Viewpoint: Under technical limitations, "Bitcoin DeFi" is just nonsense and an investment trap.

The so-called "Bitcoin DeFi" actually does not exist at all. Whether it's BitVM, BitcoinOS, Rootstock, or Soveryn, these projects are either extremely centralized or completely unrealistic.

Written by: Justin Bons, Founder of Cyber Capital

Compiled by: Yuliya, PANews

The so-called "Bitcoin DeFi" actually does not exist at all. Whether it's BitVM, BitcoinOS, Rootstock, or Soveryn, these projects are either extremely centralized or completely unrealistic. After in-depth research, the truth is shocking; much of the promotion of these projects can almost be termed as fraudulent.

The Fundamental Reason Bitcoin Cannot Support Decentralized Finance

The reason Bitcoin cannot achieve true Decentralized Finance is that it lacks a Turing-complete virtual machine. Simply put, it cannot support complex smart contracts like Ethereum or Solana. This means that no matter how the project parties promote it, Bitcoin does not possess the core capabilities required for DeFi.

The "De" in DeFi stands for "Decentralized". However, all projects currently claiming to be "Bitcoin DeFi" are essentially very centralized, which misleads users and has caused investors to lose hundreds of millions of dollars.

BitVM

BitVM claims to enable smart contracts on Bitcoin through "optimistic two-party computation," similar to the operation of many Ethereum Layer 2 networks (ETH L2), involving a "prover" and a "verifier." However, unlike most centralized ETH L2s, BitVM is more centralized because its "verifier" is also permissioned.

In most ETH L2s, such as Optimism, users can still submit fraud proofs even if the centralized "prover" attempts to cheat. BitVM, on the other hand, has only one licensed "validator," which essentially constitutes a highly centralized system.

In fact, BitVM relies on two computers run by a trusted party chosen by a single authority, which is almost the most centralized form. Although BitVM2 plans to decentralize the "validators," this may only be possible after the initial setup, which still requires a group of licensed participants and requires a "1-of-n honest assumption." The actual situation of the current deployment makes these future commitments seem irrelevant.

In addition, the BitVM system is extremely inefficient, as Bitcoin (BTC) does not have a Turing complete programming language, but theoretically, any function can be implemented through simple switches. BitVM attempts to achieve this by chaining opcodes together in dispute cases 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.

However, this solution is extremely impractical as it is several orders of magnitude less efficient and requires very powerful computers to process, leading to significant centralization pressure, even if both computers are permissionless. This also severely limits the system's capacity, as the equivalent processing of a Turing-complete virtual machine requires only a small amount of resources, making BitVM comparatively difficult to scale. Even ignoring BTC's own lack of capacity to support large-scale BitVM, it is still understandable why BitVM adopts an optimistic model, as the required processing volume is too large, resulting in a worrying situation both now and in the future.

Rootstock

Rootstock is a sidechain connected to BTC, focusing on smart contract functionality. However, it relies on a "permissioned federation" to maintain a 2-way peg, which means that this federation can review or even steal user assets.

Although Rootstock is essentially no different from a bank, which goes against the original intention of Bitcoin's decentralization, at least Rootstock acknowledges its centralized characteristics in the project introduction, which can be considered honest in terms of attitude.

Sovryn

Sovryn is actually built on Rootstock and relies on its smart contracts and anchoring mechanism, thus it is also highly centralized.

However, it claims on its official website to be "decentralized" and to provide "Bitcoin native transactions," which is clearly misleading. What is even more concerning is that the team behind Sovryn is also involved in the next project, BitcoinOS.

BitcoinOS

BitcoinOS is currently the most extravagant 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.

But the fact is that its white paper has serious information gaps, completely avoiding the critical "off-chain execution" part of the project design, which is the core of introducing trust risks.

BitcoinOS adopts a structure similar to BitVM called "prover - verifier", and the documentation makes no mention of how to achieve the decentralization of the verifier. This "deliberate omission" is highly misleading, suggesting that its verifiers are still under centralized control.

In addition, the project claims to support a Rollup that is "more advanced than Ethereum," but technically it is fundamentally unable to achieve this goal. Bitcoin lacks Turing completeness, which means that the execution, ordering, and validation of L2 must all be done off-chain. This inevitably requires a centralized sequencer or consortium to intervene, thereby exposing more centralized risks.

