M6 Labs Crypto Market Pulse: Bitcoin DeFi Summer

GM, Anon! 

Today, we’ll be diving into the most promising Bitcoin DeFi protocols being built out that could usher in this new era of Bitcoin now that the halving is behind us. 

Now, remember, if any of these protocols and projects seem underdeveloped or even lacklustre compared to their Ethereum counterparts, it’s because they are!

It’s interesting that despite Bitcoin being the behemoth that the entire market is hinged upon, its ecosystem is relatively underdeveloped compared to others. Bitcoin was perfect for its intended purpose, but all the bells and whistles being built now are extremely innovative and novel since the upgrades allowing these protocols to be built out only came into being last year.

This is where the opportunity lies.

Venturing into unknown territory with tech that doesn’t seem to work half the time and a frustrating user experience. By the time all these issues are solved, it’s usually much harder to spot opportunities. Imagine only having the original version of Uniswap to make swaps on. Ahh, those were the days, simpler days.

Now, let’s start breaking down these protocols!

Let’s go check DeFiLlama, one of the most trusted sites in crypto, for the data they’ve collected on DeFi on Bitcoin. Surely, this will allow us to begin an effective deep dive.

Woah, how can this be?! Only 11 projects are currently listed, boasting a collective market cap of $1B. However, numerous new and innovative projects are currently under development, with many of them already operational, and not even one has made the list! Not even DefiLlama seems to have their finger on the pulse of the exciting developments currently underway on Bitcoin! 

We hope that you’re starting to see how one has to seek this information out and do a lot of research, and again, that was just to drive the point home 😉

Now let’s really get into it! 

In the world of Bitcoin DeFi, several groundbreaking protocols are paving the way for a new era of financial innovation and accessibility. 

At the forefront of Bitcoin DeFi, Interlay offers a seamless entry into DeFi with its unique bridge architecture. Users can lock their BTC on the Bitcoin blockchain to generate iBTC, a 1:1 representation of Bitcoin on Interlay. 

This system ensures asset security through decentralized vault operators and facilitates interoperability across networks using Polkadot’s cross-chain mechanism. Interlay’s benefits include interoperability, scalability, composability without smart contracts, forkless upgrades, and a “bring-your-own-fees” strategy. Its main use cases span swapping, lending, borrowing, trading, staking, and pools.

Alex is powered by Stack’s L2 solution, which bridges the gap between Bitcoin’s security and DeFi’s dynamism. Focused on supporting Ordinals and BRC20 tokens, it enables asset issuance directly on Bitcoin’s Layer 1 and provides smart contract capabilities through Stacks integration. With a user-friendly approach, Alex fosters decentralized trading, lending, and borrowing, opening new financial opportunities for Bitcoin users.

LNSwap pioneers non-custodial crypto swaps between Bitcoin and Stacks using trustless atomic swaps. Enabling fast and private transactions via Lightning Network and on-chain Bitcoin swaps, LNSwap enhances interoperability and efficiency in the Bitcoin DeFi space. Its key focus areas include Bitcoin to Stacks swaps, Lightning Network integration, on-chain Bitcoin swaps, non-custodial swaps, and a widget for Stacks apps.

Built on Rootstock (RSK), Sovryn offers decentralized Bitcoin trading and lending directly on the Bitcoin blockchain. Its key focus areas include BitcoinOS, a financial operating system on Bitcoin; a DeFi platform offering borrowing, lending, and margin trading; Sovryn Dollar (DLLR), a bitcoin-backed stablecoin; cross-chain interoperability; spot exchange and margin trading; lending pools and yield farming; and Bitocracy, a governance model for platform decision-making. Sovryn serves as a gateway to DeFi on Bitcoin, accelerating its adoption through improved cross-chain coordination and L2 innovations.

Zest Protocol is an on-chain lending platform designed for Bitcoin, allowing users to lend or borrow BTC securely. Operating with open-source smart contracts on-chain, Zest Protocol aims to unlock the productive potential of Bitcoin, making it more than just a store of value or medium of exchange.

StackingDAO introduces “liquid stacking” on the Stacks blockchain, offering decentralized stacking solutions. With the upcoming Stacks Nakamoto upgrade, demand for non-custodial stacking solutions like StackingDAO is expected to rise, democratizing access to stacking rewards for Bitcoin holders. 

Babylon aims to bolster Bitcoin’s security through innovative protocols like timestamping and staking. By leveraging Bitcoin’s strengths, such as its Proof-of-Work consensus and censorship-resistant nature, Babylon ensures a more secure decentralized environment. 

Its timestamping protocol enhances data immutability, benefiting various use cases like timestamping PoS blockchains. Additionally, Babylon’s staking protocol enables direct staking of Bitcoin assets for PoS chains, enhancing economic security and liquidity.

Bitflow Finance revolutionizes the Bitcoin DeFi landscape with a DEX tailored for Bitcoin users. Through advanced technologies like PSBTs and Atomic Swaps, Bitflow enables secure trading, borrowing, and earning with Bitcoin. Its focus areas include trading stablecoins, Bitcoin swaps, single-sided liquidity provision, and real yield generation, all while prioritizing transparency and open-source principles.

