored by Co-Founder of Ethereum, Vitalk Buterin and CEO of eToro, Yoni Assia
    -Known as proto-NFTs or the earliest precursor to NFTs
    -Last Colored Coins wallet halted support in 2018

Really Good for Bitcoin (RGB)

RGB (short for “RGB Protocol”) is a proposed protocol that aims to enable the issuance and management of digital assets (colored coins) on the Bitcoin blockchain. It is designed to provide a standardized and more efficient way of representing and transferring assets on the Bitcoin network, offering features similar to colored coins and tokenization.

  • White Paper: 2017
  • First Implementation: 2017
  • Price of Bitcoin at Launch: $2,000
  • Creators: Maxim Orlovsky, Peter Todd, Giacomo Zucco, Federico Tenga, and Olga Ukolova
  • Type: Series of Protocols for Smart Contracts on Bitcoin (Client-side Validation)
  • DeFi Ecosystems: Smart Contracts, ZK & Privacy Products, NFTs, DEXs, and Tokens
  • Notable Mentions:
    -RGB was originally envisioned in 2016 by Giacomo Zucco (BHB Network) as a “non-blockchain based asset system” basing on earlier ideas of Peter Todd about client-side-validation and single-use-seals and implemented as original MVP around 2017 by BHB Network with support from Poseidon Group. Since 2019, Dr Maxim Orlovsky, Pandora Core AG, acts as the main designer and lead contributor to RGB protocol, designing and implementing more than 95% of its current code and underlying standards. Since 2019 RGB was restructured and re-thought from scratch by him as a generic form of computing and confidential smart contracting system. This refactoring happened as a part of LNP/BP Standards effort, created in 2019 and initially funded by iFinex Inc and Fulgur Ventures (2019H2–2020H1), and, later (from 2020H2), by Pandora Core AG, personal funds of Dr Maxim Orlovsky and community donations. A lot of input into RGB design, re-design and protocol peer-review came from a broader community, which included contributions from more than 50 people and organizations
    -Uses single-use seals defined over bitcoin transaction outputs (UTXO)
    -RGB operates in “shards”, where each contract has a separate state history and data; different smart contracts never intersect in their histories directly. This allows for another level of scalability.
    -RGB contracts may interact via Bifrost protocol over the Lightning Network, allowing multiparty coordinated state changes, enabling functionality like DEX over Lightning etc.
    -Uses client-side validation paradigm offered by Peter Todd, where the data is held by a “state owner” (like asset owner) and not by public consensus.
    -RBG is a digital rights management system.
    -RGB is based on Bitcoin transaction graph.
    -RBG is not a blockchain and more similar to a DAG
    -Partial-State smart contract system
    -It is not a token protocol


Rootstock (RSK) is a smart contract platform that is designed to be a sidechain to the Bitcoin blockchain. It was created to enable the execution of smart contracts on the Bitcoin network, leveraging the security and decentralization of the Bitcoin blockchain while providing additional functionality and flexibility through smart contracts.

  • White Paper Release: November 19th, 2015
  • Mainnet Launch: January 4th, 2018
  • Price of Bitcoin at Launch: $11,000
  • Creators: Sergio Demian Lerner, Adrian Eidelman, Gabriel Kurman, and Diego Gutierrez-Zaldivar
  • Type: Sidechain w/ Merged Mining
  • DeFi-equivalent Ecosystems: Smart Contracts, Decentralized Applications, ETH Bridge, Borrowing and Lending, Swaps, DEX, RNS (RSK Name Service), Stablecoins, AMM, Yield Farming, and Governance
  • Top Decentralized Applications: $rBTC, Sovryn, Liquality, Money on Chain, and Tropykus
  • Notable Information:
    First general smart contract platform secured by bitcoin.
    -Powpeg is a proof-of-work secured two-way peg used to interact between RSK and Bitcoin.
    -Raised initial $350,000 seed round in 2016, $1M in 2016, $2.4M in 2017, and $3.5M in 2017.
    -$300M TVL, $0.25 transactions, 47 protocols
    -Block time confirmation: ~34 Seconds
    -EVM compatible
    -Home to 5 stablecoins
    -Acquired by IOVLabs late 2017
    -Native Bitcoin-Pegged Asset: $rBTC

Lightning Network

The Lightning Network is a second-layer solution for the Bitcoin blockchain that aims to address some of its scalability and transaction speed limitations. It was proposed by Joseph Poon and Thaddeus Dryja in a whitepaper published in 2015. The Lightning Network is designed to enable faster and more cost-effective transactions while reducing the load on the main Bitcoin blockchain.

