Thread by @TychoOnnasch

I think DeFi on Bitcoin is the biggest lever to grow crypto. Why? 👇

We need property rights on the internet for a good future. Crypto does this.

So how do we increase crypto adoption? Number go up. The higher the market cap, the more adoption.

How to move crypto market cap up? Make Bitcoin go up. Everything moves with it - still.

So how do we get Bitcoin market cap up? Bitcoin yield

Currently, Bitcoin is a non-productive asset (i.e. it doesn’t produce anything of value). There's no built-in yield.
Productive assets make up the majority of most investment portfolios. Why? Because productive assets produce cash and cash can be used to pay for things.

When Bitcoin produces a yield, it suddenly won’t have merit as 1% of an institutional investment portfolio but easily as +10%. New demand pushes Bitcoin up and with it the rest of crypto

So how do we turn Bitcoin into a yielding asset? Make it easy for people and institutions to borrow Bitcoin so they can use it productively and pay yields to lenders.

Currently, you can only lend native Bitcoin through centralised entities like Blockfi and Celsius. That creates counterparty risk for lenders.
You can do DeFi with Wrapped Bitcoin or other bridged versions but that's not the real deal & introduces new security assumptions.

Today, @Stacks makes it possible to do DeFi with real Bitcoin.
More specifically, Stacks smart contracts can read Bitcoin state and (un)lock collateral based on Bitcoin transactions.
You can read more here: catamaranswaps.org

This infrastructure still needs to scale & some updates from Stacks 2.1 to work really well (especially Flash block support).
If you want to work on this, check this out: github.com/stacksgov/Stac…

Anyway, Bitcoin DeFi -> Bitcoin yield -> Bitcoin market cap growth -> crypto adoption -> internet property rights -> good future 🌈

But what about Ethereum? Why reinvent the wheel when DeFi is already there?
Well, we're still waiting for the merge - a long time. L2s are nice but if we're adding layers on Ethereum because the main chain is too clogged, it makes more sense to add layers to Bitcoin

I go in a bit more detail here:

tycho.substack.com/p/how-i-decide…