Liquidium pioneers peer-to-peer lending on the Bitcoin blockchain, utilizing assets like Ordinals and fungible tokens as collateral. With features like Partially Signed Bitcoin Transactions (PSBTs) and Discreet Log Contracts (DLCs), Liquidium ensures a secure lending process. Its key focus areas include peer-to-peer Bitcoin lending, borrowing against Ordinals, and support for various wallets, all aimed at enhancing Bitcoin liquidity and yield generation.

Stroom focuses on enhancing Bitcoin’s utility and efficiency through the Lightning Network, offering earning opportunities within DeFi. With a core emphasis on Lightning Network enhancement and inbound liquidity solutions, Stroom streamlines Bitcoin transactions and provides native Bitcoin yield through LN routing fees. 

Its integration with EVM-based blockchains like Ethereum opens up additional DeFi opportunities, making Stroom a pivotal component in the Bitcoin Layer2 solutions ecosystem.

Orange Crypto introduces a comprehensive DeFi ecosystem for Bitcoin users, featuring products like secure wallets and decentralized exchanges. With its Orange token as the centerpiece, Orange empowers users to manage their Bitcoin and related assets in a decentralized, user-friendly environment. Its key focus areas include secure wallet solutions, decentralized asset swapping, market data aggregation, blockchain exploration, AI-driven assistance, and a loyalty rewards program, all aimed at enhancing the Bitcoin DeFi experience.

Avalon Finance operates as a decentralized, non-custodial protocol aiming to redefine financial sovereignty for Bitcoin users. By leveraging the power of smart contracts, Avalon Finance facilitates a range of DeFi activities directly on the Bitcoin network, including lending, borrowing, and staking. 

Its operational model prioritizes decentralization, ensuring that users retain complete control over their digital assets without the need for intermediaries. This approach not only enhances security by minimizing the risk of asset mismanagement but also empowers users by providing uninterrupted access to their funds. Moreover, Avalon Finance focuses on making DeFi accessible to a broader audience by simplifying the user experience and eliminating technical barriers.

Arkadiko is a DeFi protocol on the Stacks blockchain, designed to bridge the Bitcoin ecosystem with DeFi functionalities. It allows users to collateralize STX tokens to mint its native stablecoin, USDA. This capability introduces self-repaying loans and a stable medium of exchange, addressing the need for stablecoin liquidity and enabling various on-chain activities. 

Arkadiko is non-custodial and decentralized, ensuring users maintain full control over their assets. With the upcoming release of Arkadiko 2.0, the platform aims to enhance its features and user experience, continuing its innovation in integrating Bitcoin’s robustness with DeFi’s flexibility.

Some interesting data👇

As per DappRadar, Arkadiko had 156 unique active wallets conducting 896 transactions in the last 30 days.

BounceBit introduces an innovative approach to Bitcoin (BTC) restaking, positioning itself as the first native BTC Restaking chain with a dual-token staking system. This system enhances the security and functionality of the platform by allowing validators to stake both Bitcoin and BounceBit tokens. 

The platform emphasizes a secure and robust infrastructure for BTC restaking, supported by regulated custody services like Mainnet Digital and Ceffu. This infrastructure underpins various DeFi and CeFi yield mechanisms, enabling Bitcoin holders to earn yields through native validator staking and a CeFi mirroring mechanism. 

Additionally, BounceBit secures essential ecosystem components such as bridges and oracles with restaked BTC, ensuring reliable cross-chain interactions and data feeds. 

Portal is a cutting-edge decentralized exchange (DEX) that leverages Bitcoin’s security, built on a PoS validator network. It facilitates trustless and censorship-resistant swaps across different blockchains. Its design allows for instantaneous cross-chain swaps, improving the efficiency and seamlessness of trading across a fully decentralized ecosystem.

Key to Portal’s innovation is its ability to provide seamless cross-chain liquidity without the need for wrappers, bridges, or custodians, directly integrating with Bitcoin, BRC-20 tokens, and Ordinals. 

By enhancing cross-chain coordination and offering a permissionless method for asset swaps across multiple layers and networks, Portal aims to reduce liquidity fragmentation and increase Bitcoin’s utility, driving its broader adoption and integration into the DeFi space. 

Taproot is a major upgrade to Bitcoin that introduces more efficient and cost-effective smart contract capabilities to the network. Taproot Exchange allows you to interact with “Taproot assets.” These assets can be transferred through traditional Bitcoin transactions or off-chain transactions

Taproot Exchange provides comprehensive multi-chain support, coordinated liquidity support, and an easy-to-use user interface. It supports a wide array of blockchains, including all EVM-compatible chains, Lightning, Bitcoin, Solana, and Cosmos. This extensive support and versatility not only enhances user convenience but also facilitates seamless trading experiences across different blockchain environments. By eliminating common barriers to entry in the derivatives market, Taproot Exchange simplifies the process, allowing users to trade Taproot Assets derivatives with ease. 