  • White Paper Releases: February 28th, 2015, January 14th, 2016
  • Mainnet Launch: March 15th, 2018
  • Price of Bitcoin at Launch: $9,000
  • Creators: Joseph Poon and Thaddeus (Tadge) Dryja
  • Type: Layer 2
  • DeFi-equivalent Ecosystems: Payments
  • Notable Integrations: Binance and Cashapp
  • Notable Information:
    Lightning Network Daemon, CoreLightning, Eclair, and Lightning Dev Kit,
    -Launched Taproot Assets Channel
    -Operated by Blockstream
    -Lightning operates under a unified specification called the BOLT (Basis of Lightning Technology) specification
    -Second Layer Routing Network

Liquid Network

The Liquid Network is a blockchain-based inter-exchange settlement network designed to facilitate fast, confidential, and secure transactions of digital assets between participating exchanges and institutions.

  • White Paper Release: January 30th, 2017
  • Mainnet Launch: September 27, 2018
  • Price of Bitcoin at Launch: $6,500
  • Creators: Blockstream
  • Type: Federated Sidechain
  • DeFi-equivalent Ecosystems: Decentralized Applications, Bitcoin Pegged Assets, Atomic Swaps, Token Creation, Security Tokens, Lending, Liquidity Protocols, Private Transactions
  • Top Decentralized Applications: L-BTC, HODL HODL, and Sideswap
  • Notable Information:
    Governed by Liquid Federation
    -First Bitcoin backed “peg-in” cryptocurrency (L-BTC)
    -The Liquid Federation is a group of crypto-native organizations, including exchanges, trading desks, and developers, that perform vital tasks for the protocol. Of the approximately 60 members, 15 act as functionaries for 1) confirming new blocks and 2) securing and managing Bitcoin funds held in the network’s multi-signature wallet. [consensus mechanism]
    -L-BTC (liquid bitcoin) is the 1:1 wrapped bitcoin on Liquid. To transfer BTC to the Liquid blockchain, users must initiate a “peg-in.” This process is completed by sending BTC to a Bitcoin address managed by the Liquid Federation. The Federation will then send out an equivalent amount L-BTC in return for BTC. Once a user has L-BTC, they can easily interact with the Liquid chain and its ecosystem.
    -LN was built using Elements by Blockstream
    -Liquid improves: higher transaction throughput, asset issuance, confidential transactions


Stacks (previously known as Blockstack) is a decentralized computing platform that aims to build a user-centric internet by using the Bitcoin blockchain as the foundation for its operations.

  • White Paper Release: January 12th, 2021
  • Mainnet Launch: January 14th, 2021
  • Price of Bitcoin at Launch: $36,619
  • Creators: Muneeb Ali and Ryan Shea
  • Type: Layer 2
  • DeFi-equivalent Ecosystems: NFTs, DeFi, Bridge, Staking, Decentralized Applications, Pegged-Bitcoin, and Smart Contracts
  • Top Decentralized Applications: $sBTC, Alex Bridge, Gamma, and Xverse
  • Notable Information:
    -First SEC Qualified token offering (2019)
    -Created BlockStacks, which was founded in 2013
    -Blockstacks (Stacks 1.0) raised $52.8M from $STX ICO in 2017
    -Stacks 2.0 raised $23M through Reg A+ Token Offering
    -Token moved from security to non-security when Stacks 2.0 launched
    -Proof-of-Transfer (PoX) Mining algorithm [combination of PoW and PoS]
    -Stacks 1.0 mainnet launched October 2018
    -Blockstack PBC rebranded to Hiro Systems in 2019
    -Blockstack rebranded to Stacks Ecosystem in 2019
    -Staking mechanism called “Stacking”
    -Formerly known as Blockstacks.
    -Works with Blockdaemon to set up Stacks 2.0 nodes

Ordinal Theory

Ordinal theory on Bitcoin is a proposed methodology for identifying each satoshi via a serial number and tracking them in the Bitcoin coin supply, from first minting through their entire lifespan of transactions. The ordinal position of a satoshi in the Bitcoin blockchain determines its value.

