Author: Revelo Intel

Compiled by: TechFlow

Over the past few weeks and months, Bitcoin’s status as an asset has declined from its position in the 70s. Market participants have been expecting the market leader to break out to a new all-time high (ATH), but in the second quarter of 2024, this has yet to happen. Competition in the Bitcoin Layer 2 (L2) network has been growing, with Starknet announcing that they will launch their own Bitcoin L2, named Catnet. This plan involves creating a custom signet and enabling the OP_CAT opcode; if Bitcoin had not removed this opcode in the early development stages, it would have allowed Bitcoin to host smart contracts from the beginning. Now, Babylon, a project that provides BTC staking and collateralization services, is gaining more attention. The protocol is currently in the testnet stage, while also recently raising about $70 million from companies such as Paradigm.

Despite Bitcoin's price fluctuations, Bitlayer has become a leader in the Bitcoin ecosystem due to its unique approach to BitVM implementation and its ability to attract liquidity and users. Bitlayer has shown significant growth since we first reported on this emerging protocol a few weeks ago. The team just participated in GM Vietnam Blockchain Week and will be present at next month’s EthCC conference to actively promote their work and the idea of ​​BitVM. Bitlayer’s median gas fee is currently quoted at $0.40, and the protocol’s total value locked (TVL) has almost tripled to approximately $354 million. This places Bitlayer in second place in the TVL ranking of Bitcoin chains, behind Merlin chain. Notably, the Merlin chain’s TVL more than doubled in one day last month. The Bitlayer ecosystem has grown to include more than 100 decentralized applications (dApps).

Bitlayer has only been live for a few weeks and is already showing incredible growth. The chain has surpassed 1 million transactions, with activity peaking in tandem with the rise in Bitcoin’s price. In our last report, we briefly covered the Ready Player One airdrop, a $50 million event for developers and protocol teams, with $20 million earmarked for leaderboard competitions. Bitlayer has since implemented a new $23 million Mining Gala event, which concluded earlier this week. In today’s post, we’ll detail some of the key partner projects participating in this event, which make up a large portion of Bitlayer’s total TVL, user base, and activity.

Avalon Finance

Avalon claims to be the first "CeDeFi" lending market. The protocol has a TVL of over $120 million on Bitlayer, and its native tokens AVAF and esAVAF can be staked to receive protocol revenue and esAVAF rewards.

The modular protocol’s main product is its overcollateralized lending market, where users can deposit funds into separate pools to use as collateral for borrowing. Both major and minor tokens can be deposited, but only Bitcoin can currently be used as collateral for borrowing. Currently, nearly $86 million of WBTC has been lent out, with total deposits of about $180 million. Deposits earn 2x points, while borrowing earns 6x points. As a result, the maximum borrowing cap of 1,300 WBTC is almost full, with a utilization rate of about 43%. Borrowers can use up to 60% loan-to-value (LTV), 85% liquidation ratio, and 10% liquidation penalty. Users can track their points accumulation on the project’s integrated leaderboard.

Pell Network

Pell Network has a TVL of approximately $95 million on Bitlayer. Pell Network provides a range of services to the emerging Bitcoin L2 market, including network security features, blockchain operating infrastructure, and yield enhancement. Pell Network also participates in Bitcoin re-staking, aiming to diversify the returns of Bitcoin L2 and enhance the security of these chains.

On Bitlayer, users can “re-stake” various assets to receive a 15% Pell points reward. In addition to WBTC, users can also deposit various Bitcoin LSDs into the protocol, with stBTC accounting for the majority of Bitlayer’s TVL. Users can receive additional points rewards by using the protocol for the first time and extending the deposit period, in addition to earning points through some basic social interaction tasks.

On the backend, Pell Network essentially aggregates native Bitcoin staking returns and returns from LSD, creating a network where stakers can choose to validate new modules built in the ecosystem.

BitCow

BitCow is the third-largest protocol on Bitlayer with a TVL of approximately $35 million. BitCow acts as an automated market maker (AMM) that provides stablecoin exchange and centralized liquidity services. The protocol is specifically designed to serve the expanding Bitcoin L2 ecosystem. In its v1 version, BitCow provides stable exchange services for stablecoins and LSD assets while maintaining minimal gas fees and maximizing capital efficiency. The equilibrium price is also adjusted over time to take into account the gradually increasing value of LSD assets.

BitCow V2 focuses on centralized liquidity for swaps on volatile currency pairs. Features include automated pricing, 0 IL, and transparent P&L information. Automated pricing is achieved through the use of external oracles, which allows centralized liquidity without the need to manage price bands. All liquidity for a particular asset is automatically concentrated around the price determined by the oracle. This compromise approach results in higher returns for LPs while eliminating the need for LP management protocols and the complex tradeoffs associated with centralized liquidity.

In its v2 version, BitCow also adopted a dual-token LP solution, where one pair represents the volatility asset in the pair and the other represents the stablecoin. This allows volatility token LP holders to own the rights to their assets when the value of the asset changes. While stablecoin LP holders remain market neutral and accrue trading income from the pair. In addition, the protocol's Trumeme feature allows users to create their own memecoin on the testnet and provide initial liquidity.