Bitcoin Decentralized Finance: A Castle in the Air under Technical Limitations

The so-called "Bitcoin DeFi" actually does not exist. Whether it is BitVM, BitcoinOS, Rootstock, or Soveryn, these projects are either highly centralized or completely unrealistic. Upon deeper investigation, it is found that much of the promotion of these projects can be described as deceptive.

The Fundamental Reason Bitcoin Cannot Support Decentralized Finance

Bitcoin cannot achieve true Decentralized Finance primarily because it lacks a Turing-complete virtual machine, making it unable to support complex smart contracts like other public chains. This means that regardless of how projects promote it, Bitcoin does not possess the core capabilities required for DeFi.

The "De" in DeFi stands for "Decentralized". However, currently, all projects claiming to be "Bitcoin DeFi" are essentially highly centralized, a practice that misleads users and results in significant financial losses for investors.

Major Project Analysis

BitVM

BitVM claims to enable smart contracts on Bitcoin through "optimistic two-party computation," similar to the operation of many Ethereum Layer 2 networks. However, BitVM is more centralized, as its "validators" are also permissioned.

In fact, BitVM relies on two computers operated by a trusted party chosen by a single authority, which is almost the most centralized form. Although the BitVM2 plan aims to decentralize the "validators", the initial setup still requires a group of permissioned participants.

In addition, the BitVM system is highly inefficient because Bitcoin does not have a Turing-complete programming language. BitVM attempts to achieve functionality by chaining opcodes together in dispute situations and publishing them to taproot transactions, but this method proves to be overly complex and inefficient.

Rootstock

Rootstock is a sidechain connected to BTC that focuses on smart contract functionality. However, it relies on a "permissioned consortium" to maintain a two-way peg, which means the consortium 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 in the project introduction it acknowledges its centralized characteristics, which can be considered honest in attitude.

Sovryn

Sovryn is actually built on Rootstock and relies on its smart contracts and anchoring mechanism, thus being highly centralized as well.

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

BitcoinOS

BitcoinOS is the most exaggerated among these projects. It claims to solve all the problems that Ethereum has not addressed: privacy, cross-chain, trustless bridging, and even "true Rollup" and so on.

However, its white paper has serious information gaps, completely avoiding the critical "off-chain execution" part of the project design, which is precisely where the trust risk is introduced.

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

What is even more questionable is that the Rollup system of BitcoinOS requires submitting a 400KB state proof to 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.

Limitations of L2 Scaling

Currently, many Bitcoin "DeFi" projects are based on the narrative of "second layer scaling". 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, and may instead provide a sign of decline for the actual use of the original chain.

The BTC L2 scaling plan 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.

Reasons Why Bitcoin is Hard to Change

The governance mechanism of the Bitcoin community is exceptionally closed, with the core development team almost able to unilaterally block any protocol upgrades. Even relatively mild opcode recovery proposals are often long-term blocked; let alone "disruptive" proposals like introducing a Turing-complete virtual machine. Therefore, the expectation for Bitcoin to adapt to Decentralized Finance is almost impossible to achieve in reality.

Conclusion

The so-called "Bitcoin DeFi" actually does not exist. It has neither native support capabilities nor a realistic implementation path, and is completely a collective fantasy driven by greed, delusion, and ignorance. We should focus on the real Decentralized Finance economy, rather than indulging in unattainable fantasies.