Original author: Haotian (X: @tmel0211 )
I didn’t expect the topic of “BTCFi is dead” to come so quickly. Indeed, since @babylonlabs_io went online, the market expected Babylon to bring a lot of ecosystems to boost the BTCFi track, but it obviously went against expectations. As for whether BTCFi is dead, I think it is too early to judge now, and there is a misunderstanding of the evolution logic of the BTCFi track. Following the following , I share the following observations:
1) The point that links the market performance of Babylon after its launch with the prospects of the BTCFi track is obviously biased.
Because Babylon can lock the users BTC assets in the form of script contracts on the Bitcoin mainnet, while being able to output security consensus services on many BTC layer 2s and then obtain rich benefits provided by other extension chains. From the supply side, Babylons technological innovation services are indeed very useful, but from the demand side, who will purchase this security consensus service and who will provide continuous benefits?
Obviously, from the perspective of the B-side demand for secure consensus of some large, medium and small new chains, the prospects of BTCFi are obviously not as expected. However, if we look at it from the perspective of C-side user demand, every BTC Holder has the need to continue to earn interest on the BTC they hold, and the goal of BTCFis technical solution is to access trillions of dollars of traditional financial capital. How to integrate Bitcoins unique decentralized consensus with global financial liquidity is the ultimate goal of this BTCFi narrative.
Following this logic, the narrative of BTCFi has just begun in the post-ETF era, so where does the saying that it is dead come from?
2) In fact, the technical solutions surrounding BTCFi have been maturing, from the initial EVM-Compatible to the UTXO Stack architecture, to the zkVM protocol framework, RGB client verification framework, optimistic challenge proof (OCP) architecture, etc. BTCs technical solutions once presented a chaotic scene, but although they seemed scattered and chaotic on the surface, they were actually following the natural evolution and decision-making direction of the market.
The following article focuses on the comparison of the two technical paths of OP_CAT_ and BitV M2, and believes that BitV M2 has more potential because it does not require changing the existing BTC script:
1. OP_CAT path - logically reasonable but requires changing BTC OpCodes, which is difficult to be accepted by core developers.
2. BitV M2+OCP mechanism - off-chain computing and interaction are realized through the OCP challenger mechanism. When a challenge occurs, the on-chain protocol will be executed on the Bitcoin mainnet, and Bitcoin layer 1 will act as an arbitrator to ensure security.
Immature solutions will be eliminated or corrected under market pressure. For example, early Bitcoin cross-chain solutions generally adopted a centralized custody model, but now the combination of BitV M2 and OCP can provide a trustless native secure cross-chain mechanism.
When technical solutions such as BitV M2 that do not require changes to the BTC core code mature, Bitcoin will usher in its own OP moment, just as the value of Ethereum in Optimistic Rollups was recognized, directly giving rise to a wave of market ecological explosion.
3) Let’s just let the technical solutions continue to roll in and evolve, because there is another logic: the biggest challenge facing BTCFi is not technical feasibility, but a sustainable Tokenomics economic model.
Many current solutions rely on token issuance and incentives, which is obviously unsustainable. A truly sustainable BTCFi economic model should be based on the use value of its network. When the second-layer network processes transactions and charges fees, and part of the proceeds are returned to BTC stakers, a value cycle based on actual needs is formed.
This model does not rely on purchasing from external chains, but instead gains revenue by serving its own ecosystem, and is clearly superior in terms of economic model sustainability.
above.
In short, if you look at it from another perspective, the prospects of BTCFi will become clear. It’s just that the track is now in the early stages of infrastructure construction, technical solutions are converging, the Tokenomics economic model is being improved, and the door to ETF global financial liquidity access has just been opened.
