BTC ecology is booming, taking stock of new opportunities in DeFi.

Bitcoin ecosystem rapidly expanding, capitalizing on emerging DeFi opportunities.

The high-performance of the BTC ecosystem this year can be described as wave after wave, with various native and innovative protocols emerging one after another. The ecosystem around protocols such as Ordinals, Atomicals, Stacks, and RGB has quickly become rich and diverse, with many promising projects worth sharing. What’s more, the recent strong performance of Bitcoin has taken the market by storm and attracted more capital inflows. BRC-20 and BTC ecosystem tokens have experienced a significant increase in value, presenting many investment opportunities. In this issue, we will analyze the pros and cons of entering the BTC ecosystem market at this time and take stock of promising DeFi projects.

Image source: Coinmarketcap November 21, 2023

Bitcoin Ecosystem Pros and Cons Analysis

Advantages:

1. Hot Market Opportunity:

With Bitcoin’s price rising from $25,000 to $37,000 in just over a month, a gain of over 40%, it has attracted market attention in the short term. Whether it’s professional investment institutions, individual investors, or speculators, there is a large amount of capital entering the BTC ecosystem market.

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2. Hot Money and New Market Participants:

The attention and discussions generated by the continuous rise of BTC’s backbone price have brought a large amount of capital into BTC ecosystem projects. This capital not only helps drive the development of existing projects, but also provides much-needed nourishment for projects that are still in the incubation stage. Moreover, after half a year of market testing for concepts like Ordinals and BRC20, the surge in ecosystem tokens has attracted more newcomers who previously had a wait-and-see attitude to enter the market with confidence. The growth of funds and players allows for a healthy cycle of operation in the entire BTC ecosystem, making it more sustainable.

3. Upgrades to Existing Protocols and Emergence of New Protocols:

The BTC ecosystem was activated by innovations such as the Ordinals protocol and BRC20 tokens at the beginning of the year. Subsequently, ORC20, Atomicals, Stacks, Lightning Network, RGB, Taproot, BRC100, BRC420, Rootstock, BEVM, and other BTC ecosystem protocols have contributed to the development of the ecosystem. This demonstrates the vitality of the ecosystem, which is in an active development stage. With multidimensional forces injected into the Bitcoin chain this time, it can be foreseen that more new protocols will emerge, and planned protocols will be smoothly implemented. Tokens can be successfully issued, DeFi liquidity can become more abundant and stable, trading pairs can become more diverse, GameFi can attract more players, a wider variety of NFTs can emerge as hot items, and infrastructure can continue to be improved, and so on.

4. Small Investment, Big Returns Opportunity

Firstly, the barrier to entry for investment is low, which is common in the BTC ecosystem, as many new strategies and gameplays are emerging. For example, players can easily experience the latest gameplay, such as inscription carving, and participate as an investment activity. For example, players who participate in minting SATS tokens have seen the price increase by 10 times and even more than 15 times at its highest. Compared to participating in projects in established ecosystems, these high-profit opportunities are relatively rare. The BTC ecosystem is currently in its early stages of development, with a constant stream of new protocols and gameplays, bringing excitement and multiple opportunities to the coin circle once again.

Risk Analysis:

1. In the early stages of ecosystem development, the basic infrastructure is not well-established, making hardware deployment and basic operations difficult and costly. Most transactions still require offline OTC trading;

2. Indirect security issues, as there is a risk of fraudulent schemes with offline OTC trading;

3. Poor user experience, as most new protocols require a substantial amount of time for orders to be filled, resulting in lengthy transaction delays;

4. When will the hype and market frenzy subside? Once BTC prices fall, the impact on the ecosystem and bubble should be carefully considered.

Highlights of Projects

1. ALEX

ALEX is an open-source Bitcoin DeFi platform based on the Stacks ecosystem and is one of the most important protocols on Stacks. As of the date of this writing, the TVL on Stacks has reached 18M, with ALEX’s TVL accounting for 14M. ALEX provides products including Credit launchLianGuaid, DEX, order books, and futures contracts. It’s like Uniswap on the BTC chain, allowing users to swap, stake, borrow, and mine liquidity in a fully decentralized manner on the Bitcoin chain.

As a DeFi platform, ALEX also offers lending with no liquidation risk, providing users with a secure way to lock their assets in contracts for earning interest or performing other financial operations without worrying about liquidation risks associated with market fluctuations.

In the future, as the Stacks platform develops and Bitcoin technology iterates, more and more projects will be built on Stacks. ALEX’s LaunchLianGuaid service provides a launchpad for these projects, which is a very forward-looking feature and will greatly enhance the sustainability of ALEX’s development.

ALEX has launched its own governance token, $ALEX, with a current market value of 36M USD and a circulating supply of 600 million tokens. This action also provides users with the opportunity to participate in the platform and enjoy potential future value appreciation. The project raised 5.8 million USD in November 2021 and an additional 2.5 million USD in March 2023, totaling 8.3 million USD in funding.

