Written by: Albert Liang — CEO at BTC Startup Lab, Dan Von Kohorn — Managing Partner at Broom Ventures, Abdel Harraz — CEO at DeepLake Finance. Contributor references at end of article.
At the time of releasing this, Bitcoin Ordinals just reached the 100K Ordinals inscribed (minted) mark. And if you think Ordinals is a big opportunity, then you are right, but there is an even bigger opportunity right on the other side that will change the landscape of Defi before the next Bitcoin halving.
Who should be reading this? If you either hold Bitcoin or have used Defi on Ethereum or another chain, then this is for you or maybe you are trading NFTs on an EVM chain and have recently realized that Ordinals of the same kind are worth more because it is created natively on Bitcoin. However, everyone who is either part of Web3 or getting involved with Web3 should read this because we are talking about the tectonic shift that will cause the foundation of Defi to shift toward Bitcoin this year.
Specifically, what are you going to get out of this reading?
- Problem = Opportunity: What is the Bitcoin problem? And why it might be the next big opportunity in Web3.
- Opportunity = Bitcoin Unicorn Startup Ideas: What should the market build in 2023?
- Timing: Why now?
- Empowerment: How do we enable entrepreneurs to build Bitcoin Unicorn Startups?
- Connect: How to reach us to build Bitcoin Unicorn Startups together?
Problem = Opportunity
If you own Bitcoin and you have also used Defi on Ethereum or other chains, then you know the Bitcoin problem: limited DeFi use cases. Only 0.3% of the Defi market uses native, non-custodial Bitcoin today. (Source: https://defillama.com/ , 2023 Jan 26)
Contrast this 0.3% market share of Defi market against the ~400 Bn market cap of Bitcoin, comprising 40% of all cryptocurrency value vs Ethereum is 60% market share of Defi market but Ethereum comprises only 20% of all cryptocurrency value . How can this be? Simply put, Bitcoin didn’t have the basic building blocks to create Defi, while Ethereum had this capability starting 2016, a 7 year head start. So the exciting news is that starting just last month (December 2022), we now have all the basic building blocks we need to create an entire ecosystem of non-custodial Bitcoin Defi. I won’t get into the tech stack here, but if you are really curious then feel free to reach out to us! For now, we will focus on the giant opportunities for Bitcoin Defi ripe for the picking in 2023. These non-custodial Bitcoin Defi will be able to finally unlock the $264 Bn of Bitcoin just sitting idle in Bitcoin wallets, according to cryptoslate.com.
This is our opportunity to build together an ecosystem of non-custodial Bitcoin use cases, starting with DeFi! This will help the masses and institutions develop true confidence in Bitcoin and hold it even when the market tanks and centralized institutions go under because they know Bitcoin is used for solid non-custodial DeFi use cases.
A solid DeFi global ecosystem with non-custodial Bitcoin DeFi apps creates a golden opportunity for developers. Once this Bitcoin DeFi backbone is in place, it will enable crypto and Web3 to be adopted by the masses because it enables a universe of Web3 dapps: Essential building blocks which ultimately will form the metaverse for everyone. The “metaverse for everyone” is another super exciting topic, but to stay on point, let’s first focus on building the center of that metaverse which is the non-custodial Bitcoin Defi ecosystem and integrate it with our daily lives.
Opportunity = Bitcoin Unicorn Ideas
Below is a short but growing list of Web3 Bitcoin Unicorn Startup ideas. Combined, they form the foundation of the new non-custodial decentralized financial system and from there will grow many more unicorn startup ideas.
This list was created by Abdel Harraz, CEO of DeepLake Finance, the team behind the first working DLC wallet api on Stacks blockchain, and Dan Von Kohorn, a blockchain developer turned venture capitalist. Dan has the rare combination of being a software engineer, serial entrepreneur, and investor, with 20 years in the finance industry through bull & bear cycles and multiple waves of disruptive technology. Dan sold his most recent company to Chainlink, the largest decentralized oracle network in the world, and is now a Managing Partner at Broom Ventures.
Bitcoin Defi: Market Sizes, Timing, and Capital Requirements
a) Size: A score above 5 is a unicorn sized opportunity. And most likely high scoring categories can sustain several unicorn companies that specialize in different market segments of the category. In most cases, as the market matures, scores under 6 could grow to become unicorn level startup ideas.
b) Timing: A score above 5 means this idea is ready to be built in 2023. As the market matures, scores under 6 will become ripe for the picking. A score below 6, in some cases means that it has dependencies on the other riper projects to be built first.
c) Capital: Estimates the amount of capital needed to make this opportunity a success. Lower scores means less capital is needed. Don’t worry about how much capital is needed because if you are able to show traction and proof of concept on any idea that is ranked over 5 in both Size & Timing, there will be many interested investors, including us.
