Author: Haotian
Seeing that @bitsmiley_labs has raised another $10M in new funding to accelerate the vision of launching the Bitcoin-backed stablecoin bitUSD. So, what is this "Smiley" BTCFi stablecoin project going to do? What is its core technical framework? Why is the BTCFi market so unanimously popular? Let me share my thoughts:
1) The Ethereum DeFi ecosystem originated from the DAI algorithmic stablecoin of MakerDAO, and was ultimately fermented by the governance incentives of the Compound lending platform, igniting a wave of DeFi summer. bitSmiley #SMILE, in order to seize the first-mover advantage in the BTCFi market, has combined DeFi infrastructure such as MakerDAO (DAI) and Compound (Lending), and launched three major components:
1. bitUSD: An over-collateralized stablecoin protocol, benchmarked against DAI, where users can deposit BTC into the bitSmiley Treasury to mint bitUSD; It adopts the bitRC20 standard to maintain high transparency, and collaborates with ZetaChain to provide a native cross-chain bridge, ensuring circulation in the entire chain environment;
2. bitLending: A native trustless lending protocol, using atomic swap technology to achieve transaction matching in a peer-to-peer model, while also introducing an insurance system to optimize the shortcomings of the traditional lending liquidation process;
3. Credit Default Swaps (CDS): An innovative derivatives protocol that integrates NFT-based CDS slicing, and uses an aggregated bidding method to improve the efficiency and fairness of the CDS market.
2) How the specific product components work needs further experience to evaluate. To give you a glimpse, I'll mainly talk about two core technical points:
1. Native cross-chain collaboration with @zetablockchain: ZetaChain is a POS blockchain built on the Cosmos SDK and Tendermint PBFT consensus engine, which embeds specific chains into the entire chain environment to provide a series of interoperability operations. Since Bitcoin lacks smart contracts, it can deploy light nodes and perform multi-party signature operations based on the ECDSA signature algorithm, and ZetaChain only needs to effectively track and manage the UTXO on the Bitcoin mainnet to realize secure cross-chain.
In addition, since ZetaChain is an Ominichain smart contract oriented towards the entire chain environment, after solving the cross-chain problem between it and the Bitcoin network, it can theoretically leverage its full-chain circulation environment to achieve transparent management of full-chain assets.
2. bitRC20 standard, which looks like the BRC20 token standard, that's right, bitUSD has borrowed the token paradigm of being issued on the Bitcoin mainnet. When users want to over-collateralize BTC, they can first bridge the assets to the bitSmiley official bridge. The bitSmiley layer2 chain will confirm the user's collateral assets, perform consensus verification, and then transmit the information to mint bitUSD to the Bitcoin mainnet.
Since traditional BRC20 token minting always requires pre-setting the total supply, bitRC20 has added Mint and Burn operations for the stablecoin scenario to meet the need for dynamic supply adjustment. This is the meaning of the indexer, and this modified token issuance method is more easily applied and empowered by the project.
In summary, it's not hard to see why mainstream capital is rushing into the BTCFi market, and DeFi infrastructure providers like bitSmiley are also scrambling to layout the market.
On the one hand, everyone is eyeing the huge asset growth potential of the BTCFi market. Calculating from the current $1.6 billion in BTC network total locked value, it only accounts for 0.14% of the total BTC market cap. Compared to the asset lock-up rates of networks like ETH and Solana, there is still 50-100 times of growth potential, and its funding sources are not limited to on-chain, but also have the huge off-chain demand from BTC+ETH ETF funds;
On the other hand, I think that after securing the strategic positioning of core BTC asset-based stablecoins, lending, and derivatives applications, their application scenarios will radiate across the entire chain environment, and they will be able to revitalize and lead innovation in the DeFi model and users of the entire chain environment.
