Bitcoin provides “a solid ethical, economic and technical foundation for DeFi,” said Michael Saylor.
Given the recent volatility in the decentralized finance (DeFi) sector, Bitcoin (BTC) maximalist and MicroStrategy CEO Michael Saylor believes that Bitcoin and the Lightning network can save the DeFi market.
As two huge protocols, Terra and Celsius, have been hit hard over the past month, the DeFi sector is going through a difficult period. And in a recent tweet, Saylor suggested that Bitcoin and Lightning could help stabilize the industry.
According to Saylor, Bitcoin provides a “strong ethical, economic and technical foundation for DeFi.” He went on to say that the Lightning protocol and the BTC token will be used to create the next generation of DeFi.
Responding to a Bloomberg article on Tuesday, Saylor highlighted numerous key issues in the DeFi space. Mahin Gupta, founder of digital asset storage platform Liminal, told Bloomberg:
“What happens to Celsius will have major implications for the industry. This is an important player and his apparent failure will spread.”
Celsius Networks has suspended withdrawals and other transactions on its platform just under a month after the spectacular crash of the Terra blockchain, which attracted investors with around 20% annual returns. The collapse of Terra, caused by its stablecoin losing its 1:1 peg to the US dollar, and the halt of Celsius withdrawals contributed to the loss of the cryptocurrency.
As a result, the CEO of MicroStrategy was enthusiastic about the Lightning Network, a layer-two bitcoin scaling solution. Bitcoin is the future of money, Saylor says, and the Lightning protocol will support transaction scalability. He added:
“If you want to make payments and transactions at high speed, you need a baseline that is ethical, cost-effective and technically sound. This is bitcoin. But then billions and billions of transactions will happen at layer 2, like Lightning.”
To date, DeFi applications on the Bitcoin network have not reached the same popularity as on other blockchains such as Ethereum and Solana. However, some people who have studied DeFi believe it can be implemented sustainably on the Lightning Network, saying, “Stablecoins and fully secured loans against your BTC have value.”
Related: Bitcoin Lightning Network Bandwidth Charge up to 4000 BTC
According to Ignite’s Aliasgar Merchant, DeFi is “struggling” and everyone is doing their best to get through the crypto winter. He highlighted recent developments on Terra and Celius as evidence that DeFi, which should be the core of Web3, is failing. According to Merchant, the two most important aspects of developing a robust DeFi system are interoperability and scalability. He added, “Once the base is solid, we can focus more on niche protocols to meet our DeFi needs.”