Runes and BRC-20s are just a stepping stone for Bitcoin DeFi

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Bitcoin Runes and BRC-20 tokens may only be a stepping stone in the evolution of Bitcoin-native decentralized finance (DeFi).

The emergence of Runes and Bitcoin DeFi came from a desire to add more utility to the world’s safest blockchain network, according to Rich Rines, a Core DAO contributor building Bitcoin DeFi solutions. Rines told Cointelegraph:

“[Bitcoin] started as a peer-to-peer electronic cash system then morphed more into a store value and now protects $1.5 trillion of wealth. We’ve seen over the last one and a half years this desire to add more utility to the underlying Bitcoin through the rise of Ordinals, token protocols like BRC 20s and now Runes.”

Runes is a new protocol for issuing fungible tokens on the Bitcoin network that launched on April 20, the day of the Bitcoin halving. Runes are part of a wider developer movement known as Bitcoin DeFi, or BTCFi, aiming to add more utility to the Bitcoin network.

While Runes created widespread excitement among Bitcoin holders, the token standard may only be a stepping stone in the evolution of BTCFi due to the decentralized nature of the network, according to Rines:

“Hard to say if [Runes] remains the standard since Bitcoin is so decentralized. We will have to get to some sort of social consensus on some of the standards that win. Market demand and people voting with their dollars will ultimately be what helps coalesce on the final answer.”

Bitcoin Runes made a recovery this week. On April 20, Runes-related transactions accounted for the majority of Bitcoin transactions, or 81.3% of daily BTC transactions, according to Dune Analytics Data.

Share of transactions over the Bitcoin network. Source: Dune

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Bitcoin is becoming a yield-generating asset for the first time

Aiming to bolster BTCFi innovation, Core Chain launched the first noncustodial Bitcoin (BTC) staking product on April 23, enabling Bitcoin staking without compromising the security of the Bitcoin network.

Since noncustodial staking doesn’t require the underlying asset to leave a user’s wallet, it introduces a risk-free yield opportunity for Bitcoin holders, according to Rines:

“That’s where the noncustodial Bitcoin staking shines, where you take no risk. It’s totally trustless, Bitcoin becomes a yield-producing asset for the first time with those rewards that you can invest it in more Bitcoin, creating a reflexive loop.”

Other protocols are also working on creating more utility for Bitcoin. On May 6, Hermetica announced the launch of the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities.

Slated for release in June, USDh will offer yields of up to 25%, aiming to play a pivotal role in bringing more liquidity and use cases to BTCFi.

Related: Runes are offering a significant lifeline for Bitcoin miners — TeraWulf COO