JAN 17, 2024
Opinion: Bitcoin Ecosystem Tracks and Representative Projects to Watch in My Eyes
by 吴说猫弟, WuBlockchain
Note: This article is only for the author's personal information sharing, has no interest related to the mentioned projects, does not endorse any projects, and does not represent the viewpoint of Wu Blockchain.
With the leading exchanges Binance and OKX launching mainstream assets like ORDI, SATS, and RATS (contracts), other inscription assets still struggle to take the lead. The listing of Bitcoin inscription assets in exchanges is also gradually entering a vacuum period. Alongside the approval of BTC ETFs and the hype around ETH ETFs, the ETH/BTC exchange rate continues to strengthen. Some funds are gradually shifting from BTC to ETH, moving from the BTC ecosystem to the ETH ecosystem. The Bitcoin ecosystem may enter a calm 'Build' phase.
This article will analyze the Bitcoin ecosystem's track combining personal understanding and list representative projects of the track. It's worth noting that the Bitcoin ecosystem is still in its early stages, with higher risks, and investors should make rational judgments.
BRC-20 provides a convenient way to issue assets on the Bitcoin network. While offering grassroots the opportunity for a breakthrough, it also allows various inscription projects of dubious quality to occupy network space and distract users' attention. Adhering to the original intention of selecting quality projects for users, Launchpad has emerged. Launchpad is one of the most mature tracks in the current Bitcoin ecosystem, not only building the first line of investment security for users but also continuously empowering its platform token.
However, as the number of staking users grows, the rate of winning and the share will become increasingly competitive; and to continuously maintain the value of the platform coin, Launchpad needs to constantly launch new projects. In this process, especially when more users rely on Launchpad, it is prone to intentionally or unintentionally launching inferior assets due to underlying interests. Even for quality assets, if the returns do not meet expectations, they are likely to cause early users' complaints.
TurtSat is one of the mainstream launchpads on Bitcoin Ordinals, having established partnerships with OKX, Galxe, UniSat, and DWF Labs. Projects incubated/launched by TurtSat mostly offer significant returns, including CHAX Bitcoin and MultiBit. However, there are concerns, such as severe front-running by the project team of Dova and collaboration with the suspected shell project Copycat.
The core product of Bounce is a decentralized auction platform that allows users to create and participate in token and NFT auctions. Before entering the Bitcoin Ordinals scene, Bounce's AUCTION token had already been listed on major exchanges like Binance, OKX, and Coinbase. Its projects launched on Bitcoin include the Bitcoin stablecoin protocol BitStable and the Ordinals DID protocol BDID, among others.
Bounce's smart contract has undergone a security audit by Salus Security, funded by Binance Labs.
Before being listed on centralized exchanges, trading of inscription assets was similar to the early NFT listing trade, unable to achieve instant transactions. Due to the lack of smart contracts on the Bitcoin network, it becomes very challenging to implement DeFi functionalities like Ethereum's DEXs, lending, etc., on Bitcoin. Currently, there are several ways to indirectly or through third-party solutions achieve similar functionalities: Utilizing third-party protocols to execute smart contracts on sidechains parallel to the Bitcoin blockchain; cross-chain technology; Atomic Swaps; Lightning Network L2, and others.
ALEX is an integrated platform for trading crypto assets, using Bitcoin as the settlement layer and Stacks as the smart contract layer. ALEX has launched B20 (Orderbook) swap functionality, allowing users to trade BRC-20 assets through an AMM (Automated Market Maker).
ALEX has accumulated $8.3 million in funding and also received undisclosed strategic financing in December last year.
BendDAO is a well-established lending project on Ethereum NFT. In December last year, they announced their move to embrace the BTC ecosystem, planning to provide BTC NFT lending services. They will also support wBTC liquidity pools as an asset available for borrowing. Currently, BendDAO is exploring ways to enable seamless interaction between BTC NFT and BendDAO. Possible solutions include reliance on third-party cross-chain bridges and multi-signature wallet cross-chain bridges.
BitStable is a stablecoin protocol on the Bitcoin network, incubated by Bounce. BitStable is ingeniously designed, allowing users to use BRC-20 assets such as ORDI, MUBI (MultiBit), and BSSB (platform token) as collateral to mint the stablecoin DAII on the Bitcoin network. Users can also destroy it through the MultiBit cross-chain bridge to exchange for ETH DAII. Due to the lack of smart contracts, the decision-making ability of BitStable's governance system is crucial, with the capacity to manually adjust parameters for minting, destruction, and collateralization. Additionally, BitStable has built a staking feature for DAII on the Bitcoin network, where staking DAII earns the platform token BSSB.
BitStable also supports the provision of collateral from Ethereum, primarily using USDT as collateral for DAII. Official website data shows that the current supply of DAII is approximately 21.73 million, with 21.64 million being ERC-20 DAII. The collateral includes 18.63 million USDT and 3 million FDUSD in ERC-20, as well as 6,479 ORDI, 1.33 million MUBI, and 9 thousand BSSB in BRC-20.
