Over the past year, the blockchain known as Bitcoin has seen the introduction of new features like Ordinals, Runes, and BRC-20 tokens. Despite a market correction, developers remain optimistic about the growing ecosystem.
Ryan Chow, co-founder of SolvBTC, discussed two main challenges hindering the development of BTCFi. These challenges include the lack of base yield and the fragmentation of liquidity, which have resulted in a significant amount of idle Bitcoin unable to participate in the DeFi ecosystem.
In response, SolvBTC is working on developing Liquid Yield Tokens that will enable Bitcoin holders to deposit their assets and earn income from DeFi, similar to liquid staking tokens on the Ethereum blockchain. Since its launch earlier this year, the project has attracted 292,000 users and locked in a total value of $1.3 billion.
Chow used the example of SolvBTC Ethena Vault to explain how Solv brings stable base yield and earning opportunities to Bitcoin users. The Vault utilizes Bitcoin as collateral to borrow stablecoins, which are then used to mint and stake Ethena’s USDe. This process captures yield from funding rates earned from delta hedging derivatives positions, allowing users to earn a competitive APY of approximately 15% net. Additionally, Solv and Ethena provide bonus token incentives for the Vault, potentially increasing the overall yield even further. Solv is also working on developing DeFi integrations for SolvBTC.ena, which will allow users to explore additional yield opportunities across multiple networks.
SolvBTC is set to launch on the Ethereum mainnet, enabling users to tap into wrapped Bitcoin (wBTC) liquidity and generate yields directly on the Ethereum DeFi ecosystem.
Another Bitcoin yield protocol, Master Yield Market, has recently been launched. It consolidates all yield-bearing assets within the Bitcoin ecosystem, allowing users to purchase Bitcoin yield assets directly from blockchain-native DeFi protocols using Tether, Ethereum, and wrapped Bitcoin.
Meanwhile, some developers are focused on increasing the underlying capacity of the Bitcoin blockchain to enhance its DeFi performance. Sunny Fung, core developer of MetaID, stated that Bitcoin cannot solve the problem of congestion and high fees in the near future. However, layer solutions built on top of Bitcoin can address this issue by bundling individual transactions into a single application, saving time and effort.
MetaID introduces the concepts of Unified UTXO Chain and Unified Bitcoin Address, which effectively solve Bitcoin’s congestion problem and unlock the potential of Layer 2 networks that are compatible with Bitcoin. Fung believes that as long as it is a Bitcoin sidechain, Layer-2, or even BCH that is compatible with Bitcoin, MetaID can support it seamlessly.
Fung also highlighted that despite being designed early and lacking smart contracts, Bitcoin remains the best platform for Web3 applications due to its highest consensus, decentralization, security, and on-chain data storage capabilities through satoshis.
In conclusion, the Bitcoin ecosystem continues to evolve with the introduction of new features and protocols aiming to address challenges and improve the performance of DeFi on the blockchain.