Blockchain
Loka Mining CEO on Bitcoin’s DeFi possibilities
Speaking to crypto.news in an interview, Andy Fajar Hardika, CEO of Loka Mining, discussed the evolution of decentralized finance (defi) on the Bitcoin network.
On April 19, 2024, Bitcoin mining rewards they were cut halfway. Mining a block will now only generate 3,125 BTC, up from the previous 6.25 BTC. Even though the Bitcoin halving happens every four years or so this year, industry participants have really been talking about how reduced rewards will affect the mining economy.
With each halving, mining companies must adapt toa lower margin environment. Cash-strapped companies usually exit the market or merge with larger companies. Unlike previous halvings in 2016 and 2020, the 2024 halving event could involve a series of consolidations and defaults.
log into Runes AND Sort themconcepts that are revolutionizing the def landscape on the Bitcoin network.
Runes, like Ethereum’s ERC-20 standard, introduce fungible tokens to the Bitcoin blockchain, while Ordinals bring NFTs directly to the network. As the first cryptocurrency, this goes a long way in expanding the possibilities of what Bitcoin can offer beyond simple transactions.
With Runes and Ordinals, Bitcoin is finding new ways to bridge the gap with Ethereum, which has been widely acclaimed as the king of Defi. However, nothing is free of challenges. Scalability issues and concerns about the rise of blockchain loom large, echoing past obstacles in the industry.
However, the rise of protocols like Runes and Ordinals shows that Bitcoin can support more diverse decentralized applications. The miners, in return, can do so compensate the effect of the halving on revenues.
Hardika, who leads a cryptocurrency mining company, shared her insights on the matter.
How do you perceive Bitcoin’s evolving role in the defi space, given its recent advancements like the Runes protocol and the impact it has had on miner revenues and transaction fees?
Bitcoin lacks programmability but has the strongest Lindy effect and has proven to become a de facto store of value. I personally believe that these features are pushing Bitcoin to become the “mother chain”, attracting new protocols that are flourishing on Bitcoin’s L2 or sidechain.
In your opinion, can Bitcoin position itself as a competitor to Ethereum in decentralized finance or do you foresee a different outcome?
I think what we will ultimately see will not be rivalry, but rather collaboration, where chains will be “fused” and abstracted to the point that regular users won’t care or need to understand which chain they are currently using.
With Runes taking transaction fees to new heights, how do you think Bitcoin can balance rewarding miners with keeping transactions convenient and accessible? Are high fees hindering Bitcoin adoption for smaller transactions?
As Bitcoin has transitioned from a P2P electronic cash system to a store of value, I believe the high transaction fee on Bitcoin L1 is important. It serves as a trade-off for the security budget that the network must maintain. This is where L2s take part in scaling the network and adding programmability to Bitcoin. From the user’s point of view, solutions like Lightning or ICP with their ckBTC make it possible to reduce Bitcoin transaction fees to just a few cents.
Historically, Bitcoin has lagged behind Ethereum in def applications. How likely is it that innovations like Runes and Ordinals will help Bitcoin close this gap? What are the advantages or challenges of Bitcoin in this space?
Ordinals is basically a fully on-chain NFT, parallel to ERC721, while Runes is essentially fungible tokens on Bitcoin, parallel to ERC-20. These are just the first building blocks of Bitcoin’s programmability. While it is now possible to create an L1 primitive dApp, it is still very limited. I believe the actual use case would be as an anchor for L2s to provide a complete defi app on Bitcoin. A significant benefit would be that we can unlock the huge Bitcoin TVL that is currently in their holders’ wallets.
Some critics argue that protocols like Runes and Ordinals could lead to blockchain bloat and slower transaction times. What do you think about these drawbacks and how do they compare to Ethereum’s scalability challenges?
History tends to repeat itself. A few years ago, we had CryptoKitties, the first gamified NFT on the Ethereum network, consuming 13% of all transactions in the Ethereum network. This sparked discussion about the scalability of the network and ultimately triggered many upgrades and the rise of L2s on Ethereum.
Do you expect a similar trend?
I believe we see parallels between Runes and Ordinals, which now take up significant block space and contribute significantly to the network security budget. As an indirect result, there are now more than 50 Bitcoin Layers or sidechains trying to solve the scalability of Bitcoin. And of course, just like startups, most of them will eventually die or become dormant, but those with strong utility and real use cases will survive.