Written by: Haotian
I see that @bitsmiley_labs has secured $10M in new funding to accelerate its vision of launching the new Bitcoin stablecoin bitUSD. So, what exactly does this BTCFi stablecoin project, affectionately called 'Smiley', aim to do? What is its core technical framework? Why is the BTCFi market so hotly pursued by the market? Next, I will share my views:
1) The Ethereum DeFi ecosystem originated from the MakerDAO's DAI algorithmic stablecoin, ultimately fermenting through the governance incentives of the Compound lending platform, igniting a wave of DeFi summer. In order to seize the first-mover advantage in the BTCFi market, bitSmiley #SMILE combines DeFi infrastructures like MakerDAO (DAI) and Compound (Lending) to launch three main components:
1. bitUSD: An over-collateralized stablecoin protocol, comparable to DAI, allowing users to deposit Bitcoin into the bitSmiley Treasury to mint bitUSD; it adopts the bitRC20 standard to maintain high transparency while collaborating with ZetaChain for a native cross-chain bridge to ensure circulation in the entire chain environment.
2. bitLending: A native trustless lending protocol that uses peer-to-peer atomic swap technology to facilitate transaction matching, while introducing an insurance system to optimize the shortcomings of traditional lending's clearing process.
3. Credit Default Swaps (CDS): An innovative derivatives protocol that integrates NFT slicing CDS, while using aggregated bidding methods to enhance the efficiency and fairness of the CDS market.
2) The specific experience of its product components needs to be further assessed. I will mainly discuss two core technical points:
1. Collaborating with @zetablockchain for native cross-chain: ZetaChain is a POS blockchain built on the Cosmos SDK and Tendermint PBFT consensus engine, providing a series of interoperability operations embedded in a specific chain in the entire chain environment. Since Bitcoin does not have smart contracts, it can deploy light nodes and perform multi-signature operations based on the ECDSA signature algorithm. ZetaChain only needs to effectively track and manage UTXOs on Bitcoin to achieve secure cross-chain.
In addition, since ZetaChain is an Ominichain smart contract aimed at the entire chain environment, after resolving the cross-chain issues with the Bitcoin network, it can theoretically leverage its full-chain circulation environment to achieve transparent management of all-chain assets.
2. The bitRC20 standard looks similar to the BRC20 inscription standard, and indeed, bitUSD draws on the asset issuance paradigm of inscribing assets on the Bitcoin mainnet. When users want to over-collateralize BTC, they can first bridge their assets to bitSmiley's official bridge. After confirming the user's collateralized assets through consensus verification on the bitSmiley layer2 chain, the information for minting bitUSD will be transmitted to the Bitcoin mainnet.
Since traditional BRC20 inscription minting requires pre-setting the total amount in advance, bitRC20 has added Mint and Burn operations specifically for the stablecoin scenario to meet the need for stablecoins to dynamically adjust their supply. This is essentially the significance of the indexer; this flexible inscription issuance method is more likely to achieve practical application and empowerment for projects.
That's all.
Ultimately, it is not difficult to see why mainstream capital is rushing into the BTCFi market, with DeFi infrastructure providers like bitSmiley eagerly positioning themselves.
On one hand, everyone is focused on the vast asset increment space of the BTCFi market. Calculating based on the current total locked value of $1.6 billion in the BTC network, it accounts for only 0.14% of the total BTC market value. Compared to the asset lockup rates of networks like ETH and Solana, there is still a growth space of 50-100 times, and the funding sources are not limited to on-chain; there is also a substantial off-chain demand behind the large BTC+ETH ETF funds.
On the other hand, I believe that after mastering the strategic positioning of stablecoins, lending, derivatives, and other landing applications of core BTC assets, their application scenarios will radiate throughout the entire chain environment, which will invigorate and lead innovation in the DeFi model and users of the entire chain environment.
