DeFi

How Bitcoin On-chain Activity Accelerates: From Ordinals to DeFi

A broad look at Bitcoin’s DeFi journey—from Ordinals, BRC-20, and Runes to today’s DEXes, lending platforms, AMM aggregators, and the rise of L2s. + the UX and liquidity challenges shaping what comes next.

Peter Slaný
5 min read
BitcoinDeFiLayer2

How Bitcoin On-chain Activity Accelerates: From Ordinals to DeFi

For years, Bitcoin was treated primarily as digital gold: valuable, inert, and largely idle. That story shifted when Ordinals arrived and sparked a new wave of on‑chain activity. Very quickly we saw BRC‑20 and then Runes formalize fungible tokens on Bitcoin, which in turn created real demand for markets, liquidity, and tools. Today there are multiple DEXes, lending platforms, and AMM aggregators competing for flow, and a growing share of activity is happening on Layer 2 (L2) environments anchored to Bitcoin. The pace is unmistakably accelerating.

The Spark: Ordinals → BRC‑20 → Runes

  • Ordinals made it culturally and technically normal to inscribe and move non‑financial data on Bitcoin, bootstrapping user engagement at the base layer.
  • BRC‑20 transformed that energy into fungible tokens—imperfect and indexer‑dependent, but sufficient to kick‑start markets and speculation.
  • Runes emerged to streamline fungible tokens further, improving issuance, transfers, and alignment between indexers and wallets.

This cascade did two things: it brought new participants on‑chain, and it pressure‑tested Bitcoin’s tooling. The ecosystem had to converge on standards quickly—wallets, explorers, indexers, and protocols needed to agree on what state meant. That urgency catalyzed an entire stack almost overnight.

Markets Arrive: DEXes, Lending, and Aggregators

  • DEXes: Multiple designs exist across L1 and L2s, from inscription‑aware swaps to EVM‑style AMMs on Bitcoin‑anchored rollups.
  • Lending: Designs are evolving to keep BTC close to home—using native collateral and settlement—rather than defaulting to wrapped assets elsewhere.
  • Aggregators: AMM aggregators have appeared to route across fragmented pools and venues, signaling that no single DEX can serve the entire market.

A notable thread is the use of the Internet Computer (ICP) for coordination and orchestration. For example, odin.fun runs on ICP; Liquidium and, soon, TRIO also leverage ICP. This reflects a practical truth: Bitcoin DeFi today is a multi‑system problem, and teams are choosing execution and coordination layers that complement Bitcoin’s settlement guarantees.

The Rise of Bitcoin L2s

Lightning proved that payments could scale. The next wave is general‑purpose L2s that bring faster settlement, richer programmability, and familiar developer tooling while anchoring security to Bitcoin. Designs vary—from sovereign rollups to hybrid models—but the effect is the same: lower friction for builders and users, with BTC as the settlement bedrock. As these L2s mature, more DeFi activity is shifting toward them.

The Hard Parts: Fragmented Liquidity and UX/Infra Gaps

Bitcoin DeFi is not one chain or one standard. Liquidity is fragmented across:

  • Layers: L1 venues vs. multiple L2s with different execution and security models
  • Token standards: Ordinals, BRC‑20, and Runes that don’t always interoperate cleanly
  • Wallet paradigms: UTXO vs. account‑based abstractions and differing asset semantics

This fragmentation creates real challenges:

  • Routing: Finding best execution across DEXes and L2s without excessive fees or delays
  • Finality and settlement: Coordinating actions across systems with different confirmation and reorg profiles
  • Indexing and state: Keeping consistent views of inscriptions/tokens across explorers, wallets, and protocols
  • UX: Onboarding users who must juggle multiple wallets, fee markets, and mental models

Bringing DeFi to Bitcoin means solving infrastructure and product problems in tandem: consistent indexing, intent‑based routing, abstracted fee management, safer bridges, and interfaces that hide complexity without hiding risk.

Why It’s Accelerating

Three forces are compounding right now:

  1. Hardening standards: Runes and improved indexers reduce ambiguity for builders.
  2. Better aggregation: Liquidity and intent routers improve execution quality, attracting flow.
  3. Maturing L2s: Richer programmability close to Bitcoin settlement shortens the path from idea to product.

The feedback loop is straightforward: better UX and liquidity attract users; users attract builders and market makers; scale funds better infrastructure; better infrastructure further improves UX.

What to Watch Next

  • Consolidation among DEXes and the rise of meta‑routers that span L1 and L2
  • Lending and credit products that keep BTC native while broadening collateral options
  • Wider adoption of coordination layers like ICP for stateful services around Bitcoin
  • Wallets that normalize Ordinals, BRC‑20, and Runes with safer defaults
  • Improved bridges and clearer settlement assurances between L1 and L2s

Guidance for Participants

  • Builders: Design for fragmented liquidity from day one. Expose intents, integrate multiple indexers, and plan for multi‑venue routing.
  • Users: Start small. Prefer audited venues and verify asset semantics (what exactly you hold and where it settles).
  • Liquidity providers/Market makers: Lean into cross‑venue strategies; fragmentation is both a risk and an opportunity.

Closing Thought

Bitcoin DeFi didn’t begin with a grand smart‑contract upgrade—it began with Ordinals making Bitcoin fun and interactive again. BRC‑20 and Runes turned that energy into tradable primitives. DEXes, lending markets, and aggregators followed. L2s are scaling the experience while anchoring to Bitcoin’s security. The work ahead is UX and infrastructure, especially around fragmented liquidity. Solve that, and the next phase of acceleration is already here.

If you’re building in this space—or trying to make sense of it—let’s talk.

These are personal views, not financial advice. Crypto assets are volatile and risky. Do your own research.