BTCFi Boom: Exploring the Next Generation Bitcoin Stablecoin Projects and Their Technical Framework

Recently, a project dedicated to issuing a new stablecoin bitUSD on Bitcoin has secured $10 million in funding, attracting widespread attention in the industry. What are the unique aspects of this BTCFi stablecoin project, affectionately referred to as "smiley face"? What is its core technological framework? Why is the BTCFi market so highly coveted? Let's delve into these questions.

The project aims to seize the market opportunity of BTCFi, integrating the advantages of multiple mature DeFi infrastructures, and has launched three core components:

1. bitUSD: This is an over-collateralized stablecoin protocol, similar to DAI. Users can deposit Bitcoin into the project treasury to mint bitUSD. It adopts the bitRC20 standard to ensure high transparency and collaborates with ZetaChain for native cross-chain functionality, ensuring circulation in a full-chain environment.

2. bitLending: This is a native trustless lending protocol. It utilizes peer-to-peer atomic swap technology to facilitate transaction matching, while introducing an insurance system to optimize the clearing process in traditional lending.

3. Credit Default Swap ( CDS ): This is an innovative derivative agreement that integrates NFT slicing CDS technology and uses an aggregation bidding method to enhance the efficiency and fairness of the CDS market.

From a technical perspective, the project has two core technical points worth noting:

First, we will collaborate with ZetaChain to achieve native cross-chain functionality. ZetaChain is a POS blockchain based on the Cosmos SDK and the Tendermint PBFT consensus engine, providing interoperability services in an entire chain environment. For Bitcoin, which lacks smart contract capabilities, ZetaChain can deploy light nodes and perform multi-signature operations based on the ECDSA signature algorithm, ensuring secure cross-chain by effectively tracking and managing UTXO on Bitcoin. Furthermore, ZetaChain's full-chain smart contract features give it the potential to achieve transparent management of assets across the entire chain.

Secondly, the bitRC20 standard draws on the concept of inscriptions for asset issuance on the Bitcoin mainnet. When users collateralize BTC, they first need to bridge assets through the official channel. After the project’s layer2 chain confirms the user’s collateralized assets and completes consensus verification, it will send a minting instruction for bitUSD to the Bitcoin mainnet. Unlike traditional BRC20 inscriptions that require a preset total supply, bitRC20 introduces Mint and Burn operations to meet the dynamic supply adjustment needs of stablecoins. This flexible inscription issuance method is more conducive to practical applications and empowerment.

Mainstream capital is rushing into the BTCFi market, and DeFi infrastructure providers like these are also actively laying out their plans, mainly for two reasons:

On one hand, the BTCFi market has a huge asset increment space. Currently, the total locked value in the BTC network is only $1.6 billion, accounting for 0.14% of the total market value of BTC, which still has a growth potential of 50-100 times compared to the asset locking rates of networks like ETH and Solana. Moreover, its funding sources are not limited to on-chain but also include a large amount of off-chain demand behind BTC+ETH ETF funds.

On the other hand, after mastering core applications related to BTC assets such as stablecoins, lending, and derivatives, its application scenarios will radiate throughout the entire blockchain environment, expected to invigorate and lead the innovation of the entire blockchain DeFi model, having a profound impact on users.