Given how unstable the decentralized finance (DeFi) industry is right now, MicroStrategy CEO and Bitcoin maximalist Michael Saylor thinks that Bitcoin and the Lightning network can save the DeFi industry.
Within a month of two huge protocols, Terra and Celcius, experiencing severe issues, the DeFi sector is experiencing difficulty. Saylor said in a recent tweet that Bitcoin and Lightning could help stabilize the market.
Saylor says that Bitcoin provides a “solid ethical, economic, and technological basis for DeFi.” He said that the next version of DeFi will be built with Lightning and the BTC token.
Saylor was reacting to a Tuesday Bloomberg article that highlighted multiple significant vulnerabilities in the DeFi industry. The creator of the digital asset custody company Liminal, Mahin Gupta, told Bloomberg:
“What is happening with Celsius will have serious repercussions for the industry. It’s a not-insignificant player, and its apparent failure will have ripple effects.”
Less than a month after the shocking collapse of the Terra blockchain, which promised investors 20 percent annual returns, Celsius Networks stopped withdrawals and other activities on its platform. The collapse of Terra, which happened when its stablecoin lost its 1:1 peg to the US dollar, and the freezing of withdrawals by Celsius have both contributed to the decline of cryptocurrencies.
Because of this, the CEO of MicroStrategy has been very optimistic about Bitcoin’s layer 2-scaling option, which is called Lightning Network. Saylor asserts that Bitcoin is the future of money and that the Lightning protocol will facilitate the scalability of transactions. Also, he said:
“If you’re going to do payments and transactions high speed, you’re going to need a base layer that’s ethically sound, economically sound, and technically sound. That’s what Bitcoin is. But then billions and billions of transactions are going to go on a layer 2 like Lightning.”
DeFi apps have not yet become as popular on the Bitcoin network as they are on other blockchains, like Ethereum and Solana. Even so, some people who have looked into DeFi think it could be used in a sustainable way on the Lightning Network. They say that “stablecoins and fully collateralized loans against your BTC have value.”
Wil Lee, who created the nonfungible token (NFT) project the littles, says that BTC and LN could give DeFi and NFTs a boost. He told Cointelegraph that some new protocols are still being tested, but protocols like BTC and LN have already shown how powerful they are on their own.
“Anyone who wants to buy or sell cryptocurrencies must be sure that the market is stable.” When a well-known protocol is involved, I can relax, which makes the whole cryptocurrency ecosystem stronger. If Bitcoin backs your DeFi or NFT project, you’re likely to get more people to join.
Aliasgar Merchant of Ignite says that DeFi is “struggling” and that everyone is doing everything they can to make it through the crypto winter. People pointed to recent events on Terra and Celius as proof that DeFi, which is supposed to be the basis of Web3, is failing. Merchant says that interoperability and the ability to grow are the two most important parts of a strong DeFi system. He went on to say, “If the base is strong, we can focus more on specialty protocols to meet our DeFi needs.”
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