In the past year, the blockchain known as Bitcoin has experienced the introduction of new features like Ordinals, Runes, and BRC-20 tokens. Despite a market correction, developers remain optimistic about the growth of the ecosystem.
Ryan Chow, co-founder of SolvBTC, identified two main challenges facing the development of BTCFi. These are the lack of base yield and the fragmentation of liquidity, which have resulted in a significant amount of idle Bitcoin unable to participate in the DeFi ecosystem.
To address this, SolvBTC is working on the development of Liquid Yield Tokens, which will allow Bitcoin holders to deposit their assets and earn income from DeFi, similar to liquid staking tokens on the Ethereum blockchain. Since its launch earlier this year, SolvBTC has attracted 292,000 users and has a total value locked of $1.3 billion.
Chow explained how SolvBTC Ethena Vault provides stable base yield and earning opportunities for Bitcoin users. The Vault uses Bitcoin as collateral to borrow stablecoins, which are then used to mint and stake Ethena’s USDe. This process captures yield from funding rates earned from delta hedging derivatives positions. Users can earn a competitive annual percentage yield (APY) of approximately 15% net. Additionally, Solv and Ethena offer bonus token incentives, further boosting the overall yield. SolvBTC is also working on integrating with other DeFi platforms to provide additional yield opportunities.
SolvBTC plans to launch on the Ethereum mainnet, allowing users to access wrapped Bitcoin (wBTC) liquidity and generate yields directly in the Ethereum DeFi ecosystem.
Another Bitcoin yield protocol, Master Yield Market, has recently been launched. It consolidates all yield-bearing assets within the Bitcoin ecosystem and enables users to purchase Bitcoin yield assets directly from blockchain-native DeFi protocols using Tether, Ethereum, and wrapped Bitcoin.
In the meantime, developers are focused on increasing the capacity of the Bitcoin blockchain to enhance its DeFi performance. Sunny Fung, core developer of MetaID, believes that Bitcoin alone cannot solve the problem of congestion and high fees. However, layer solutions on top of Bitcoin can address this issue by bundling individual transactions into a single application. Fung introduced the concepts of Unified UTXO Chain and Unified Bitcoin Address, which effectively solve Bitcoin’s congestion problem and unlock the potential of Layer 2 networks that are compatible with Bitcoin.
Fung also highlighted that despite Bitcoin being the earliest blockchain and lacking smart contracts, it remains the best option for Web3 applications due to its strong consensus, decentralization, security, and on-chain data storage capabilities through satoshis.