Bitcoin cannot support true Decentralized Finance

Recently, there have been multiple projects in the market claiming to achieve Decentralized Finance on Bitcoin ( DeFi ), but upon deeper investigation, it is found that these projects are either highly centralized or completely unrealistic. In fact, due to Bitcoin's lack of a Turing-complete virtual machine, it cannot support complex smart contracts like Ethereum or some other public chains, making true Bitcoin DeFi a technical impossibility.

Project Analysis

BitVM

BitVM claims to enable smart contract functionality on Bitcoin through "optimistic two-party computation." However, unlike most centralized ETH Layer 2 networks, BitVM is more centralized because its "validators" are also based on a permissioned system. This essentially constitutes a highly centralized system.

In addition, the BitVM system is highly inefficient. It attempts to achieve functionality by chaining opcodes together in dispute situations and publishing them to taproot transactions, using Boolean logic to combine opcodes into logic gates. However, this approach proves to be overly complex and inefficient, requiring very powerful computers to process, leading to significant centralization pressure.

Rootstock

Rootstock is a sidechain connected to BTC that focuses on smart contract functionality. However, it relies on a "permissioned consortium" to maintain bi-directional anchoring, which means that the consortium can review or even steal user assets. While Rootstock is essentially no different from traditional financial institutions, contradicting the original intention of Bitcoin's decentralization, it at least acknowledges its centralized characteristics in its project introduction.

Sovryn

Sovryn is built on Rootstock and is therefore highly centralized as well. However, it claims on its official website to be "decentralized" and provides "Bitcoin native trading", which is clearly misleading.

BitcoinOS

BitcoinOS is currently the most exaggerated among these projects. It claims to solve all the problems that Ethereum has not addressed: privacy, cross-chain, trustless bridging, and even "true Rollup", etc. However, in fact, its white paper has serious information omissions and completely avoids the critical "off-chain execution" part of the project design.

BitcoinOS still adopts a "prover-verifier" structure similar to BitVM, and the documentation does not mention how to achieve the decentralization of the verifiers at all. This "deliberate omission" is highly deceptive, implying that its verifiers are still under centralized control.

Limitations of L2 Scaling

Currently, many Bitcoin "DeFi" projects are derived from the narrative extension of "second layer scaling" (L2 scaling). However, this approach has almost never been successful in practice. Pushing transaction traffic to another competing chain does not truly expand the capacity of the original chain, but instead provides a sign of decline for the actual use of the original chain.

Worse still, this approach often distorts the incentive mechanisms of the original chain's leadership through the corrosive effects of L2 tokens and equity. Taking a well-known public chain as an example, it once dominated the DeFi space for a long time, but it has now been surpassed by other public chains in terms of "real usage rate."

Bitcoin's Future

Many people still harbor illusions about Bitcoin's potential to adapt to DeFi functionalities, but in-depth political and economic analysis indicates that such a transformation is nearly impossible. The governance mechanism of the Bitcoin community is exceptionally closed, and the core development team can almost unilaterally prevent any protocol upgrades.

Conclusion

The so-called "Bitcoin DeFi" does not exist. It has neither native support capabilities nor a practical implementation path; it is entirely a collective fantasy. Instead of indulging in fantasy, it is better to focus on those DeFi projects that are truly operating on-chain, as they are creating enormous economic value every year.