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Building DeFi around Bitcoin is possible – and there are solutions

DeFi on Bitcoin is what the market needs

SAN MARINO, MI, REPUBLIC OF SAN MARINO, December 14, 2021 / – Ethereum has done a lot to revolutionize the financial market and is already making waves in the traditional financial world. Decentralized finance, or DeFi for short, has unleashed a lot of potential, but it is already not without its challenges. The Ethereum network has encountered scalability issues as DeFi continues to grow in popularity, which is not good news for current network subscribers – especially small users. Miners, meanwhile, sometimes make around five or six times more than bitcoin miners.

The first mover advantage has served Ethereum well, but not necessarily its users at this current stage. Fortunately for them, there are other alternatives for the DeFi market – including Bitcoin, which could be the answer the DeFi market needs to overcome many of its challenges.

DeFi on Bitcoin is what the market needs

Developing DeFi ecosystems on Bitcoin might seem counterintuitive at first, but a quick look at the idea makes it clear how useful it can be. Imagine if you could only access the breadth of DeFi services from a Bitcoin wallet via a sidechain; This could fundamentally redefine the way users study crypto and DeFi.

After all, the majority of the DeFi value is already denominated in Bitcoin: there are more than 250,000 wBTC, 15,600 RENBTC on Ethereum 2,600 rBTC (Rootstock) and 3,300 L-BTC (Liquid Network). At current prices, the Bitcoin peg-ins are worth around $ 13 billion.

This is even more important when you consider that many services are migrating from Ethereum due to the unsustainably high gas fees. Just look at the increased engagement from Binance Smart Chain, Avalanche, Polygon, Solana, Cardano, and other smart contract networks – developers and users alike are heading in this direction because they want more sustainable and secure networks for work.

Ethereum will inevitably have to deal with these issues in order to achieve widespread commercial acceptance. Either way, the industry will see a big shift in how it interacts with the DeFi market, and groundbreaking projects and forward-thinking developers will look to the solutions as proposed by Mintlayer.

Why build on Bitcoin?

The opportunities to build DeFi on top of Bitcoin have piqued the interest of projects like Mintlayer, which appears particularly interested in leveraging Bitcoin’s security and second-layer solutions to fuel the growth of the DeFi market.

For example, consider asset tokenization which is one of the most talked about applications of the DeFi market. Representing real estate, stocks and precious metals as digital assets has enormous advantages, but it also poses enormous challenges. The legal nature of these can vary considerably from country to country.

Mintlayer’s ACL allows users to adapt the rules for regulating issued assets to meet various legal requirements. But the real advantage of Mintlayer is that it tries to build a DeFi ecosystem on top of a blockchain – Bitcoin.

Mintlayer is building a second-layer sidechain that does not require a specific gas token and enables the direct exchange of Bitcoin for tokenized assets. Since Bitcoin is the most popular and most secure cryptocurrency in the world, this has advantages that are easy to see.

The sidechain has another pretty compelling feature – it provides tools to migrate from other blockchains like Ethereum Smart Contracts to a new WASM environment (the same one used by Polkadot which already includes a tool to port Solidity Smart Contracts!). This makes it easier for developers to get started and build communities quickly on the largest blockchain by users and market capitalization.

Mintlayer’s approach to building on Bitcoin

The idea of ​​making Bitcoin more robust by making it easier to develop is not new with some other solutions on the market like Rootstock, Liquid or Stacks.

Mintlayer claims to be the sidechain with the most sincere connection to the Bitcoin blockchain itself. Although it is possible to connect BTC, the focus here is on direct interoperability between tokens issued on Mintlayer and Bitcoin, which is possible thanks to the architecture of the sidechain using UTXO and Bitcoin Script.

The Mintlayer ecosystem of tokens – like stock tokens or stablecoins issued on the sidechain – will also be compatible with the Lightning Network, perfect for scaling when both parties are using a channel on the mainchain (BTC) and the Mintlayer -Sidechain are connected.

To make Atomic Swaps and Lightning Swaps secure, each Mintlayer block is directly linked to a BTC block and the protocol also uses a built-in checkpointing system that takes a snapshot of the Mintlayer blockchain in Bitcoin. These control points are consolidated (considered valid by the entire network) after Bitcoin blocks have been created over them for a week. This averts typical threats from PoS systems such as long-range attacks.

In essence, Mintlayer is a Bitcoin wallet with real, unconnected Bitcoin that enables additional functions for booting.

The future of DeFi on Bitcoin

Being able to use Bitcoin in the DeFi market brings instant improvements that any serious developer and user base would at least consider as a viable option. Although Ethereum has started to establish itself as the primary decentralized application platform, it is time for the market to realize that Bitcoin is the ideal blockchain for some of its most famous functions.

Bitcoin has stronger security (due to its healthy decentralized distribution of tens of thousands of public nodes) and could be very efficient as a basis for the DeFi. serve

Sara Rita Noggler
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December 14, 2021, 3:12 PM GMT

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