This project aims to revolutionize DeFi on Bitcoin

Bitcoin (BTC), the original cryptocurrency with the largest market capitalization, continues to lead the crypto market – to both the green and the red. Although the crypto space gave birth to quite a few projects, the rest of the pack is no match for Satoshi Nakamoto’s idea for financial transactions.

The unique unused transaction output (UTXO) model used for the Bitcoin blockchain allows BTC to function much like a paper currency, resulting in superior security and robustness as a peer-to-peer currency. Especially compared to the bank account-like model that Ethereum-based DeFi solutions usually adopt. As the pioneering cryptocurrency, Bitcoin presents massive liquidity, but Ethereum-based DeFi solutions have yet to develop a secure and efficient way to exploit this.

DeFi already met Bitcoin, but there was a catch

With the introduction of the Taproot upgrade, which enabled the implementation of smart contracts, DeFi found its route to the Bitcoin base for the first time. However, it started off on the wrong foot: As the Taproot upgrade allowed people to bypass the original 80-byte limit on the Bitcoin blockchain, people wasted no time uploading all sorts of digital properties, including images, NFT-like inscribed assets and more , clogging the foundation with unnecessary digital junk and possibly making Satoshi Nakamoto cringe.

Bitcoin needs its own layer-2 DeFi ecosystem that expands the use of BTC and doesn’t put any extra pressure on the base layer, and that’s where Mintlayer comes in. Mintlayer is an L2 solution rooted in the established network of the Bitcoin blockchain. Similar to how the Lightning Network solved Bitcoin payments at scale, Mintlayer is poised to bring decentralized finance to Bitcoin’s toolkit, without compromising the principles of the Bitcoin community.

Improved security through nuclear exchange

As the massively damaging DeFi hacks and exploits of last year showed, trying to use Bitcoin in a non-native blockchain via wrapped tokens or cross-chain bridges was a bad idea. After years of attacks and more than $2.5 billion in lost user funds, it is clear that the risk of becoming an attack surface is too high for any token bridge to grow reliably.

Mintlayer, on the other hand, uses atomic swaps to allow a 1:1 transaction from native Bitcoin to tokens on the Mintlayer blockchain, effectively removing the need for any wrapped tokens or token bridges. This way, Bitcoin owners can use their BTC to try different DeFi use cases.

Enrico Rubboli, co-creator of Mintlayer, explained why DeFi should be in the sights of traditional financial institutions:

“DeFi is a trust-minimizing technology. When the code replaces humans, it’s incorruptible, taking human error out of the equation as much as possible. We’re still early days with it, both in terms of regulation and technology, but that’s why Mintlayer exists .”

To facilitate rapid adoption, Mintlayer spent 2022 developing a mobile wallet and browser extension as well as integration with the Lightning Network. Following the launch of its original token MLT, Mintlayer aims to have its main network ready by the third quarter of 2023. Mintlayer’s mission is to build a protocol with the least friction for Bitcoin users to create the applications they need and use platforms built by others.

The team also announced the Mintlayer ecosystem fund to accelerate the growth of a DeFi ecosystem centered around Bitcoin. Projects that add value to the Mintlayer ecosystem can also benefit from various grants provided by the ecosystem fund. The fund helps projects and startups in various stages of development find blockchain investors and like-minded stakeholders to push the space to new horizons.