Author: Haotian
Seeing that @bitsmiley_labs has secured new funding of $10M to accelerate the rollout of its new Bitcoin stablecoin, bitUSD. So, what exactly does this BTCFi stablecoin project, affectionately called 'Smiley', intend to do? What is its core technical framework? Why is the BTCFi market receiving unanimous enthusiasm from the market? Next, I will share my thoughts:
1) The Ethereum DeFi ecosystem originated from MakerDAO's DAI algorithmic stablecoin, ultimately fermenting in Compound's lending platform governance incentives, igniting a wave of DeFi summer. bitSmiley #SMILE aims to seize the first-mover advantage in the BTCFi market by combining DeFi infrastructure such as 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; adopting the bitRC20 standard ensures high transparency, while collaborating with ZetaChain for a native cross-chain bridge to ensure circulation in the full chain environment;
2. bitLending: A native trustless lending protocol that uses peer-to-peer atomic swap technology for transaction matching, while introducing an insurance system to optimize the shortcomings of traditional lending's liquidation 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) How its product components can be further experienced will need evaluation. To illustrate, 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 the full chain environment by specific chains. 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 designed for the full chain environment, after resolving the cross-chain issues with the Bitcoin network, it can theoretically achieve transparent management of full chain assets through its full chain circulation environment.
2. bitRC20 standard seems similar to the BRC20 inscription standard; indeed, bitUSD draws on the paradigm of issuing assets on the Bitcoin mainnet. When users want to over-collateralize BTC, they can first bridge assets to bitSmiley's official bridge. After confirming the user's collateral assets, the bitSmiley layer2 chain will perform consensus verification and then relay the minting information of bitUSD to the Bitcoin mainnet.
Since traditional BRC20 inscription minting requires pre-setting a total amount, bitRC20 has added Mint and Burn operations specifically for stablecoin scenarios to meet the dynamic supply adjustment needs of stablecoins. This essentially highlights the significance of the indexer; this flexible method of issuing inscriptions is more likely to lead to actual applications and empowerment for projects.
That's all.
Ultimately, it is not difficult to see why mainstream capital is rushing into the BTCFi space, and DeFi infrastructure providers like bitSmiley are also eagerly positioning themselves.
On one hand, everyone is focused on the vast asset incremental space in the BTCFi market. Based on the current total locked value of 1.6 billion dollars in the BTC network, it only accounts for 0.14% of Bitcoin's total market value, which indicates a 50-100 times growth potential compared to the asset locking rates of networks like ETH and Solana. The sources of funding are not limited to on-chain; there is also substantial off-chain demand from large BTC+ETH ETF funds.
On the other hand, I believe that mastering the strategic positioning of stablecoins, lending, derivatives, and other applications related to core BTC assets will radiate application scenarios throughout the entire full chain environment, revitalizing and leading innovation in the DeFi model and user experience within the full chain environment.
