As the Dubai Token2049 Conference has concluded, one key point is that the story about Bitcoin (BTC) is rapidly expanding beyond its traditional role as a valuable reservoir of potential defi assets competing with Ethereum and Solana.
Prominent industry players like Franklin Templeton see this development as a positive step and believe it will increase the usefulness of Bitcoin without diluting its core attraction as a valuable repository as a purist and maximalist fear.
“I don’t think that focusing on Bitcoin Defis will dilute or complicate the core story of Bitcoin,” explained Kevin Farrelly, principal of blockchain venture capital at Franklin Templeton and vice president of digital assets in a keynote address at the Bitcoin side event this week. “Instead, we’re extending Bitcoin utility for certain types of investors. This is technically refined enough to optimize for your yield, security, or custom portfolio needs.”
“These users are not replacing the essays in the ‘value store’. They’re building on that,” Farrelly added. “It’s not diluting the story, it’s an evolution of infrastructure.”
Franklin Templeton is an investor in Bitlayer, a BitVM that functions as a calculation layer for Bitcoin while maintaining the security of the mainnet. It offers new features such as faster transaction processing, lower fees, smart contracts and advanced obligation integration, as well as features that are not natively supported by base layer Bitcoin alone.
Franklin Templeton’s Bitcoin ETF (EZBC) has registered a net inflow of $260 million since it debuted on January 11th last year. As of May 1, the fund holds 5,213 BTC, and it manages 5,213 bTC as its current price of Bitcoin is just above $97,000.
Nakamoto’s original vision for the Bitcoin blockchain was driven by creating a decentralized financial system that promotes financial sovereignty and privacy, and by eliminating the need for intermediary in transactions. But over a decade since its founding, Bitcoin, the native cryptocurrency of blockchain, quickly gained a reputation as digital gold, a trusted storage for value.
Bitcoin’s current market capitalization is over $1.9 trillion, with the digital asset market value accounting for nearly 60% of the $3.12 trillion per Coindesk data. It is the most liquid cryptocurrency, with an average of billions of dollars in daily trading volumes around the world, and several publicly listed companies employ it as a reserve asset.
Additionally, several regulated alternative investment instruments associated with BTC have emerged over the years, allowing traditional market participants to be exposed to cryptocurrency.
For example, 11 spot ETFs listed in the US have raised nearly $40 billion in investor money since their debut last January, according to Data Source’s Farside Investors. Meanwhile, Ether ETFs saw net inflows of just under $3 billion.
The powerful institutional intake of BTC is widely attributed to its simple and compelling narrative as a digital gold. This is an easy-to-understand asset compared to complex platforms such as Ethereum and Solana. These platforms support a wide range of distributed finance (DEFI) applications and use cases, helping native token holders earn additional yields in addition to spot market holdings.
“At the heart of it, it is considered a digital store of value,” Farrely told Koindsk. “Unlike more complex crypto projects, Bitcoin doesn’t require a deep technical explanation. It has a clear, focused purpose. Its clarity can be part of what makes it easier to model and make it easy to assign ETFs.”
As a result, many purists resist the idea of introducing defi-like characteristics directly into the Bitcoin blockchain, fearing that it will dilute its central appeal.
The topics around Bitcoin defi at the Bitlayer event and main Token2049 conference are specific, highlighting the increased demand for BTC holders for additional yield opportunities.
“Bitcoin debt with minimal trust-minimized bridges, and sustainable yield products for on-chain Bitcoin holders are becoming extremely important for Bitcoin asset holders and network maintainers,” Bitlayer co-founder Charlie Yechuan Hu told Coindesk.
“At Bitlayer, we are building a critical infrastructure that can use BitVM technology to strengthen Bitcoin debt,” added Hu. “Many interesting Bitcoin debt use cases can make Bitcoin assets more valuable and provide more reasons for users to keep and use in the future.”
This BTC Defi trend could also benefit miners who are rewarded for mining blocks. Although rewards per block are halved every four years, an increase in activity in the chain driven by the Defi application will help offset this reduction through higher transaction fees, supporting network security and sustainability.
“Certainly, Bitcoin Defi is also introducing new transaction fees, which are key components of the long-term sustainability and security of the network as block rewards continue to decline,” Farrelly said.
Hu expressed a similar opinion. A rise in network hashrate means miners need more activities like Bitcoin Defi, and it means they remain profitable.
“We need to build a great Bitcoin rollup with security verification capabilities, which could result in Bitcoin charges,” Hu said.
