Can Developers build DeFi on Bitcoin?
Tags: webdev, bitcoin, beginners, programming
Published: 2023-03-06 15:03:51

The potential of blockchain as a transparent and decentralized infrastructure platform has made it one of the most promising technological innovations of the 21st Century. 

Blockchain is the foundation of an emerging world of decentralized finance that promises to restore parity to the world with equitable access to financial services. It’s the basis of non-fungible tokens, which have transformational applications as they allow for the tokenization of real world assets and more besides. It’s a breakthrough technology that some believe will soon usher in a new era of the decentralized Web3, an internet that will be more private, free of censorship, owned by its users, who’ll be able to control who can access their data. 

One of the hottest areas in blockchain is decentralized finance, and it’s a space that’s brimming with potential. Today, there are hundreds of DeFi applications running on smart contract platforms that make it possible for anyone to borrow, lend, invest, stake for passive income and discover other financial opportunities. However, the vast majority of DeFi runs on Ethereum. Bitcoin, despite being the most widespread and valuable cryptocurrency, barely even figures. That’s because, originally, Bitcoin only had limited programmability, which made it impossible to develop complex applications atop of its blockchain infrastructure. 

However, with the introduction of the famous [Taproot upgrade](https://cointelegraph.com/bitcoin-for-beginners/a-beginners-guide-to-the-bitcoin-taproot-upgrade) in November 2021, DeFi on Bitcoin has suddenly become a viable proposition. Taproot fundamentally altered the way Bitcoin transactions are verified, while improving efficiency by condensing complex computations. With Taproot, smart contracts are now supported on Bitcoin. But even so, problems with Bitcoin’s scalability need to be solved if it is to become a reliable platform for DeFi. 

**Bitcoin’s DeFi Ecosystem**

To make Bitcoin practical for DeFi, it needs its own Layer-2 network or sidechain that enables more complex transactions to be made without adding to congestion on the main blockchain. This is where [Mintlayer](https://www.mintlayer.org/en/) comes in. It works in a similar way to the Lightning Network, which allows Bitcoin to scale by facilitating payments off-chain. Mintlayer provides a way for Bitcoin DeFi transactions to be performed off-chain, where they can be settled instantaneously and with very minimal fees, without compromising on Bitcoin’s network security. 

One of the key advantages of Mintlayer, which acts as an infrastructure platform for DeFi apps, is that it uses “atomic swaps” to make it possible for users to swap native BTC for Mintlayer tokens on a 1:1 basis. This negates the need for wrapped tokens and bridges, meaning Bitcoin users can natively use their digital assets in a range of DeFi protocols. 

Another option for building DeFi on Bitcoin is [Rootstock,](https://rootstock.io) which is a sidechain that runs in parallel with the main Bitcoin network. RSK, as it’s known, uses Smart Bitcoin, or RBTC as its utility token, for paying smart contract fees. RBTC is pegged 1:1 with BTC, meaning the two assets can be swapped for one another across the two networks. RSK’s main advantage is that it is compatible with Ethereum-based dApps, enabling users to swap their BTC for RBTC and borrow, lend, trade and do more with their assets. 

Similarly, the [Stacks ](https://stacks.co)project is another sidechain that’s linked to Bitcoin via its novel “Proof-of-Transfer” consensus mechanism. With Stacks, all transactions are eventually settled on the base Bitcoin blockchain. It provides the infrastructure for Bitcoin-native DeFi apps and has its own native token, STX, which is used to pay for transaction fees and can be staked for a passive income. 

**How To Build DeFi On Bitcoin?**

Developers who’re looking to build DeFi on Bitcoin are welcomed with open arms by the Mintlayer, RSK and Stacks communities, which are only too willing to provide the funds they need to get their ideas off the ground. Through community grants, developers have a way to deliver on their visions for decentralized finance protocols that can change the world. 

Bitcoin developer grants are generally offered alongside technical support to developers, and encompass projects ranging from decentralized exchanges to DeFi, to crypto wallets and NFTs, block explorer tools and GameFi. 

**Mintlayer Ecosystem Grants**

Mintlayer is keen to help developers explore any ideas they have that can get the nascent Bitcoin DeFi ecosystem off the ground. It’s especially interested in projects that bring something “new and unique” to its ecosystem, helping bring it closer to its goal of making Bitcoin more useful and directly interoperable with all DeFi use cases. 

[Mintlayer’s grants](https://www.mintlayer.org/en/ecosystem/) typically range from between $50,000 to $200,000 and are offered through three distinct initiatives. First is its incubator program, which is designed to help developers take an idea all the way from the drawing board to unicorn status. It’s aimed at projects that are still in the earliest stage of development, and provides mentorship around putting a team together, designing a technical roadmap, legal structure, marketing strategies, fundraising and more. 

The accelerator program is aimed at more experienced teams that already have a clear idea and roadmap and need funding and assistance to execute, and will introduce them to senior VCs and advisors who can enable those next steps. Finally, the Mintlayer grants initiative is for other ideas that can add value to its ecosystem that don’t involve issuing a preallocated token or generating revenue. Examples of these projects include developer tools, block explorers, wallets and educational resources. 

Developers can also join the [Mintlayer community](https://www.mintlayer.org/en/community/) to learn more about the opportunities within its ecosystem. 

**RSK Grants**

Rootstock offers its own [grants program](https://developers.rsk.co/grants/) with up to $200,000 on offer to developers who’re looking to build DeFi apps native to Bitcoin. To qualify for a grant, developers must submit their ideas to the RSK community and undergo a four-stage application process. This involves a careful review of the idea by the RSK team, feedback and a request for changes or more details, and finally, approval for a grant if it meets the project’s requirements and goals. 

RSK says it’s looking for developers who have an idea for any kind of software tool that can help enable the RSK ecosystem, including in-browser wallets for dApps, smart contract compile and deploy toolchains, new DeFi dApps, and even proposals to improve the RKS protocol itself. 

Besides grants, RSK also offers [training courses](https://developers.rsk.co/courses/) for developers who want to learn how to build on its unique infrastructure. 

**Stacks Grants**

Stacks provides [financial assistance](https://stacks.org/grants) to developers who want to help improve its infrastructure or build their own tools, services, dApps and community resources, or create educational material and fund research projects that can improve its ecosystem.

The money comes from the Stacks Foundation, with the wider community voting on which proposals should receive funding. Developers will be awarded anything from $100 to $5,000 to bring their ideas to fruition. To apply, head to the [Stacks GitHub repo ](https://github.com/stacksgov/Stacks-Grant-Launchpad)for more instructions on how to submit a proposal. Stacks’ grant review committee meets once a week to provide feedback on the latest applications, so a speedy response is guaranteed. 

**Developers Are Key To Growing Bitcoin DeFi**

It has become very common for blockchain networks to offer grants and other types of funding assistance to developers who’re looking to build on their infrastructure. By providing grants, blockchain ecosystems can strengthen the value of their projects and increase their communities. While there are many talented blockchain developers in the world, very few of them have the time and money to make their ideas a reality. So a little incentive can go a long way, helping good ideas grow into viable products that add value to the wider ecosystem. 

For developers, it’s not only financial assistance they’ll be receiving. Along with the money, they’ll receive crucial feedback that’s necessary to refine their ideas. Best of all, they’ll gain access to a vibrant community that’s required to develop a sustainable business with long-term growth prospects.