Bitcoin Cash (BCH): A Promising Platform for Decentralized Finance (DeFi)
Bitcoin Cash (BCH) is quickly gaining traction in the world of decentralized finance (DeFi) thanks to its unique features and potential advantages over other platforms. In this article, we will explore the rise of DeFi and the obstacles it faces, and how Bitcoin Cash offers a promising solution.
The Rise of DeFi
DeFi has quickly become one of the largest sectors in crypto, with decentralized trading, borrowing and lending, and other financial services. In 2021, the sector saw almost $180 billion in total value locked in various protocols. Although the DeFi space also experienced a decline, it stood out in the market upturn during the first quarter of 2023, with a $29.6 billion rise in value, outperforming major asset classes like gold and oil. The increasing popularity of DeFi can be attributed to the growing number of decentralized applications (DApps) and the flow of users from centralized to decentralized exchanges. However, the rise in popularity also comes with caveats.
Caveats of DeFi
One of the primary caveats of DeFi is the rising transaction costs as more users start using a network. During the bull market in 2021, the Ethereum network saw a large influx of transactions, mainly happening within the DeFi space, resulting in steeply rising transaction costs on the network. Sending crypto became so expensive that users faced a significant barrier to interacting with DeFi DApps. Another risk is the vulnerability to smart contract back door keys, massive centralization on single contracts, and counter-party risks of custodial stablecoins. With numerous bridge hacks plaguing the space, and failures of algorithmic protocols such as Terra, using DeFi DApps is certainly not without risk.
Bitcoin Cash: A Solution for DeFi
Thanks to continuous development since its foundation in 2017, Bitcoin Cash (BCH) can perform as a vibrant environment for smart contract deployment and the creation of DeFi DApps on its UTXO mainchain. BCH offers several advantages for DeFi applications, potentially offering better scalability and security. One new project that has recently launched is BCH Bull, which lets users create long or hedge positions on several assets such as the United States dollar, Bitcoin and gold, with the help of the AnyHedge protocol. Users can even add leverage to their on-chain trades. Each trade has its own independent smart contract, eliminating centralized security risks for smart contracts. Furthermore, the UTXO-based protocol of Bitcoin Cash prevents high transaction fees and makes the chain scalable, meaning fees don’t increase even if the transaction volume on the network increases. Since October 2022, BCH Bull has been in beta, creating and redeeming over 3,000 smart contracts. The project has now been released into full production mode this month, allowing its growing user base to initiate up to 90-day-long contracts at 2~3x the previous contract size, enjoying the security and scalability that Bitcoin Cash offers. In conclusion, Bitcoin Cash offers a promising solution for DeFi, with its unique features and potential advantages over other platforms. With the continuous development of the platform and the growth of DeFi, Bitcoin Cash could become a leading platform in the world of decentralized finance.
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