Coral Finance’s novel derivatives trading platform features an innovative Premium Trading mechanism. This platform is designed to cater primarily to crypto projects seeking non-inflationary liquidity solutions, with a broader goal of attracting traditional finance (TradFi) users by integrating real-world assets (RWA) like stocks. 

The Premium Trading Mechanism aggregates liquidity for efficient market-making, allowing crypto assets to be traded at premium rates. Via this mechanism, users can create derivative cTokens minted 1:1 from the staked token. Coral Finance also introduces Premium Pools, which are central to its trading model, enabling liquidity providers to earn high-yield returns by trading cTokens at a premium. 

Yala Protocol connects Bitcoin liquidity with its meta-yield stablecoin, $YU, enhancing the utility of Bitcoin without compromising its security. $YU operates seamlessly across various blockchain ecosystems, increasing transactional efficiency and accessibility without the reliance on traditional bridges or the physical relocation of Bitcoin.

Along with stablecoin issuance, Yala is also developing a decentralized Oracle network to ensure real-time and tamper-resistant price data, crucial for managing liquidations and maintaining the stablecoin’s peg. 

Additionally, Yala introduces a modular layer to Bitcoin’s network, where its programmable indexer not only organizes and indexes data for efficient queries but also serves as a validator for DeFi solutions. 

BadgerDAO is a decentralized autonomous organization dedicated to integrating Bitcoin into the DeFi ecosystem more effectively. BadgerDAO prioritizes several strategic areas:

• The use of Bitcoin as collateral within DeFi protocols enables Bitcoin holders to generate yields without needing to liquidate their holdings. 
• Championing decentralized governance, allowing its community of token holders to influence the protocol’s development through voting on key proposals. 
• Enhance cross-chain interoperability, creating essential bridges between Bitcoin and other blockchain systems to foster a more interconnected and liquid ecosystem. 

Hydranet is an innovative DEX. Central to its platform is the HDN token, which functions as both a governance tool and a means for holders to benefit from trading fees collected on the DEX. This model reinforces Hydranet’s commitment to a community-driven development approach, where tokenomics play a critical role in funding both infrastructure improvements and marketing efforts.

The platform includes a multi-currency light wallet integrated directly into the DEX client, enhancing usability by combining security with convenience for handling multiple currencies. Additionally, Hydranet emphasizes community involvement in its development process, enabling HDN token holders to participate in governance decisions.

StackSwap is a DEX and marketplace built on the Stacks blockchain. By enabling the issuance and exchange of tokens directly on the Bitcoin network through Stacks, StackSwap positions itself as a leader in advancing the next wave of BTCFi projects.

Key features of StackSwap include:

• A DEX which provides liquidity for new BTCFi projects. It allows users to create and launch their projects with minimal technical barriers.
• StackSwap employs an Automated Market Maker (AMM) model to facilitate efficient token swaps and liquidity pooling.
• Plus, the platform also offers mechanisms for staking and governance, allowing users to stake STSW tokens to earn governance rights and additional rewards. 
• Other features include token launchpad, group farming, vaults for loans, and NFT minting.

Velar is a pioneering DeFi protocol designed to unlock Bitcoin’s potential by integrating sophisticated DeFi products directly on the Bitcoin blockchain. With the integration of sBTC, a tokenized version of Bitcoin on the Stacks blockchain, Velar taps into Bitcoin’s vast liquid value for use in diverse financial applications. 

Codenamed “Dharma,” Velar V1 features an automated liquidity protocol inspired by Uniswap v2, built using the Clarity language on Stacks L2. This setup offers robust DeFi functionalities such as token swaps, liquidity pools, and farming options, essential for maintaining liquidity and rewarding users.

Velar also hosts an IDO launchpad to facilitate the launch of new tokens on the Stacks platform, promoting innovation within the Bitcoin DeFi landscape. By providing comprehensive tools for staking and farming, Velar enables users to actively participate and tailor their investment strategies. 

Satoshi Protocol is an innovative force in the Bitcoin DeFi landscape, utilizing the Bitcoin-Ethereum Virtual Machine (BEVM) to introduce a Collateralized Debt Position (CDP)-style stablecoin system. This platform enables Bitcoin holders to mint SAT, a stablecoin pegged to the US dollar, using their Bitcoin as collateral. With a minimum collateral ratio of 110%, the system provides a secure way to leverage Bitcoin assets, enhancing liquidity and spendability without the burden of unpredictable interest payments.

The protocol also incorporates the OSHI utility token, which plays a vital role in governance, incentives, and maintaining the health and security of the platform. Additionally, Satoshi Protocol features a redemption mechanism that allows SAT holders to efficiently reclaim their collateralized Bitcoin, ensuring the stablecoin’s value remains consistent.

That wraps it up for today, Anon! We trust you found this issue insightful and that it sets you on course for your venture into the Bitcoin cosmos!