Worlds collide in Bitcoin-based DeFi project — Nothing is impossible

Bitcoin (BTC) has grown from a small project to a frontrunner for a possible global currency thanks to its unmatched market capitalization, unmatched liquidity pool, and reliable infrastructure. The long-term benefits of Bitcoin have secured its place on the balance sheets of industrial giants such as Tesla and MicroStrategy, as well as some small nation-states, regardless of transitory market conditions.

It’s no wonder that every major player in the decentralized finance (DeFi) space is itching to dip into Bitcoin’s vast pool of liquidity. However, since DeFi protocols were built on Ethereum or other blockchains, they lack native compatibility with the Bitcoin network, making it more difficult to leverage BTC liquidity.

Several projects have come up with solutions to access Bitcoin liquidity over the years, with the most prominent being wrapped versions of BTC and token bridges. Numerous reports highlighted that token bridges are too vulnerable to act as DeFi’s gateway to Bitcoin liquidity, with cross-chain bridges accounting for half of all DeFi exploits.

DeFi on Bitcoin: A difficult task

As DeFi struggles to find an ideal way to access Bitcoin liquidity, BTC holders also want their long-term investment to reach its full potential without introducing additional vulnerabilities or relying on a centralized third party. Even without the Herculean task involved on the technical front, the idea of ​​using the base layer of the Bitcoin blockchain for something other than peer-to-peer fund transfers sparked mixed reactions from the Bitcoin community.

Despite the misconception that Bitcoin is limited to simple transactions, contracts have been published using Bitcoin scripts. Users have published the first NFTs and some even managed to play a retro computer game on the Bitcoin base layer through the Ordinals protocol. Casey Rodarmor, creator of Ordinals, described it as a way to “make Bitcoin fun again.”

However, not everyone prefers to use the original blockchain in such a way. Bitcoin OGs didn’t take time to weigh in on the topic, pointing out that the base layer isn’t optimized for uses other than P2P fund transfers. Blockstream CEO Adam Back argued in a tweet that, unless Ordinals were used for something effective, “it’s another proof of consumption of block-space stuff.”

A potential solution should address the Bitcoin community’s concerns about blockchain congestion without introducing new vulnerabilities or relying on third-party custody. Mintlayer, a Layer-2 solution rooted in the established network of the Bitcoin blockchain, aims to provide an acceptable and credible answer for all parties.

Reliable DeFi? Bitcoin fixes this

The founders of Mintlayer designed the protocol to be as interoperable with the base Bitcoin layer as possible. It uses an Unused Transaction Output (UTXO) accounting system, much like the Bitcoin blockchain, for superior security and robustness. As a Layer-2 solution built on the Bitcoin network, Mintlayer removes the need for wrapped tokens or token bridges – the primary attack vectors for DeFi hacks – and instead uses atomic swaps for 1:1 transactions from native BTC to tokens on Mintlayer – the blockchain. .

Mintlayer enables Bitcoin holders to access all types of DeFi instruments as well as a large ecosystem of decentralized apps with their native BTC.

Instead of competing with Bitcoin, Mintlayer aims to strengthen the original cryptocurrency by providing a solid infrastructure that expands the use of BTC to new horizons. Speaking about building a decentralized protocol to give people new development opportunities, Mintlayer CEO Enrico Rubboli said: “Bitcoin is digital gold, and Mintlayer is designed to run on the digital gold standard. We believe that a truly decentralized protocol that is user-friendly and highly interoperable with the largest pool of digital liquidity is the future of decentralized finance.”

Expand Bitcoin’s reach

Going into the details of the project, developers explain that users are not required to have ML, the original token of Mintlayer, to pay transaction fees. Users can pay for transactions with any token a block signer accepts. To achieve autonomy, privacy and self-defense – the key pillars of the Bitcoin philosophy – the Mintlayer software is optimized to the point that users will be able to run a full node on an average desktop computer.

Apart from removing the friction around using Bitcoin to complete a financial transaction, Mintlayer also seeks to make the use of BTC for non-financial projects within DeFi easy, secure and seamless. By offering a unifying solution to the highly fragmented state of decentralized finance, Mintlayer encourages developers and users to focus on the growth of a truly inclusive, fair and transparent financial ecosystem for the benefit of all.

The token generation event (TGE) for Mintlayer’s native token ML is scheduled for March 21, 2023. The testnet launch is expected for Q2 shortly after, followed by the mainnet launch in Q3. The newly launched mobile wallet and browser extension for Mintlayer is also available for download.

Learn more about Mintlayer