  • Handbook Release: August 2022
  • Mainnet Launch: January 20th, 2023
  • Price of Bitcoin at Launch: $22,675
  • Creator: Casey Rodarmor
  • Type: Meta-Protocol
  • DeFi-equivalent Ecosystems: DeFi, NFTs, Tokens, Metaverse, and Namespace
  • Top Meta-layers: Inscriptions, Digital Artifacts, BRC-20, Bitmap, and SNS
  • Notable Information:
    -Inscribe up to 4MB of data on a single Ordinal
    -Unlimited Data compilation using Recursion
    -Store TXT, .MP4, .MP3, jpeg, png, and any type of file
    -Leverages Segwit and Taproot Bitcoin upgrades
    -Ordinals = Sat + dataset
    -Inscription = data file on the sat

Trustless Computer / New Bitcoin City

Trustless Computer is a platform that allows users to create and run decentralized applications (dapps) on the Bitcoin blockchain. It is a modified version of the Ethereum Virtual Machine (EVM) that adds smart contracts to Bitcoin.

  • Gitbook Release: April 2023
  • Mainnet Launch: March 2023
  • Price of Bitcoin at Launch: $30,295
  • Creator: Punk3700
  • Type: Layer 1* / BVM (Bitcoin Virtual Machine)
  • DeFi Ecosystems: GameFi, NFTs, DeFi, Bridge, DEX, Smart Contracts and Liquidity Pools
  • Top Decentralized Applications: New Bitcoin DEX, Trustless Bridge, and Generative.xyz
  • Notable Information:
    -Leverages Smart BRC20 and Smart Inscriptions
    -Native Currency $TC
    -Bridge between Ethereum, Bitcoin, and Trustless Computer
    -BRC-721 (NFT Standard)
    -Deploy Smart Contracts on Bitcoin
    -BVM (Bitcoin Virtual Machine) is a state machine similar to Ethereum-VM that utilizes the Bitcoin blockchain as a data layer to achieve transaction-level consensus.
    -4 Main components: BVM, Local MemPool, TxWriter, TxReader
    -Trustless Computer claims to be a Layer 1, NOS is its Layer 2
    -NOS uses Optimism codebase to scale


Mintlayer is a Layer-2 scaling solution for Bitcoin that uses the Lightning Network to enable smart contracts and decentralized applications (dApps) on the Bitcoin blockchain.

  • White Paper Release: November 10, 2021
  • Testnet Launch: July 31st, 2023
  • Price of Bitcoin at Mainnet Launch: TBD
  • Creators: RBB SRL and Enrico Rubboli
  • Type: Sidechain
  • DeFi Ecosystems: DeFi, Stablecoins, NFTs, Tokenized Assets, Decentralized Applications, Smart Contracts, and Staking
  • Top Decentralized Applications: $MLT (Native Asset)
  • Notable Information:
    -Raised $5.2M in seed round on May 24th, 2021
    -Its protocol allows batching transactions (even between different tokens), features a UTXO-based accounting system and uses Ethereum’s Access Control List for token security
    -Its consensus mechanism, Dynamic Slot Allocation (DSA), is a variation of proof-of-stake but with a twist: Users don’t need to refer to external sources for time validation because every block anchors to a block on Bitcoin; and it has an integral checkpoint system that can be enabled by any network participant to prevent 51% attacks.
    -Mintalyer also incorporates Wasm, a general-purpose virtual machine that can compile from a wider range of programming languages. It’s a register-based machine and more flexible than EVM.
    -3 Standards: MLS01, MLS02, MLS03 (NFTs)
    -Lightning Network Compatible
    -Uses Schnorr Signatures
    -No gas fees on platform

History of Bitcoin DeFi

Bitcoin, the pioneering asset within the cryptocurrency ecosystem, stands out for its unique characteristics. As you have just reviewed, building on Bitcoin entails an elongated growth timeline, primarily due to the inherent complexities of the UTXO model when compared to the ease of utilizing the Ethereum Virtual Machine (EVM) and smart contracts. Nonetheless, with the crypto industry surging past a remarkable $1 trillion market cap, and Bitcoin itself commanding about half of that value with an impressive $500 billion market cap, various ecosystems now seek to partake in the abundance. It is in this pursuit that we venture into the realm of Bitcoin DeFi, exploring how decentralized finance can thrive on the backbone of the world’s most renowned cryptocurrency.

