Original title: ""CN"Why should we invest in BitSmiley?"
Original source: Laobai, ABCDE
BitSmiley is the MakerDAO+Compound of the Bitcoin ecosystem, providing comprehensive solutions for Bitcoin Defi, filling the most missing "stable currency" + "lending" infrastructure in the current Bitcoin ecosystem.
In addition to providing BRC20-compatible bitRC20 format stablecoins in the form of BTC over-collateralization, BitSmiley also provides peer-to-peer lending based on BRC20, as well as insurance and CDS derivatives built on lending, and has established partnerships with a number of BTC Layer2 , providing stablecoins and Defi ecological products.
1. The hot BTC ecosystem and the missing infrastructure
Recently, the Bitcoin inscription ecosystem represented by Ordi has obviously entered a hot period. The Gas on the chain is often hit to more than 300 by "some unknown" inscriptions, and a transaction costs dozens of US dollars, reaching the congestion level during the ETH Defi Summer that year.
However, unlike the Defi Summer in 2020, the ETH Defi ecosystem was led by relatively mature Defi infrastructure at that time. MakerDAO in the stablecoin track, Compound/AAVE in lending, and Uniswap in Dex were all established in 2018-2019. In addition to asset issuance, the current BTC ecosystem is still in a "wild period". In addition to Unisat providing basic services such as wallets and markets for BRC20 users, traditional Defi components such as Dex, lending, and stablecoins are basically missing, not to mention advanced gameplay such as derivatives. Other types of XXRC20 protocols are still exploring and building the infrastructure of wallets and trading markets. In addition, just as the major Alt Layer1+Layer2 carried the value overflow caused by the high gas of ETH during the Defi Summer period, the concept of BTC Layer2 has entered people's field of vision. We need a faster and cheaper Layer2+complete Defi infrastructure in the BTC ecosystem.
2. BitUSD - Overcollateralized bitRC20 stablecoin based on BTC
The BitUSD stablecoin is the core component of BitSmiley. It was first launched on the BTC Layer2 that BitSmiley first cooperated with, and then gradually expanded to other BTC Layer2
The overall over-collateralization mechanism of BitUSD is similar to that of MakerDAO. Those who are familiar with Defi will definitely be familiar with it. Here is a brief description
At the minting level, users pledge BTC (either using Wrap BTC on the cooperative Layer2 or using BitSmiley’s own official bridge to bridge BTC) to BitSmileyDAO, and then mint out bitUSD
Redemption is a reverse mechanism
The liquidation also uses MakerDAO's latest liquidation 2.0 mechanism, which uses the Dutch auction model. When the LTV (Loan to Vaule) is lower than the set threshold, the liquidation process is initiated.
Two points worth emphasizing are as follows:
One is the last leg of liquidation - in the design of MakerDAO, when insolvency (bad debt) occurs due to various reasons such as drastic market fluctuations, Maker token holders will become the last guardians, and MakerDAO will issue additional MKR to repay bad debts, which is equivalent to diluting the interests of MKR holders in disguise. BitSmiley, on the other hand, uses the future platform revenue as debt for English auction. In the future, the platform will give priority to repaying creditors after deducting basic operating expenses.
Second, the format of BitUSD will appear in the form of a bitRC20 inscription that is compatible with BRC20.
Because the BRC20 format inscription requires a total amount to be determined before deployment, which is not suitable for stablecoins whose quantity is dynamically adjusted at any time, BitSmiley chose to use a new inscription format - bitRC20, which is both backward compatible with BRC20 and supports access control and upgrades. With the version number and the Burn operation, the flexibility of the entire "stablecoin inscription" meets the needs of the system.
3. Subsequent Defi products - lending, insurance, CDS
In addition to the core stablecoin, BitSmiley has also tailored Defi products that are suitable for the technical characteristics of BTC. Based on peer-to-peer lending supported by its own stablecoin, it superimposes advanced derivatives such as insurance and CDS, giving BTC Defi a new way to play.
1 Peer-to-peer native lending based on bitRC20 -
As we all know, it is difficult to implement peer-to-peer lending like AAVE or Compound based on BTC because it does not support smart contracts.
(However, through multi-signature and based on the existing BTC OPcode, native peer-to-peer lending based on BTC can be fully realized. For example, A wants to borrow bitRC20 by pledging BTC, and B is willing to lend bitRC20 and set interest rates and other conditions. The two are matched under BitSmiley’s matching mechanism and the transaction is completed through atomic swap technology.)
In the future, the team also plans to launch the functions of loan splitting and order merging, aggregate and match similar peer-to-peer orders, and thus "simulate" a lending model similar to "group-to-group", greatly improving capital utilization and TVL, and catching up with the capital efficiency of the peer-to-peer pool on ETH.
·Insurance -
There is a more thorny problem with native lending based on BTC, which is the liquidation mechanism
On the ETH side, like Compound or AAVE, liquidation is supported by oracles. However, on the BTC side, compared with the block time of ETH12S, the 10-minute BTC block time makes it difficult for liquidation to replicate the ETH liquidation model. The liquidation process triggered in the first minute may be invalid in the 10th minute. Based on this, BitBitSmiley designed an alternative solution, namely, loan insurance without liquidation. When the price of the collateral BTC falls, the lender has the right to "force" the purchase of insurance
Here we introduce an insurance seller Charlie (Alice and Bob are the borrower and lender)
The insurance pricing model uses the extreme value theory and T-Copula, which are common in the insurance industry. The team has extremely rich experience in this regard. Team members have a solid foundation in capital pricing theory and financial mathematics, and have participated in application projects for the pricing of traditional financial derivatives and DeFi derivatives. At the same time, the platform's original "Black Box Purchase Mechanism" will also increase insurance pricing efficiency and transaction volume.
·CDS -
Those who are familiar with the 2008 financial crisis must be familiar with advanced derivatives such as CDS (credit default swaps). Of course, the fault is not the derivative tool CDS, but the fact that houses were sold to too many buyers who were not qualified to buy houses.
CDS (credit default swap) plays an important role in traditional financial derivatives. Its characteristics can help investors conduct more efficient risk management, credit assessment, arbitrage transactions, and increase market liquidity and pricing efficiency. However, the reason why advanced derivatives such as CDS have not appeared in the ETH DeFi ecosystem is that the ETH lending ecosystem has always been a peer-to-pool model, while CDS is built on a peer-to-peer model. BitBitSmiley's native BTC peer-to-peer lending is more suitable for the development of derivatives such as CDS. (The above two paragraphs can be replaced by this paragraph)
CDS can package multiple loans with similar risks and characteristics to form a CDS asset portfolio. In this way, CDS based on peer-to-peer loans can not only ensure the safety of the guarantor's funds, but also have the speculative attributes of derivatives.
In summary, BitSmiley fills in the missing link of "inscription-shaped stablecoin" in the current BTC ecosystem, and opens a new door for BTC Defi through lending, insurance, CDS derivatives and other solutions. It is bound to become an indispensable key component in the BTC ecosystem.
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