Author: RunesCC
Side Protocol, an expansion protocol of the Bitcoin ecosystem, has released white paper v1, which will soon introduce Bitcoin’s first on-chain bank, and launch a full range of decentralized financial services centered around native lending.
What is Side?
According to the white paper, Side Protocol is the first decentralized banking system tailored for Bitcoin, with native lending business as the core, providing diversified financial services. Side uses native Bitcoin technology to implement non-custodial Bitcoin liquidity lending protocols, and promotes the development of more ecological financial products through sidechain infrastructure.
What is Side’s vision?
According to a previous interview with Dave Hrycyszyn, co-founder of Side Protocol: “If Bitcoin’s goal is to replace fiat currency and gold, then Side Protocol’s vision is to play the role of a traditional bank in the Bitcoin world.”
In the traditional financial system, the most important institution is the bank, and what is the core business of the bank? It is lending, and other financial services revolve around lending. Even in Web3, the largest DeFi protocols (such as Aave) are mainly related to lending.
As Dave said, if Bitcoin is the equivalent of electronic cash or gold, then a huge lending market around Bitcoin will inevitably exist.
The problem in the industry at present is that there is no protocol that provides native lending services for Bitcoin like banks, and all Bitcoin-related products involve users giving up control of their assets, such as WBTC or cross-chain bridges. Even many of the current Bitcoin second-layer protocols are based on centralized cross-chain bridge solutions.
Side Protocol hopes to release Bitcoin's liquidity and capital efficiency more safely through Bitcoin's native technology, making Bitcoin lending protocols based on liquidity pools possible.
More importantly, Side Protocol is not only positioned as a lending protocol, it also provides developers with the Bitcoin expansion infrastructure Side Chain and a wealth of ecological development tools to support the development of various application products. If the project develops smoothly, it is expected that a large number of ecological projects will emerge in the future.
Side's main protocols and applications
Side Protocol's core product, Side Finance, is a Bitcoin-native liquidity lending protocol (not P2P), and Discreet Log Contracts (DLCs) are the core of Side Finance's infrastructure, a Bitcoin smart contract framework based on oracles. DLC allows conditional payments to be executed based on off-chain events without the need for third-party custody of funds. DLC uses cryptographic techniques such as multi-signature transactions, hashed time lock contracts (HTLCs), Schnorr signatures, and Adaptor signatures to ensure user rights while achieving security and non-custodial nature.
During the lending process, DLC locks the collateral through the initial 2-of-2 multi-signature, generates a pre-signed transaction (CETs) based on the event results, and when the oracle reveals the liquidation price, the DCA (Distributed Collateral Agent, a component that holds the 2-of-2 multi-signature together with the user) can spend the UTXO to conduct a liquidation discount auction for the collateral, allowing external bidders to repay the liquidity pool. Therefore, Side is able to achieve non-custodial lending when BTC is used as collateral, that is, except for the liquidation scenario, any other misappropriation of collateral requires the consent of the user himself.
It is worth mentioning that before Side Finance was proposed, most DLC-based Bitcoin loans were peer-to-peer, which means that borrowers and sellers need to be matched, which does not conform to the common automated operation mode of DeFi. Pool-based lending protocols will unlock more DeFi composability.
In addition, Side Chain is an important component in the Side Protocol ecosystem and the core of Side Finance liquidity aggregation.
Side Chain is based on the Cosmos underlying development and uses the high-performance CometBFT consensus engine, which supports fast transaction confirmation and high throughput, and is very suitable for application scenarios with high requirements for confirmation speed. Smart contracts run in the Wasm virtual machine and are written in Rust, with excellent performance and security. Rust's memory security and Wasm's compatibility greatly reduce the risks of reentrancy attacks, which are common in Ethereum smart contracts.
In terms of user experience, Side Chain is fully compatible with Bitcoin addresses: users can use native formats such as Taproot and Native Segwit without changing the address format. It also supports direct signature operations from Bitcoin wallets (such as Unisat and OKX), bringing better User experience. Compared to EVM-based Bitcoin scaling solutions on the market (using 0x addresses and EVM wallets), Side Chain provides significant convenience.
In addition, Side Chain also has a built-in cross-chain bridge module Side Bridge, which provides cross-chain services for assets such as BTC and Runes for users with higher trust preferences. Combined with other DeFi services such as the native DEX provided by Side Chain, it lays the foundation for the on-chain DeFi market after the future outbreak of the Rune meme.
Finally, in the project plan, Side Chain will play the role of Bitcoin's modular settlement layer in the future, supporting one-click deployment of various Rollups, and connecting to other blockchain ecosystems through interoperable protocols such as the IBC protocol, providing rich asset liquidity, including native USDC and USDT and other assets.
At the application level, the team has developed ecological tools such as Side Station (browser) and Side Wallet (Bitcoin and Side Chain dual-chain wallet) to provide users with a smooth product interaction experience.
Chainspace was built by gang members
The team's background is quite impressive. The core members come from well-known Web2 and Web3 companies such as Meta, Binance, and Google. Co-founders Dave Hrycyszyn and Shane Qiu have deep professional backgrounds in distributed systems, blockchain scalability, token economic design, and DeFi products.
The two have successfully founded, developed and exited many companies, including Chainspace and Nym. Chainspace was acquired by Facebook and became the Libra project. Nym received more than $50 million in financing from a16z, Polychain, Binance and other institutions during its development. In the financing that has been made public so far, it has received support from institutions such as Hashkey and Symbolic Capital.
Genesis Airdrop
In the Bitcoin ecosystem, there are only a handful of teams focusing on native application development, and Side Protocol is the first project to propose a liquidity lending protocol. Its goal is to become similar to Aave in the Ethereum ecosystem in the Bitcoin ecosystem, and even to surpass it.
The team is also the OG developer of the Cosmos faction, and has a thorough understanding of the underlying technology and cryptographic engineering of the blockchain. In the future, it is expected to not only shine in the revenue of the lending protocol, but also flourish in ecological applications.
Side Protocol has completed multiple rounds of testnets, and the mainnet is expected to be launched soon. Finally, it is strongly recommended to follow the official X account. The Genesis Airdrop is about to start, bringing rich benefits to the majority of users in the Bitcoin ecosystem.
Official X Account
https://x.com/SideProtocol
Disclaimer: This article is for reference only and should not be used as legal, tax, investment, financial or any other advice, and does not represent the position of RunesCC.
