CEO of Loka Mining 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

were
slashed
in
half.
Mining
a
block
will
now
generate
only
3.125
BTC,
compared
to
the
previous
6.25
BTC.
Although
the
Bitcoin
halving
happens
every
four
years
or
so
this
year,
it’s
really
got
industry
participants
talking
about
how
the

reduced
rewards
will
affect
the
mining
economy.

With
each
halving
event,
mining
firms
have
to
adapt
to
a

lower-margin
environment.
Cash-strapped
firms
usually
exit
the
market
or
merge
with
bigger
firms.
Unlike
the
earlier
halving
events
in
2016
and
2020,
the
2024
halving
event
may
result
in
a
slew
of
consolidation
and
defaults. 

Enter

Runes
and

Ordinals,
concepts
that
are
revolutionizing
the
defi
landscape
on
the
Bitcoin
network.

Runes,
like
Ethereum’s
ERC-20
standard,
introduce
fungible
tokens
to
the
Bitcoin
blockchain,
while
Ordinals
bring
NFTs
directly
onto
the
network.
As
the
premiere
cryptocurrency,
this
goes
a
long
way
in
broadening
the
possibilities
of
what
Bitcoin
can
offer
beyond
simple
transactions. 

With
Runes
and
Ordinals,
Bitcoin
is
finding

new
ways
to
close
the
gap
with
Ethereum,
which
has
largely
been
hailed
as
the
king
of
defi.
However,
nothing
is
without
its
challenges.

Scalability
issues
and
concerns
over
blockchain
bloat
loom
large,
echoing
past
impediments
in
the
industry.

Still,
the
birth
of
protocols
like
Runes
and
Ordinals
shows
that
Bitcoin
can
support
more
diverse
decentralized
applications.
Miners,
in
return,
are
able
to

offset
the
halving’s
effect
on
revenue. 

Hardika,
who
leads
a
cryptocurrency
mining
firm,
shared
his
insights
on
the
matter.

How
do
you
perceive
Bitcoin’s
evolving
role
in
the
defi
space,
given
its
recent
advances
like
the
Runes
protocol
and
the
impact
it’s
had
on
miner
revenues
and
transaction
fees?

Bitcoin
lacks
programmability
but
has
the
strongest
Lindy
effect
and
has
proven
to
become
the
de
facto
store
of
value.
I
personally
believe
these
characteristics
are
driving
Bitcoin
to
be
the
“mother
chain,”
attracting
new
protocols
that
are
blooming
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
see
in
the
end
is
not
rivalry,
but
rather
collaboration
—
where
chains
will
be
“fused”
and
abstracted
away
to
a
point
that
regular
users
don’t
really
care
or
need
to
understand
which
chain
they’re
currently
using.

With
Runes
driving
transaction
fees
to
new
heights,
how
do
you
think
Bitcoin
can
balance
rewarding
miners
with
keeping
transactions
affordable
and
accessible?
Are
high
fees
hindering
Bitcoin’s
adoption
for
smaller
transactions?

As
Bitcoin
transitioned
from
a
P2P
e-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
the
network
needs
to
maintain.
This
is
where
L2s
take
part
in
scaling
the
network
and
adding
programmability
to
Bitcoin.
From
a
user’s
perspective,
solutions
like
Lightning
or
ICP
with
their
ckBTC
enable
Bitcoin
transaction
fees
to
be
reduced
to
just
a
few
cents.

Historically,
Bitcoin
has
lagged
behind
Ethereum
in
defi
applications.
How
likely
is
it
that
innovations
like
Runes
and
Ordinals
will
help
Bitcoin
close
this
gap?
What
are
Bitcoin’s
advantages
or
challenges
in
this
space?

Ordinals
is
basically
fully
on-chain
NFT,
parallel
to
ERC721,
while
Runes
is
essentially
Fungible
Tokens
on
Bitcoin,
parallel
to
ERC-20.
These
are
just
early
building
blocks
for
Bitcoin
programmability.
While
it’s
now
possible
to
build
an
L1
primitive
dApp,
it’s
still
very
limited.
I
believe
the
actual
use
case
would
be
like
anchor
points
for
the
L2s
to
provide
a
full-blown
defi
app
on
Bitcoin.
One
significant
advantage
would
be
that
we
can
unlock
the
massive
Bitcoin
TVL
that
is
currently
sitting
in
their
holders’
wallets.

Some
critics
argue
that
protocols
like
Runes
and
Ordinals
could
lead
to
blockchain
bloat
and
slower
transaction
times.
What
are
your
thoughts
on
these
drawbacks,
and
how
do
they
compare
to
Ethereum’s
scalability
challenges?

History
tends
to
repeat
itself.
A
few
years
back,
we
had
CryptoKitties,
the
first
gamified
NFT
on
the
Ethereum
network,
consuming
13%
of
all
transactions
in
the
Ethereum
network.
This
ignited
the
discussion
about
network
scalability
and
eventually
sparked
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
are
now
taking
significant
block
space
and
contributing
a
significant
amount
to
the
network’s
security
budget.
As
an
indirect
result,
there
are
now
more
than
50
Bitcoin
Layers
or
sidechains
trying
to
solve
Bitcoin’s
scalability.
And
of
course,
just
like
startups,
most
of
them
will
eventually
die
down
or
become
dormant
—
but
those
with
strong
utility
and
actual
use
cases
will
survive.