The Bitcoin design is simple on purpose. It has been designed to do a few things, and it does them very well. However, these properties come with inherent limitations.
While the most amount of value is in Bitcoin, it can’t benefit that much from the innovation happening in other segments of the digital currency industry. While you technically can run smart contracts on Bitcoin
, it’s quite limited in scope compared to Ethereum
or other smart contract platforms.
Tokenizing bitcoin on other chains could increase the utility of the network. How? Well, it could enable functionality that isn’t natively supported on Bitcoin. At the same time, the core functionality and the security model of Bitcoin remain intact. Additional advantages could be increased transaction speeds, fungibility
, and privacy.
Here’s another potential reason. One of the greatest aspects of DeFi is the idea of composability. It means that since all these applications are running on the same public, open-source
, permissionless base layer, they can seamlessly work with each other.
Bringing Bitcoin to this composable layer of financial building blocks is considered to be an exciting prospect by many. It could bring forth many new types of applications that use bitcoin and wouldn’t otherwise be possible.