We’re going to momentarily set aside the question of “should this exist” and just acknowledge that, because Bitcoin is permissionlessless, “Bitcoin DeFi” does exist.
Last cycle, so-called “Decentralized Finance” was a kingmaker for a new class of crypto degens and builders alike. Script kiddies became mechanism designers overnight as new classes of cryptoassets emerged from the “DeFi Summer” of 2020. The formula for success was simple: Why simply lend against an asset when you can rehypothecate it several times over, add a governance token, and then pool that with another asset that is doing the exact same thing? As crypto financialization turned to pure, unadulterated speculation, scantily clad claims of “utility” inspired mass hallucination events at best and facilitated impressive wealth extraction at worst.
Bitcoin alone stood as the only unsullied major blockchain. Bitcoin is not built to accommodate such programmability; it’s the dumb rock of the crypto ecosystem. But in the post-Ordinals world of data blobs & heterogeneous cryptoassets, the tinkerers among us have discovered ways to create similar speculative markets. These markets are about to heat up.
The one limitation of Bitcoin compared to Ethereum or Solana, though, is its slow block times, but we believe that this a feature not a bug. We’re calling it “SlowFi“.
SlowFi vs BitcoinFi
My personal opinion is that “SlowFi” is actually a subset of “BitcoinFi” or “BitFi” if we’re going to embrace these terms as descriptive of a class of systems on Bitcoin. BitFi refers to any way to earn yield on Bitcoin on-chain or off-chain, actively or passively. Many of the “Layer 2s” out there would fall into this category.
I think it makes the most sense to consider SlowFi an actual type of behavior within BitFi. SlowFi is a DeFi-esque financial use case where Bitcoin’s 10 minute block time is a core limitation. Additionally, SlowFi denotes some degeneracy, ironically embracing the block time limitation in spite of the degen’s demand for speed, stimulation, and immediate execution of a trade.
Examples of Bitcoin SlowFi
The team building OPNET coined the term SlowFi to describe the slower settlement nature of their indexer-side smart contract metaprotocol. I would actually put many things in the SlowFi category, even perhaps Ordinals trading itself: BRC20s, PSBT-based marketplaces for Inscriptions, Runes, Trac Network, OPNET, Programmabe/Proto Runes, and even the Counterparty protocol could fall into the SlowFi classification.
Off-chain indexing is a common feature of each of these SlowFi phenomenon. Ordinals kicked off an era of posting data to Bitcoin and then providing a schema for interpreting and sequencing that data with another system. They are very similar to rollups in a way (in fact, you could argue they are rollups).
Bottom line: SlowFi is naturally difficult to classify and it will certainly evolve over time.
Do we consider merge mined sidechains like Fractal Bitcoin SlowFi? Do we consider OPNET-but-on-Fractal-Bitcoin SlowFi? Ultimately these will be determined by the market. I suspect that the definition will very much be vibes-driven. If something feels slow and might be considered DeFi, we’re just gonna call it “SlowFi”.
On a personal note, I think it’s actually interesting that posting data blobs to Bitcoin is gaining momentum as a trend. While I’m pessimistic that most of it will not successfully scale long term (fees get expensive very quickly), I do think some interesting systems and products will emerge from this trend.
In the short term, I can hear the degens finally waking up from their long summer slumber, feeling like it’s time to start thinking risk-on again.