2. Arkadiko

Protocol Arkadiko is a decentralized liquidity protocol based on Stacks. The focus of this project is to provide decentralized stablecoins for every ecosystem, and Arkadiko is the stablecoin project for the Bitcoin Stacks ecosystem.

Through Arkadiko, users can use their native Stacks token, $STX, as collateral to mint their own stablecoin, USDA. The project also supports Swap and lending. USDA can be used within the Arkadiko protocol to repay loans on the Farm, and the Farm’s profits are generated through the Stacks consensus mechanism called Proof of Transfer (POX).

3. Sovryn

Sovryn is the first non-custodial smart contract application for Bitcoin lending, borrowing, and margin trading on the Rootstock network. Sovryn is not a traditional Ethereum DeFi model, as it allows users to borrow, lend, and utilize the inherent assets of Bitcoin without sacrificing custody of their keys. Additionally, users have direct governance rights under the Bitocracy system protocol. Sovryn also introduces EVM-compatible Ethereum-style smart contracts to Bitcoin, which is a significant innovation as developers believe Bitcoin is the center of the cryptocurrency world, with more users, more liquidity, and institutional usage.

Sovryn offers users the following specific services:

– Lending Pool: Users can earn interest by lending their tokens to borrowers and margin traders.

– Margin Trading: Users can create long and short trades with leverage of up to 5x.

– Spot Exchange: The platform acts as an Automated Market Maker (AMM) and allows for instant trades between different tokens at low cost and low slippage.

– Fast BTC Relay: Users can utilize Bitcoin instantly with smart contracts and other decentralized products using any BTC wallet.

The project has a token called SOV, with a current market value of $11 million and a circulating supply of 37 million. The project raised $2.1 million in 2020, followed by three funding rounds in 2021 totaling $2.5 million, $10 million, and $9 million respectively. In 2022, they raised $5.4 million, bringing the total funding to $29 million.

4. MoneyOnChain

MoneyOnChain is a decentralized, Bitcoin-backed stablecoin protocol built on RSK. With the support of Bitcoin, this protocol consists of four tokens and provides several use cases for Bitcoin holders, including leveraged Bitcoin operations.

– The first token is Dollar on Chain (DOC), which is a stablecoin pegged to the US dollar. Users can send and receive any amount of DOC quickly.

– The second token is BitPRO (BPRO), designed specifically for Bitcoin holders to generate passive income from their tokens. BPRO holders have several sources of income: they receive a certain percentage of fees charged by the platform, interest rates, and a small leverage of Bitcoin prices. BPRO absorbs unwanted Bitcoin volatility from DOC and sells it to BTC2X.

– The third token is BTC2X, which is a token prepared for traders who want to double their Bitcoin price. Traders pay interest for these long positions, which goes to BitPro. BitPro also earns a certain percentage of platform fees and receives subsidies in the form of MOC tokens.

– Money On Chain (MoC Token) is the fourth token. It aims to manage decentralized autonomous organizations (DAOs) and can also be used to pay platform fees, which are lower than BTC. MoC holders will also be able to receive rewards for providing services to the platform. MoC token holders will vote on contract modifications and new features. At a fundamental level, the DAO decides whether to update the smart contract code.

– BEVM is a BTC Layer2 compatible with EVM. Its core goal is to expand Bitcoin’s smart contract scenarios, allowing BTC to break free from the limitations of the Bitcoin blockchain, which is non-Turing complete and does not support smart contracts. BTC can be used as native GAS for decentralized applications on the BEVM Layer2.

– The design concept of BEVM is to directly utilize the native Bitcoin technology without changing the existing technical framework of Bitcoin to achieve decentralized BTC Layer2. The specific approach is Musig2 aggregation multi-signature technology + Bitcoin lightweight node, which achieves BTC decentralized cross-chain to BTC Layer2. Since Layer2 is fully compatible with EVM, it becomes easy to enable BTC to implement various decentralized applications.

– As BEVM is an EVM-compatible Layer2, all decentralized applications that can be deployed on ETH EVM, such as DeFi, GameFi, SocialFi, NFTFi, can also be deployed on BEVM. The only difference is that ETH Layer2 uses ETH as GAS, while BTC Layer2 uses BTC as GAS. Each transaction on BTC Layer2 will be sequentially packed into BTC Layer1 in a 10:1 ratio, allowing BTC Layer2 to share the security of BTC Layer1. In the long run, this BTC Layer2 solution aims to enhance scalability, reduce costs, and foster a more secure and decentralized financial ecosystem, which is of great significance for the long-term development of Bitcoin.

