In light of the recent fragility in the decentralized finance (DeFi) sector, Michael Saylor, CEO of Bitcoin (BTC) and CEO of MicroStrategy, feels that Bitcoin and the Lightning Network can save the DeFi market.
With two massive protocols, Terra and Celsius, experiencing severe difficulties within a month of each other, the DeFi sector is going through a rough time. In a recent tweet, Saylor suggested that Bitcoin and Lightning could help stabilize the industry.
According to Saylor, Bitcoin provides “a sound ethical, economic and technical foundation for DeFi.” He went on to say that the Lightning protocol and BTC tokens will be used to build the next generation of DeFi.
Saylor was responding to a Bloomberg story on Tuesday, highlighting several major concerns in the DeFi space. Mahin Gupta, founder of digital asset custodian platform Lumiere, told Bloomberg:
“What happens with Celsius will have serious repercussions for the industry. He is a player to be reckoned with, and his apparent failure will have ripple effects.”
Celsius Networks has shut down withdrawals and other transactions on its platform almost a month after the Terra blockchain’s spectacular crash, which lured investors with annual returns of around 20%. The collapse of Terra, which arose when the stablecoin lost its peg to the US dollar, and the suspension of percentage withdrawals, led to losses in the cryptocurrency.
As a result, the CEO of MicroStrategy was very excited about the Lightning Network, a Bitcoin solution to layer two scaling. According to Saylor, Bitcoin is the future of money and the Lightning protocol will help scale transactions. He added that:
“If you’re going to make payments and transactions at a high speed, you need a base layer that is morally sound, economically sound and technically sound. That’s what Bitcoin is. But then billions and billions of transactions will go to Layer 2 like Lightning.”
So far, DeFi applications on the Bitcoin network have not achieved the same level of popularity as other blockchains such as Ethereum and Solana. However, some people who have studied DeFi believe that it can be implemented in a sustainable way on the Lightning Network, stating that “stablecoins and loans fully secured against your BTC have advantages.”
Related: Bitcoin Lightning Network Capacity Charges With 4000 BTC
According to Ignite’s Aliasgar Merchant, DeFi is “struggling,” and everyone is doing everything they can to make it through the crypto winter. He emphasized recent events on Terra and Celius as evidence of the failure of DeFi, which is meant to be the core of Web3. According to Merchant, the two most important aspects of developing a robust DeFi system are interoperability and scalability. He added that “once the norm becomes established, we can begin to focus more on specialized protocols to meet the needs of DeFi.”
