Decentralized finance (defi) has created several protocols that allow crypto-assets to collect revenue.A decade and a half ago, a bitcoin exchange called Bitcoinica introduced the first interest collection system for bitcoin deposits. Although Bitcoin was the first to test the waters, after a series of hacks, approximately 62,101 bitcoins were stolen from the exchange and interest-bearing crypto accounts were not returned for up to eight years.
In 2012, Bitcoin interest bearing accounts were introduced by Bitcoinica
These days, interest-bearing accounts and yield-collecting Diffie protocols are all the rage in the cryptocurrency world, but most people don’t know that the idea originated more than a decade ago. In the year In mid-February 2012, the now-defunct bitcoin exchange BitCoica came up with an idea to collect bitcoin deposits to collect interest. The idea came from 18-year-old Bitcoin enthusiast Zhou Tong, who founded the exchange a year ago. BitTicaka saw $71.56 million worth of 3,724.12 BTC traded on its trading platform in the first 24 hours today.
In September 2011, Bitcoinica was the second largest bitcoin exchange by volume behind Mt Gox. Founder of Bittika February 13, 2012 “We are pleased to announce the start of public testing of our interest system” We are the first website to offer interest on Bitcoin deposits. This post is intended to explain how the system works – if you deposit $10,000 with us and the interest rate is always 4.17, you will earn $4.17 daily or $1,644 annually (with compound interest).
Today’s escrow protocols are largely derived from the world’s decentralized finance (defi), which is completely separate from Bitcoinica’s escrow account offering. Bitcoinica’s concept is similar to what other centralized crypto exchanges like Coinbase, Crypto.com and many others offer today, because Bitcoinica was a centralized Bitcoin trading platform.
Bitcoin is similar to Celsius, in that it offers interest-bearing payments but eventually runs into financial trouble. Bitcoinica’s interest accounts are calculated hourly, and payments are distributed at the end of each day. “Bitcoinica has been doing well lately. [five] months, and we are the fastest growing bitcoin business ever,” Zhou Tong wrote at the time.
The following month, Bitcoinica was hacked after accounts holding interest in Bitcoinica, and 43,554 bitcoins worth $837.17 million were lost using today’s exchange rates. More than a month later, on May 11, 2012, Bitcoinica was hacked again with the loss of 18,547 bitcoins, worth an estimated $356.50 million today.
It has been 8 years since Crypto Yields broke Bitcoin.
Interest-bearing accounts through Bitcoinica haven’t seen much activity since the controversy surrounding Bitcoinica founder Zhou Tong and the hacks. Bitcoinica was eventually taken offline and in August 2012 the company went into liquidation. Interestingly, the day Zhu Tong announced the concept of a BTC interest-bearing account, one of the first comments asked the founder to reassure the community that their funds are safe.
“Calm our fears and tell us why bittika won’t be hacked and how our money won’t be stolen out of thin air?” The person asked the founder of Bitcoinica. While Zhu Tong promised to keep the exchange secure, the two breaches of the trading platform were considered some of the most controversial data breaches in crypto history, in addition to the scandals surrounding Mt Gox.
It took more than eight years for crypto interest-bearing accounts to finally catch on in the digital currency industry. Additionally, with Diffie protocols, products can access crypto assets in a private and unregulated manner without holding them on a centralized exchange.
However, like Bitcoinica, interest-bearing crypto platforms can fail, and Celsius is one of the most bankrupt lenders in recent times. While Celsius and BitTitka are decentralized, the DeFi platforms can also be embedded in the same Terra blockchain ecosystem.
When UST was removed from the $1 equation, DeFi users had to connect to the banking process afterwards using the lender’s application anchor protocol. Other Defi apps have been hacked or seen as carpet pulled, and Defi users looking to earn interest have lost all their money.
What do you think of the first bitcoin interest accounts offered by Bitcoinica a decade ago? Let us know what you think about this in the comments section below.
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