The story is strewn with crucial moments. Some go unnoticed, only to be dusted off and illuminated by historians decades later, while others emerge with all the fanfare of a holiday parade. From the outcry alone, the launch of the Runas token standard appears to fall into the latter category.

On April 19, the new protocol – designed to facilitate the more efficient generation of Bitcoin’s native fungible tokens and coincided with Bitcoin BitcoinUSD fourth scheduled halving – generated a flurry of investment activity. More than 7,000 Rune tokens were minted in the first two days after launch. To date, more than 91,000 runes have been engraved on Bitcoin, with an associated $4.5 million in transaction fees paid to miners. At the height of the mid-April furor, demand drove transaction fees to an unprecedented high of $128.45.

At the time, several analysts wondered whether we were seeing a repeat of the 2021 “summer” for decentralized finance (DeFi), when the launch of multiple decentralized applications and tokens led to rampant activity and a sudden flood of liquidity on Ethereum. blockchain. But if so, autumn came pretty quickly; by mid-May, the number of Rune engravings had dropped by 99%.Cointelegraph

So, was the launch of Runes truly a historic moment for Bitcoin DeFi (BTCFi) or just an expression of momentary interest? It may have been a little of both.

Facilitating efficient token generation by the Runes protocol could be key to enabling net staking and, by extension, investment activity, layer 2 expansion, and DeFi innovation. But make no mistake: runes alone are just one advancement among many. Over the past decade, a BTCFi revolution has been quietly underway – and, pending the likely approval of the Bitcoin Improvement Proposal (BIP) OP_CAT in 2025, it appears poised to trigger unprecedented growth for Bitcoin.

Related: Runes Protocol Will Start a New Season for Bitcoin After Halving

But before we can speculate about what’s to come, we must consider where we currently are. Mainstream adoption has three fundamental pillars: visibility, versatility and accessibility. As the leading cryptocurrency, Bitcoin deserves attention and respect, but (at least for now) it falls short of the other two categories.

A Temporary Hurdle: Innovators Face Capital Inefficiency and Limited Scalability of BTCFi

Bitcoin is capital effective but not capital efficient. Despite its high market capitalization, prominent status as a store of value, and significant investor adoption, BTC is critically underutilized as an investment asset. As of early April, approximately 65% ​​of the BTC supply had not been moved in over a year. The value was 10% lower than in January, which coincided with the launch of multiple exchange-traded funds. Although investors are starting to put their BTC to work, more than half are still committed to focusing.

To be fair, BTC investors have many reasons to be conservative, given the lack of sustainable yield opportunities, the absence of institution-friendly yield products, and the unknown risks of moving or deploying assets. Enter our slow current of revolution – a slow culmination encompassing years of persistent determination to evolve Bitcoin from a store of value to a vibrant financial ecosystem in its own right.

Related: 3 trends to consider before Bitcoin’s bull run resumes

Efforts to date focus on two main priorities: making Bitcoin more programmable and improving capital efficiency. By definition, the current Bitcoin network does not offer smart contract functionality. While this reduces complexity and the risk of security breaches, it also avoids the use of loops and logical conditions, thereby restricting the development and scaling of dApps. Blockchain’s high on-chain transaction fees and – until Runes – inefficient tokenization protocols have made active, yield-generating investment activities even more difficult.

Bitcoin’s DeFi ecosystem may be nascent, but it is undeniably growing. In addition to the basic DeFi primitives such as DEXs, money markets, vaults, oracles, and stablecoins, BTCFi encompasses solutions aimed at resolving the existing pitfalls of BTC, the asset, and Bitcoin, the network. General and specific L2s such as Stacks, Merlin and B2 are developing their own BTCFi ecosystems. Projects like Babylon are driving the development of DeFi by bridging the gap between Proof-of-Work and Proof-of-Stake models.

With all of this in context, the emergence of BTCFi and the subsequent “Bitcoin DeFi Summer” seems inevitable, yet long overdue. But defenders will likely have to wait another year – or even two, taking into account the time of innovation – before the season starts.

OP_CAT could usher in a new BTCFi renaissance – if approved in 2025

If Runas arrived in a cacophony, the Bitcoin OP_CAT proposal arrived with a whisper. Set to be revised in 2025, this landmark document would re-establish smart contract functionality that has not been available in Bitcoin since Satoshi Nakamoto himself disabled it in 2010. OP_CAT would enable logical and conditional loops, thus allowing the creation of rules or conditions on how Bitcoin is spendable – and opening the door to many development possibilities, including Layer 2, Smart Contracts and more.

If OP_CAT passes, it will fundamentally change the way people enjoy Bitcoin and usher in a new renaissance for projects seeking to make BTC more programmable or capital efficient. Innovators will finally have a secure path to adapt Bitcoin’s programmability for critical use cases such as DeFi, scalability and chain interoperability, thus leading to more abundant, varied and profitable investment opportunities.

At this point, we will officially gain our second pillar for mass adoption. Bitcoin will continue to attract attention as an area of ​​DeFi expansion. This, coupled with the development of a secure and robust infrastructure, could lead to huge amounts of capital flowing into BTC yield-generating protocols. There are obstacles, of course; for example, as individual L2 and DeFi ecosystems emerge and grow, they will form their own communities and leverage their own version of BTC – which will inevitably lead to the fragmentation of liquidity and yields.

Accessibility is also a concern. For all its appeal and potential, cryptocurrency can seem intimidating and inaccessible to individual investors. While institutional stakeholders have committed to the cause, more work needs to be done to educate and engage the general public. Many Bitcoin holders and potential users may be familiar with DeFi usage or key concepts (i.e. bridging). Education and concept abstraction will be important priorities for ecosystem advocates looking to encourage widespread adoption.

The true BTCFi summer may be a few years away, but if history tells us anything, it’s that we need to start empowering our future users now. While not all of these smooth moments of advancement and preparation have headlines like Runas’ debut, they are all important. Much like how blockchain works, making history is a collective effort; individuals must step up and contribute to the cause. The pieces are in play, change is underway, and our collective advocacy for the cause is strong – the only question that remains is when we will see our vision for BTCFi come to fruition.

Mikhil Pandey is a guest columnist for Cointelegraph and co-founder and chief strategy officer of Persistence One, a layer 1 blockchain. He holds a bachelor’s degree in electronic engineering from the University of Mumbai.

This article is for general information purposes and is not intended and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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