Place/Date: - November 5th, 2021 at 11:37 am UTC · 3 min read
Bitcoin is the most popular blockchain network in the world and initiated the rise of cryptocurrencies and peer-to-peer payments. Its marketcap has risen to over $1 trillion amid new use-cases and applications in different sectors.
Decentralized finance, popularly known as (DeFi) is a unique concept that has grown in popularity and appears to be coming to the Bitcoin ecosystem. StackSwap is a blockchain platform that is set to launch the first fully working decentralized exchange on Bitcoin.
The DeFi industry has witnessed the rise of new projects in the past 24 months that have introduced innovative features. For example, smart contracts have been used to create automated decentralized protocols that enable different financial solutions on blockchain technology.
Terms like staking, lending, liquidity mining, yield farming, and atomic swaps have become mainstays in the crypto world. Traders and liquidity providers have leveraged these concepts to increase their portfolios and generate sustainable income.
The amount of funds locked in different DeFi protocols has risen to over $50 billion during this period. Interestingly, Bitcoin has been left behind from this revolution despite its position as the most popular cryptocurrency.
The nature of the Bitcoin network makes it difficult to build smart contract applications directly on its blockchain. Also, Bitcoin faces the long age problems of slower confirmation times and higher transaction fees when compared to 3rd generation blockchains like Solana and Binance Smart Chain.
Whether DeFi can succeed on the Bitcoin network remains to be seen. However, the Bitcoin network remains one that can transform DeFi to the next level. Bitcoin accounts for 47% of all crypto liquidity and can solve the DeFi wide problem of liquidity.
Several projects have taken up the challenge of developing DeFi solutions on Bitcoin. StackSwap is one of the examples and is looking to establish a major stake in the Bitcoin ecosystem.
StackSwap is a decentralized exchange that is built on Stacks, a layer-1 blockchain that solves the scalability problem of Bitcoin. Stacks enables the creation of smart contracts functions on the Bitcoin network using a unique consensus algorithm called Proof of Transfer (PoX)
Proof of Transfer is a consensus that enables interoperability between two blockchains (Stacks and Bitcoin). This ensures that transactions made on Stacks are verified on the Bitcoin network. This way smart contract applications built on Stacks are backed by Bitcoin, which provides security.
StackSwap leverages this architecture to develop a decentralized finance ecosystem that supports different features. Some of which include a trading platform where users can swap between different tokens, liquidity providers can provide LPs in supported pools for rewards and PoXL mining.
The automated market maker model implemented by StackSwap is similar to the norm in the DeFi ecosystem and ensures that traders are always matched for trades as long as there is enough liquidity in the respective pools.
Initial DEX Offerings have become the trend in DeFi as new project launch tokens within dedicated launchpads. StackSwap features a launchpad for project teams to issue tokens, create liquidity pools within the Bitcoin network.
DeFi is an ever-evolving ecosystem, and Bitcoin blockchain is one that can benefit from this fast-growing industry. Ethereum, which is the most popular smart contract network has become too expensive for the average crypto lover to enjoy the best of DeFi.
StackSwap can take up a key role with its Stacks blockchain architecture and expand the potentials of DeFi in the Bitcoin ecosystem.