Bitcoin and DeFi together may not be very popular terms in the same project, because, essentially, Ethereum is the leading smart contract platform in the decentralized finance industry. However, despite the robustness of Bitcoin as a system, it is possible to develop a myriad of financial protocols on its network – which include DeFi protocols – and this would denote that Bitcoin could become the home of the decentralized network of smart safest contracts in the world.
Is Bitcoin part of the DeFi revolution? The answer could be yes, although other unknowns would appear: How is it possible? How much is the improvement compared to Ethereum? How far can you go?
DeFi and its risks
Many of them, not to mention all of them, were answered at CryptoNight 2020, an event organized by the NGO Bitcoin Chile and of which Eudebate2009 is a media partner, and a place where RSK solutions were discussed as a network of smart contracts built on the network Bitcoin
Gabriel Kurman, co-founder and current RSK was in charge of exposing the true integration of decentralized smart contract networks with the robust, strong and seemingly inflexible Bitcoin network, sponsored by the project that he and RSK support.
Bitcoin and smart contracts is no longer just an idea, it is now a reality
The problem is clear. After more than 8 months of confinements, economic debacles, job losses, and signs of financial unsustainability, it was shown that this process of “inequity, all it has done was to worsen even more”, according to Gabriel’s statement in the introduction of your presentation.
Gabriel continued to denote that those better positioned benefited, while “those who have been fighting it the most, suffer the most; they are always the most vulnerable in this type of shocks ”.
Gabriel’s idea showed that the current centralized financial pillars are unsustainable when the world requires equal opportunities, especially speaking of economic opportunities.
Their data pointed out that there are more than 3 billion people ignored by the system, which in turn, are mostly part of the most vulnerable already mentioned.
The strength of Bitcoin
Starting from this relevant problem, perhaps the philosophy of DeFi can be better perceived: a financial system decentralized in opportunities, decentralized in participation, decentralized in control, and decentralized in operation.
But for Gabriel, you cannot talk about DeFi without starting with Bitcoin, since, first of all, “Bitcoin has taught us why it is important that the system that is going to help us replace [the traditional financial system], has to be decentralized ”.
Words from Gabriel Kurman in his introduction to CryptoNight 2020.
Although Bitcoin “represents better than any other cryptoactive in the system” the purpose of DeFi, given its governance, scarcity, and global neutrality; the elasticity factor is always present.
“Bitcoin lacks programmability, scalability and automation if we want it to really serve us to end the problems of inequality that the system has.”
On the other hand, regarding the reality of a decentralized financial system, for the co-founder of RSK and his colleagues it was not possible to choose the programmability of the smart contracts of Solidity in Ethereum, since in addition to the fact that Ether could not be compared to BTC as a safe haven for the necessary collateralization, the “world’s computer” network was not going to be able to cope with the security level of the Bitcoin network.
Indeed, if you talk about the power of hashing as a security factor within a decentralized data network, Bitcoin leads, and Ethereum is far behind. According to data from Glassnode, the hashing power of Bitcoin, measured in Ehash / sec (quintillion hashes per second) is 134 Ehash / sec, while Ethereum, whose figure can be measured in Thash / sec (trillions of hashes per second) , is 252 Thash / sec.
The hashing power of Bitcoin reaching 134 quintillion hashes per second.
In conclusion, the Bitcoin network is approximately 500,000 times more secure than Ethereum in terms of hashing power, or mining power.
In addition to this, Gabriel highlights how the Bitcoin network continues to lead the amount of value transferred per second in a way that is also safe and efficient, where the non-viability of attacks on the network is noted taking into account the economic incentives of the herself.
On RSK, this second layer network that runs on top of Bitcoin already accumulates 60% of all the hashing power of Bitcoin, that is, a value that would be around 80 Ehash / sec, which is the same as approximately 300,000 times the total power Ethereum mining.
In other words, and according to Gabriel’s own:
“To make an attack on RSK, you have to have 60% of the cost necessary to make an attack on Bitcoin, and this makes RSK the most secure smart contract platform on the planet.”
Words from Gabriel Kurman in his presentation of CryptoNight 2020.
Gabriel Kurman during his presentation with the value of 58.9% for RSK’s hashing power absorbed from the Bitcoin network.
The capacity of the RSK-Bitcoin duo
In addition to using the Bitcoin network as the engine to give life to RSK, smart contracts, which have multiple implementation possibilities, seek to take the value of the BTC currency for its functionality.
To test such ability of RSK, after Gabriel Kurman’s presentation, Manu Ferrari from Money On Chain entered the scene, one of the most important decentralized finance protocols built on top of RSK, based on financial services including the creation of the first backed stablecoin. with BTC.
Blockchain smart city
Money On Chain largely deploys RSK’s ability as a smart contract network using Bitcoin as its main power without dispensing with decentralization, which, as mentioned above, should always be present in the DeFi-led revolution.
The current and fully operational development of Money On Chain breaks down 3 products:
Dollar On Chain (DoC): described according to its official website as the first stablecoin backed one hundred percent by Bitcoin, with a value that seeks parity with the US dollar, but without the need for the centralization that resides in alternatives such as Tether. It should be noted that transactions with DoC have a very low cost compared to transfers of other stablecoins that run on Ethereum, mainly thanks to RSK’s solution as a network.
BPro, “Bitcoin on steroids”: a financial derivative directly anchored to BTC that with leverage manages to accelerate the returns on the price of Bitcoin, as well as the losses in this case. An interesting factor of this product is that the profit of all the performance that the BPro generate are in BTC and not in another currency, therefore, it is an attractive product for bitcoiners, in the words of Manuel.
BTCX, “Leveraged Bitcoin”: it is the BTC with more leverage, more focused on investors, speculators and traders, as it describes a financial derivative with more marked leverage than BPro, but with relatively low costs.
Money On Chain made this possible by adding a very predominant ingredient within the DeFi realm: governance.
Indeed, it is not the creators of Money On Chain who have all the power over their protocol and therefore their products, but it will be the governance given through their MoC token that will decide the fate of the project itself.
Even though the Total Blocked Value (TVL) of the entire Money On Chain system is hovering around a very low figure compared to similar protocols in Ethereum, the reality and capacity of RSK and the usability of Bitcoin was presented at CryptoNight 2020 as a viable alternative that solves important problems within the ecosystem encompassed by smart contracts, decentralized finance, and the new financial paradigm sponsored by Web 3.0.