Let me emphasize a few things here.
Firstly, the above list is nowhere near exhaustive, so please chime in if you have any great ideas you would like to build in Bitcoin Defi, Ordinals, or an enabling technology. We have the know-how and the means to support you on your entrepreneurial journey.
Secondly, we have already begun supporting entrepreneurs in the categories of Bitcoin Defi and Ordinals, but we need many, many more entrepreneurs to build all of these great opportunities!
Thirdly, we will support any entrepreneur who is determined to build in any category above. Especially, if the category has a score above five in both market “Size” and “Timing” because these are the Bitcoin unicorn startup ideas ready to be built in 2023!
Why do we believe these are the Bitcoin Defi unicorn ideas for 2023?
Let’s take a look at a few of these idea groups.
Group 1) Derivatives: This group represents many potential unicorn startup ideas. The “Options, perpetuals, and futures” category is ripe for building and contains several unicorn startup ideas. Here’s a quick analysis on why this category alone holds several unicorn level ideas:
- Market Size: Globally derivatives are estimated to have a nominal value of $600 Trillion in 2022 vs $1 Trillion for crypto derivatives. From these numbers we can see that the crypto derivatives market has huge room to grow.
- Biggest opportunity in cryptocurrency derivatives: Bitcoin is the most valuable cryptocurrency, estimated at $400 Billion representing about 40% of the entire market cap of cryptocurrency. Compare this to Ethereum, the second largest cryptocurrency, coming in at 19% market cap of the entire cryptocurrency. Since the size of derivatives are proportional to the notional value of its underlying asset, if you use Bitcoin as the underlying asset to create derivatives, it means your startup ideas would have the biggest growth potential of all cryptocurrencies.
- Blue Ocean: There are proven business models for Defi derivative dapps on Ethereum and other blockchains, but there currently are no Defi Dapps that provide derivatives trading with non-custodial native Bitcoin. What this means is that the Defi models on Ethereum that hold up during this bear market can be adapted to build new non-custodial native Bitcoin Defi Dapps on blockchains that are native to Bitcoin, such as Stacks which uses Bitcoin as its settlement layer. And we can show you how.
Group 2) Credit, Debt, Lending, Borrowing… This group contains a gang of Bitcoin unicorn startup ideas ripe for the building in 2023. And rightly so, because a strong credit and lending ecosystem is one of the foundational building blocks of the traditional financial world and this also holds true for the cryptocurrency Web3 universe!
- Market Size; Globally the credit/debt industry is estimated to be around $300 Trillion in 2022. By comparison, the total TVL for decentralized crypto lending protocols is just around $10 Billion total (reference: https://defillama.com/). This shows that we are at the beginning of the Defi debt and credit growth trend with plenty of room for growth.
- Biggest opportunity in cryptocurrency credit, debt, lending/borrowing: Bitcoin is an ideal asset to use for lending and borrowing because it is the most secure and highly regarded cryptocurrency. And with a market capitalization of around $400 Billion, a non-custodial Bitcoin DeFi lending protocol would only need to activate 2.5% or $10 billion dollars to become larger than all of the current Defi lending protocols combined. This is the super power of building DeFi applications using non-custodial native Bitcoin at its center. And non-custodial Bitcoin DeFi startups in this category could very well become the foundation to solving the bankless problem in most of the world as well as disrupt traditional commercial banking.
- Blue Ocean: Again the exciting thing is that currently there are no non-custodial native Bitcoin Defi lending applications at scale of any kind. At the same time there are Ethereum based Defi lending protocols that are weathering the bear market nicely and so savvy entrepreneurs can modify their Web3 business models to create a lending protocol with non-custodial native Bitcoin at its core.
I could go on with the other groups and categories of non-custodial Bitcoin unicorn startup ideas, but there’s no need because they all follow the same pattern:
- Market Size: All in the hundreds of billions if not trillions of dollars and in some cases more.
- Biggest opportunity in all of Defi: All enjoy the benefit of Bitcoin being the largest, most secure, and widely accepted cryptocurrency globally. Bitcoin represents 40% market value of all of cryptocurrencies, but used only in 0.3% of Defi. Once non-custodial Bitcoin Defi is fully activated, it could represent 90% or more of the total market capitalization of cryptocurrencies.
- Blue Ocean: All enjoy the benefit of either no or almost no other Defi offers non-custodial native Bitcoin. And there are many successful Web3 business models* for entrepreneurs to learn from so they can build quickly in 2023. *Do keep in mind that Web3 Defi enabled by smart contracts is only a few years old, so I would consider all the “successful” cases the version 1.0 of Web3. This means that there is still plenty of room for innovation as we discover more ways to apply Web3 superpowers to Defi using non-custodial native Bitcoin as part of its core offering.
Timing: Why Now?