Bitsquare / Bisq

Bisq (formerly known as Bitsquare) is an open-source, decentralized, and peer-to-peer (P2P) cryptocurrency exchange. It was created to provide a platform for users to trade cryptocurrencies in a private, secure, and censorship-resistant manner without the need for a central authority or intermediary.

  • White Paper Release: October 19th, 2017
  • DEX Launch: April 23rd, 2016
  • Price of Bitcoin at Mainnet Launch: $442
  • Creator: Manfred Karrer
  • Type: Non-Custodial Decentralized Bitcoin Exchange and DAO
  • Notable Information:
    -$BSQ is the native token
    -USD for Bitcoin p2p exchange
    -Transitioned to DAO in 2019
    -BSQ tokens minted through a process called coloring
    -Utilizes Atomic Swaps
    -Originally named Bitsquare (2014)
    -Renamed to Bisq (2017)

Atomic Swaps

Atomic swaps, also known as cross-chain swaps, are a technology that allows the direct exchange of different cryptocurrencies or digital assets between two parties without the need for an intermediary or a centralized exchange. Atomic swaps are based on smart contracts and operate on a trustless basis, ensuring that both parties fulfill their obligations during the swap process.

  • BitcoinTalk Post Release: May 2nd, 2013
  • First BTC Atomic Swap: November 17th, 2017
  • Price of Bitcoin during first Atomic Swap: $7,700
  • Creator: Tier Nolan
  • Type: Asset Swap
  • Notable Information:
    -Atomic swaps make use of the hash timelock contract technology (HTCL), which is a smart contract that “locks” the transaction and requires verification from both parties for the exchange to be completed.
    -September 17th, 2017: First ever On-chain Atomic Swap was between Litecoin and Decred.
    -November 17th, 2017: First ever off-chain Atomic swap (using the Lightning Network) was between Bitcoin and Litecoin. The swap exchanged 10 LTC for 0.1167 BTC.
    -Since this creation Bitcoin Ordinals have gone on to also perform on-chain swaps as early as July 17th, 2023.

Wrapped Bitcoin

Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin (BTC) that runs on the Ethereum blockchain as an ERC-20 token. It represents a 1:1 peg with Bitcoin, meaning that one WBTC is backed by one BTC held in reserve. The process of converting Bitcoin to WBTC and vice versa is known as “wrapping” and “unwrapping.”

  • Whitepaper Release: January 24th, 2019
  • First $WBTC on ETH: January 31st, 2019
  • Price of Bitcoin during first Wrap: $3,485
  • Creators: Bitgo, Kyber Network, and Ren Protocol
  • Type: Tokenized Bitcoin on Ethereum
  • Notable Information:
    -Idea was first proposed on October 26, 2018.
    -Initially launched with 8 merchant partners.
    -Minting (creation) — Burning (redemption) process
    -Merchants in charge of minting/burning process
    -BitGo is custodian of BTC
    -Moved to DAO model late 2019
    -December 13th, 2022 vote passed to move to new DAO model
    -Over 35 partners and merchants today
    -Uses on-chain Proof-of-Reserves

Ren Protocol / RenVM

Ren (REN) is a decentralized blockchain protocol that aims to enable interoperability between various blockchains by providing a trustless and permissionless way to move assets and data across different networks. The primary focus of Ren is to facilitate cross-chain liquidity for decentralized finance (DeFi) applications. By enabling the transfer of assets between different blockchain networks, Ren aims to enhance liquidity, accessibility, and usability for users in the DeFi ecosystem.

  • Whitepaper Release: December 18th, 2017
  • Mainnet Launch: May 27th, 2020
  • Price of Bitcoin during Launch: $8,837
  • Creators: Taiyang Zhang and Loong Wang
  • Type: Bridge and Pegged-Assets
  • Notable Information:
    -Raised $33M during 2018 ICO
    -One of the first Ethereum Protocol’s to bridge non-native assets
    -1 of 3 Co-Authors of “Wrapped Bitcoin” Whitepaper
    -Native currency $REN
    -Deployed Bitcoin wrapped assets on Polygon, Artbitrum, and Solana
    -Acquired by Alameda Research in Feburary 2022
    -Pegged Assets assigned to FTX Liquidators late 2022
    -Received $1M grant from Fantom Foundation in July to build Ren 2.0.
    -Joins the Badger DAO in 2020 to Advance Bitcoin in DeFi

Threshold Network

Threshold Network is a decentralized application (dApp) that creates trustless and secure multi-signature wallets on the Bitcoin blockchain. It uses threshold cryptography to distribute the signing power of a wallet across multiple nodes, making it impossible for any one node to control the wallet.