BitStable has completed an audit by Salus Security.
BitFlow provides users an open-source platform on Bitcoin, where they can trade with BTC and earn profits. Utilizing technologies like Partially Signed Bitcoin Transactions (PSBT), Atomic Swaps, and Stacks Bitcoin (sBTC), its core functionalities include stablecoin trading, BTC trading, one-sided liquidity, and yield farming. BitFlow plans to launch BTC Atomic Swaps in the fourth quarter of 2023 as per its roadmap, but this feature has not yet been launched.
BitFlow has received investments/donations from entities like the Stacks Foundation and Bitcoin Startup Lab. Additionally, it has completed audits conducted by Coinfabrik and StrataLabs.
Cross-chain bridges for Bitcoin might be significantly more important than those between EVM networks. This importance stems not only from facilitating the migration of assets within the Bitcoin network but also as a crucial pathway for Bitcoin to integrate into more complex financial systems. However, due to the value and influence of Bitcoin, the security of its cross-chain bridges is especially critical. Any security vulnerabilities could lead to significant economic losses and market impacts. The design and implementation of cross-chain bridges must rigorously consider security and decentralization. This security concern is not just about preventing potential hacker attacks but also requires robust solutions to address crises like inscription asset index consensus fragmentation.
MultiBit, incubated by TurtSat, is the first BRC-20 cross-chain bridge project between Bitcoin and EVM networks. It facilitates token transfers across different networks through multi-signature contracts and relies on listening nodes to monitor transaction statuses on both Bitcoin and EVM networks. Since its launch, the MultiBit Bridge has completed over $490 million in cross-chain transaction volume. Additionally, MultiBit supports the cross-chain transfer of NFTs from Bitcoin to Ethereum and plans to expand its functionalities to include staking, mining, and trading in the future.
MultiBit has successfully completed an audit by Salus Security.
There is currently much debate regarding the necessity of Bitcoin Layer2, primarily dependent on the understanding of Bitcoin network's current performance, future development goals, and market demand. For instance, the popularity of BRC-20 has led to a significant increase in network transaction fees, creating a desire for an L2 solution that could reduce transaction costs by batch processing transactions on top of the main chain. However, any L2 must maintain network security and decentralization while improving efficiency. Whether there is sufficient demand for a faster, cheaper Bitcoin L2, the possibility of L2 creating different levels within the Bitcoin ecosystem, and whether assets leaving the costly Bitcoin mainnet still belong to the Bitcoin network itself, are all points of contention. Regardless of the debate, proponents are already moving forward on the path to Bitcoin Layer 2.
Bitfinity is an L2 network built on ICP, compatible with EVM, designed for Bitcoin and on-chain assets. It utilizes a threshold cryptography scheme called Chain-Key, which enables the creation of decentralized cross-chain bridges between Bitfinity and the Bitcoin mainnet. The Chain-Key's private keys are regularly regenerated every 11 minutes using a process known as "moon-math." Bitfinity has launched its testnet and plans to launch its mainnet in 1-2 months, introducing its native token BFT.
In January of this year, Bitfinity completed a token financing of $7 million, with investments from Polychain Capital, ParaFi Capital, and others, reaching a latest valuation of $130 million.
Nubit, launched by Riema Labs, is a Bitcoin-native data availability layer aimed at transforming the way Bitcoin network transactions are processed, making them more cost-effective and efficient. Additionally, Riema is researching the Bitcoin-native data availability standard BRC-1310, which includes BTC staking, data availability sampling technology, direct data proofs on the Bitcoin network, and decentralized bridges. These innovations are expected to reduce trust requirements, increase data throughput, lower costs, and improve data accessibility.
Riema Labs completed an undisclosed amount of angel funding in January this year, with investments from Bounce Finance, BRC-20 founder domo, and others.
From the perspective of data being fully stored on-chain and immutability, storing artistic collectibles as NFTs on Bitcoin might be more appropriate than on Ethereum. This aligns with the initial intent of Casey in creating Ordinals, which was to store things on the Bitcoin network that would never change. Although Bitcoin NFTs are still in their early stages, notable projects like Bitcoin Frog and NodeMonkes have emerged, along with some early explorations of using Bitcoin NFTs to implement financial leverage operations.
Liquidium is a peer-to-peer lending platform built on the Bitcoin network. Users can use Bitcoin Ordinals NFT assets or BRC-20 assets as collateral for BTC lending. This process is facilitated through Partially Signed Bitcoin Transactions (PSBT) and Discrete Log Contracts (DLC).
In December of the previous year, Liquidium completed a pre-seed funding round of $1.25 million. Investors include Bitcoin Frontier Fund and Side Door Ventures, among others.