What is more absurd is that the Rollup system of BitcoinOS requires the submission of a 400KB state proof on the main chain every six blocks, occupying 10% of Bitcoin's block capacity. This makes Bitcoin OS an extremely slow and expensive data availability solution, making it difficult to compete with other solutions, and also leads to DeFi on BTC being not only completely centralized but also insecure. However, these details are not mentioned at all in the official documentation, which is shocking.

The so-called "L2 scaling" is actually an illusion.

Currently, many Bitcoin (BTC) "DeFi" projects are derived from the narrative extension of "Layer 2 scaling" (L2 scaling). Broadly speaking, L2/modular "scaling" attempts to expand its functionality and performance by building additional layers on top of the underlying layer (L1).

However, this approach has almost never succeeded in practice. Pushing transaction traffic to another competing chain does not truly expand the capacity of the original chain; instead, it provides a sign of decline for the actual use of the original chain, as this practice offers some degree of excuse for "never having to expand L1."

Worse still, this approach often distorts the incentive mechanisms of the original chain leadership due to the corrosive effects of L2 tokens and equity. Take Ethereum as an example; it has long dominated the Decentralized Finance space, but it has now been surpassed by Solana in terms of "real utilization rate." This is not coincidental, but rather a structural consequence brought about by the L2 narrative.

The L2 scaling plan for BTC may make large-scale self-custody impractical. Users who want to control their private keys still need to conduct multiple on-chain transactions to access L2. However, the current on-chain capacity cannot support such large-scale operations.

For example, if all coin holders wanted to move their coins now, the transaction queue would exceed two months; if everyone in the world made just one transaction, the queue would exceed twenty years. This means that self-custody is almost impossible to achieve, and the public will have to access through custodial service providers, which completely contradicts the original purpose of Bitcoin.

Why Bitcoin Will Not Change

Many people still harbor fantasies about Bitcoin potentially adapting to DeFi functions, but in-depth political and economic analysis indicates that such a transformation is almost impossible.

The governance mechanism of the Bitcoin community is exceptionally closed, and the Bitcoin Core team can almost unilaterally block any protocol upgrades. For example, even the OP_CAT proposal, which is a relatively mild opcode recovery proposal, has been locked for a long time; let alone proposals like introducing a Turing-complete virtual machine that are considered "disruptive." Therefore, it is simply unrealistic to expect Bitcoin to adapt to Decentralized Finance.

This is a "scam cycle"

Projects surrounding Bitcoin DeFi have actually formed a "scam cycle": every few years, a new wave of projects claiming to "implement DeFi on Bitcoin" appears in the market, often raising hundreds of millions of dollars from investors. However, they quickly disappear due to technical bottlenecks, model vulnerabilities, and other issues. A few years later, new projects return, targeting a group of new investors who are unaware of the history.

These projects largely leverage people's fantasy that "Bitcoin can also play DeFi", but the reality is that there have been almost no significant technical changes to the Bitcoin protocol over the past decade. With so much money and resources invested, it is hard to believe that the same code can "suddenly realize" it today.

Bitcoin DeFi is just an illusion

Among all the surveyed projects, Soveryn and BitcoinOS are the most controversial, with their promotions being extremely exaggerated, completely overshadowing the significant trade-offs and defects of the projects. Although Rootstock is still a centralized solution, it at least acknowledges this fact. BitVM shows some innovation, but still cannot escape its limitations in efficiency and structure.

What’s even more ironic is that after深入研究 the BTC ecosystem's L2 projects, one ends up appreciating the transparency and self-critical spirit of Ethereum’s L2 even more. The Ethereum ecosystem even has a dedicated "L2Beat" project to track the risks and operational status of each L2, while Bitcoin’s L2 has almost no similar disclosure mechanisms.

Ultimately, 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 driven by greed, delusion, and ignorance, much like the myth that Bitcoin itself once brought. We should no longer tolerate the mediocrity and stagnation of Bitcoin. There is already a real DeFi economy on-chain, generating billions of dollars in revenue each year—rather than indulging in fantasies, it is better to support the real crypto revolution.