  • Whitepaper Release: March 2021
  • Mainnet Launch: September 2020
  • Price of Bitcoin during Launch: $10,789
  • Creators: Keep Project and NuCypher
  • Type: Bridge, Stablecoin, and DAO
  • Notable Information:
    -Threshold Network is an on-chain merger between Keep Project and NuCypher (January 2023)
    -Governed by ThresholdDAO
    -First Decentralized two-way BTC <-> ETH Bridge
    -thBTC is a stablecoin backed by Bitcoin (not released)
    -V1 launched in October and has now been sunsetted
    -Threshold Access Control is an Encryption Network under the Threshold Network


BadgerDAO is a decentralized autonomous organization (DAO) and protocol focused on bringing Bitcoin to decentralized finance (DeFi). It aims to bridge the gap between Bitcoin and DeFi by creating innovative products and infrastructure that enable users to leverage the value of their Bitcoin assets within the DeFi ecosystem.

  • Medium Post Release: September 15th, 2020
  • Mainnet Launch: December 3rd, 2020
  • Price of Bitcoin during Launch: $8,837
  • Creator: Chris Spadafora
  • Type: DAO, Bridge, Yield Aggregator, and Synthetics
  • Notable Information:
    -Objective: Build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains.
    -Product #1: Sett — an automated DeFi aggregator focused on tokenized BTC assets.
    -Product #2: $Digg — a non-custodial synthetic Bitcoin on Ethereum. It’s an elastic supply cryptocurrency that’s pegged to the price of Bitcoin. Every day the supply is automatically adjusted across all wallets based on the USD value of $DIGG vs $BTC. If Digg’s price is higher than BTC, your wallet balance increases; if it’s lower than your balance decreases.
    -Joins the Badger DAO in 2020 to Advance Bitcoin in DeFi
    -Launches BTC Bridge with RenVM
    -Product #3: ibBTC — Interest Bearing Bitcoin
    -BadgerDAO suffers $120M exploit December 2021
    -Product #4: Released its eBTC Protocol “purple paper,” introducing a censorship-resistant synthetic bitcoin for DeFi.

Interlay Bitcoin

Interlay is a modular, programmable layer between Bitcoin and the multi-chain ecosystem that unlocks decentralized (financial) use cases for BTC.

  • Whitepaper Releases: March 2019(v1) and February 14th, 2023(v2)
  • Mainnet Launch: June 8th, 2022
  • Price of Bitcoin during Launch: $29,295
  • Creator: Alexei Zamyatin
  • Type: Bridge, DEX, AMM, and Tokens
  • Notable Information:
    Launched BTC — DOT Bridge in August 2022
    -Product #1: iBTC vaults — mixed-asset collateral to insure BTC reserves, making iBTC redeemable 1:1 with BTC over the Bitcoin blockchain
    -Interlay’s DeFi hub a one-stop shop for all things decentralized Bitcoin finance featuring BTC swaps, lending, and staking. High throughput, low fees payable in any asset, and native stablecoin integrations aim to provide an experience competing even with centralized providers.
    -Interlay’s BTC bridge is the secure way to use Bitcoin in the multi-chain ecosystem. iBTC, a 1:1 BTC-backed asset, is secured by a decentralized network of vaults. BTC deposits are insured by a multi-collateral system and secured by cross-chain light clients.


Bitcoin has existed for 6,143 days at the time of this conclusion — take that, Lindy! For the large majority of its lifespan, curious builders have prodded the mother chain in hopes of uncovering a new way to leverage its technology to improve humanity (or their wallets). We didn’t even mention the first altcoin that was forked from Bitcoin, BitDNS (now known as Namecoin), on April 21st, 2011, which is also merge-mined.

For 99% of the world, decentralized finance is Bitcoin; for the remaining 1%, DeFi refers to whatever bags they may be holding, the amount of engagement they may receive from social signaling (that’s a nice way of saying shitposting), or views based on their entrepreneurial history.

Decentralized finance becomes more obscure the deeper down the rabbit hole you go. Building on Bitcoin is hard, building with Bitcoin is tough, and building using Bitcoin is challenging. But if there’s one thing we’ve learned from this multi-month-long journey of research, it’s this — there’s no doubt Bitcoin will find its way into whatever DeFi ecosystem you decide to participate in.

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