- Blue Ocean: Entrepreneurs have only recently started looking into this space, so there are very few fishermen in this very vast and big blue ocean.
- Catalyst: This is two fold. Firstly, the FUD in the market from the fall of CeFi companies such as Celcius, BlockFi, FTX, and Genesis and fiat money becoming more unstable are the perfect catalysts that make people aware that they need DeFi solutions as an alternative to centralized finance. Secondly, the massive attention to Bitcoin caused by the Ordinals craze that started the last week of January 2023 has made Bitcoin a thing again so Bitcoin Defi projects will have an easier time marketing not only to its users, but also engaging with investors and hiring talent.
- DeFi is in for 2023: Some DeFi protocols have remained valuable and strong even in this new bear market. These early Defi success cases will pave the road for user and investor confidence and a new wave of startup investments will result around non-custodial native Bitcoin DeFi.
- Easy to Startup: The cost of building startups is much lower in a bear market. And more importantly, building in a bear market entrepreneurs and investors position themselves to capture the next bull run.
- Bitcoin Halving: The next Bitcoin halving is around 2024 April or 15 months away. This is more than enough time for entrepreneurs to build the foundation of their startups now, so that they may capture the value created by the next bull run triggered by the Bitcoin halving.
- Technology: All of the technology building blocks needed for this ecosystem of non-custodial native Bitcoin Defi applications finally became mature in the recent months. Some of the most recent technologies were built by our ecosystem at Stacks and by entrepreneurs trained through our BTC Startup Bootcamp. If you are curious to learn what these new tech tools are, reach out to us. (find our contact info at the end of this article)
All of the above points show us that the stars have aligned in recent months. This means that for the first time ever non-custodial Bitcoin Defi is possible! So let’s capture this opportunity together in 2023! This first wave of opportunity will be taken this year before the next Bitcoin halving in early 2024! With that said, how do you start building the new backbone of the global decentralized financial system around non-custodial Bitcoin DeFi solutions, products, and services?
Empowerment: How do we enable entrepreneurs to build Bitcoin Unicorn Startups?
Since the next Bitcoin halving is in less than 14 months, we feel a sense of urgency. So we have already begun recruiting and training entrepreneurs who understand this once in a lifetime opportunity of building non-custodial Bitcoin DeFi or Ordinals startups. And to help entrepreneurs do this we offer a unique solution tailored for non-custodial Bitcoin DeFi startups. Here’s a small peek into how we enable entrepreneurs to succeed by providing community, mentorship, resources, tools and methods to build the foundation of an investment ready startup:
1. The science and roadmap of turning an idea into an investment ready startup in Web3 DeFi (Note: The same scientific process can be applied to Ordinals startups.)
2. Making sure the problem you want to solve is big enough to turn into a startup
3. Co-founder matching for both marketers and engineers alike
4. Finding the customers that need to use your product the most
5. Tools and services to help you build your non-custodial Bitcoin DeFi startups
6. Web3 DeFi business modeling & aligning platform and user interesting
7. Designing your network effects into your market domination strategy
8. Creating your Tokenomics and incentive mechanisms to propel your Web3 DeFi flywheel
9. Traction & Community building for your BTC Defi or Ordinals startup
10. Mentorship, Coaching
We’ll show you in just 3 months how to turn a Bitcoin Unicorn Idea into an investment ready startup. It is a transformative process that positions you to capture the next bull run that will come with the next Bitcoin halving happening in about 1 year.
I invite you to check us out! www.btcstartuplab.com We have run 24 cohorts which makes us one of the longest running pre-accelerators in the world. With the previous 3 cohorts being 100% Web3 startups. Our next cohort will be tailored and focused on empowering entrepreneurs to build their teams, marketing, and products for non-custodial Bitcoin Defi and Ordinals startups. To learn more, see below for our contact info.
Connect: How to reach us to build non-custodial Bitcoin Unicorn Startups together?
Collaboration is to our mutual benefit because only through a community effort will we be able to build together the non-custodial native Bitcoin DeFi ecosystem that will become the new foundation of the Web3 decentralized financial system of the world. If you understand how essential Defi and Ordinals use cases are in solidifying Bitcoin’s real utility and value, then contact us on Twitter @btc_albert, @btcstartuplab, or check us out at www.btcstartuplab.com to apply to our startup program and turn your Bitcoin Defi or Ordinals idea into an investment ready startup!
Contributors & Bitcoiners: Trevor Owens — Managing Partner at Stacks Ventures, Jacob Brown — Analyst at Stacks Ventures, Kevin Williams — Analyst at Stacks Ventures, Matt — Tokenomics Resident at Stacks, Xan Ditkoff — Founder Daemon Technologies, Tycho Onnasch — General Manager at Trust Machines, Rick Bartelink — Social Strategist, Tom Giles — Serial Entrepreneur