– HOTFI (short for “Highly Optimized Thermal Financial Instrument”) is a customizable lending platform that offers a high level of flexibility and security. It is designed to provide a seamless and efficient experience for users to lend and borrow various digital assets. With HOTFI, users can earn interest on their deposited assets or borrow assets at competitive rates. The platform also offers advanced risk management tools and supports a wide range of digital assets. HOTFI aims to revolutionize the lending industry by providing innovative features and maintaining a high level of security for users’ assets.

Note: The translation provided is a general overview and may not capture all the nuances and details of the original text.

7. Orders

HOTFI is a liquidity solution built on the ordinal protocol and EVM protocol, which is based on the BRC20 standard token. It will introduce the LaunchLianGuaid function to promote the launch of high-quality projects and is committed to providing continuous development momentum for the DeFi ecosystem within the ordinal.

HOTFI provides the following functions for ordinal users:

– Decentralized peer-to-peer matching trading of BRC20 standard tokens;

– Real-time Swap function;

– Allowing users to provide liquidity through AMM and earn passive income;

– Stake section, where users can deposit their BRC20 tokens and receive farming rewards;

– Community support and open DAO governance, building the DEFI ecosystem together with users.

HOTFI’s DeFi functional services almost cover the common needs of users. Based on this, through more community participation and DAO governance mechanisms, as well as attention and introduction to future high-quality projects, it will gradually accumulate strength for the Ordi ecosystem. With the continuous development and growth of the BTC ecosystem and BRC20 tokens in the future, HOTFI is expected to become an important part of the ecosystem.

Exchange Orders is the first DEX fully operated on the Bitcoin network, and its order book operates entirely on the Bitcoin network. Orders aims to witness a trustless order book DEX, liquidity pool, exchange DEX, and LaunchLianGuaid. It fully utilizes the potential of Bitcoin Layer 1, supported by the ordinal protocol, PSBT technology, Bitcoin script, and the revolutionary Nostr protocol.

Highlights of Orders:

– Orders cleverly learn from the NFT gameplay of Blur and present a blockchain-based DEX system for currently complex and difficult-to-trade BRC20 tokens;

– It combines liquidity mining, order book, and buy/sell mechanisms (Ask and Bid);

– Simple and user-friendly operation interface, very similar to Blur gameplay, easy to use;

– The project token RDEX has practical application value and also has excellent liquidity as a trading pair;

– Deep-rooted professional background team, technical capabilities can be verified from the whitepaper.

Currently, Orders has released the Beta version and is already available for use. It has practical landing scenarios and usage needs. The whitepaper demonstrates the team’s professional capabilities and gives a positive outlook on the project’s development. However, as the first DEX on the Bitcoin network, this project is also a rising star, undoubtedly with many mechanisms to be optimized in the future. Considering the potential risks such as future crashes based on token distribution mechanisms, it is recommended to be interested, participate, and consider investing in RDEX tokens after understanding.

MultiBit is the first ever two-way bridge designed for the cross-network transfer of BRC20 and ERC20 tokens. Its most notable advantage is the liquidity of BRC20 tokens, breaking down barriers between different blockchain networks. This innovative design also improves token accessibility, allowing users to transfer between different networks more conveniently and flexibly.

MultiBit simplifies the process of token transfer between Bitcoin BRC20 and EVM networks. First, users transfer BRC20 tokens to a dedicated BRC20 address. Once confirmed, these tokens are ready to be minted on the EVM network. But what makes MultiBit unique is its dual bridge functionality, seamlessly enabling transfers back to Bitcoin from the EVM network.

There is no doubt that MultiBit breaks the barriers between BRC20 and the outside world, greatly driving the development of the BTC ecosystem, which is foreseeable and commendable. In addition, MultiBit emphasizes the promotion of liquidity and accessibility of BRC and ERC tokens in a secure and user-friendly manner, providing users with a trusted and confident environment. The realization and guarantee of this point will empower MultiBit to further development, as security and convenience are essential qualities for a cross-chain project to go further and thrive.

9. Bitlight Labs (Cosminmart)

Bitlight Labs has developed infrastructure based on the RGB protocol and deployed multiple applications on the Lightning Network. Among these are Bitswap and the Bitlight Wallet, which provide users with more transaction and interaction options, achieving faster and maximized transactions.

Its features include the following:

– Ability to manage smart contract systems with rich states;

– Use of Peter Todd’s client verification example: data is held by “national owners” (e.g. asset owners), rather than publicly recognized holders;

– Graph operations on top of Bitcoin transactions, can come from lightning channels on the Bitcoin blockchain;

– Can write scripts using the Simplicity script language verified by Turing-complete formal semantics from Blockstream.

Lightning Labs’ open-source, secure, and scalable Lightning system allows users to send and receive funds more efficiently than ever before. Lightning Labs also offers a range of verifiable, non-custodial financial services based on the Lightning Network.

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