Comprehensive Interpretation of BTCFi: From Lending to Staking, Build Your Own Mobile Bitcoin Bank

As Bitcoin's position in the financial market solidifies, the BTCFi( Bitcoin financial) sector is rapidly becoming the forefront of cryptocurrency innovation. BTCFi encompasses a range of Bitcoin-based financial services, including lending, staking, trading, and derivatives. This article delves into several key tracks of BTCFi, exploring stablecoins, lending services( Lending), staking services( Staking), restaking services( Restaking), as well as the combination of centralized and decentralized finance( CeDeFi).

Overview of the BTCfi Track

BTCFi(Bitcoin Finance) is like a mobile Bitcoin bank, encompassing a series of financial activities centered around Bitcoin, including Bitcoin lending, staking, trading, futures, and derivatives. According to data from CryptoCompare and CoinGecko, the BTCFi market reached approximately $10 billion in 2023. Data from Defilama predicts that by 2030, the BTCFi market will reach a scale of $1.2 trillion, which includes the total locked value(TVL) of Bitcoin in the decentralized finance(DeFi) ecosystem, as well as the market size of Bitcoin-related financial products and services. Over the past decade, the BTCFi market has shown significant growth potential, attracting more institutional participation, such as Grayscale(, BlackRock), and JPMorgan( starting to venture into the Bitcoin and BTCFi markets. The participation of institutional investors has not only brought in a large influx of capital, increasing market liquidity and stability, but also enhanced the maturity and regulation of the market, bringing greater recognition and trust to the BTCFi market.

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BTCFi Track Segmentation

) 1. Stablecoin stablecoin track

Stablecoins are a type of cryptocurrency designed to maintain a stable value. They are typically pegged to fiat currencies or other valuable assets to reduce price volatility. Stablecoins achieve price stability through reserve asset backing or algorithmic supply adjustments, and are widely used in scenarios such as trading, payments, and cross-border transfers, allowing users to enjoy the benefits of blockchain technology while avoiding the extreme volatility of traditional cryptocurrencies.

The classification of stablecoins based on the degree of centralization and the type of collateral are two relatively intuitive dimensions. Among the mainstream stablecoins currently, classified by degree of centralization, we can divide them into centralized stablecoins represented by USDT, USDC, and FDUSD, as well as decentralized stablecoins represented by DAI, FRAX, and USDe. Classified by type of collateral, they can be divided into fiat/physical collateral, crypto asset collateral, and under-collateralized.

According to DefiLlama data on July 14, the total market value of stablecoins is currently reported at $162.372 billion. In terms of market value, USDT and USDC are far ahead, with USDT leading by a wide margin, accounting for 69.23% of the total stablecoin market value. DAI, USDe, and FDUSD follow closely behind, ranking 3rd to 5th in market value. All other stablecoins currently account for less than 0.5% of the total market value.

Centralized stablecoins are mostly fiat-backed or asset-backed, essentially being RWA of fiat or other physical assets. For example, USDT and USDC are pegged 1:1 to the US dollar, while PAXG and XAUT are pegged to the price of gold. Decentralized stablecoins are generally backed by crypto assets or are uncollateralized ### or under-collateralized (. DAI and USDe are both backed by crypto assets, which can be further divided into fully collateralized or over-collateralized. Uncollateralized ) or under-collateralized ( are typically referred to as algorithmic stablecoins, represented by FRAX and the former UST. Compared to centralized stablecoins, decentralized stablecoins have a lower market value, are slightly more complex in design, and have given rise to several star projects. In the BTC ecosystem, the stablecoin projects worth paying attention to are all decentralized stablecoins, so below we will introduce the mechanisms of decentralized stablecoins.

)# Project One, Bitsmiley Protocol

The first native stablecoin project in the BTC ecosystem.

On December 14, 2023, OKX Ventures announced a strategic investment in the stablecoin protocol bitSmiley based on the BTC ecosystem, which allows users to over-collateralize native BTC to mint the stablecoin bitUSD on the BTC network. At the same time, bitSmiley also encompasses lending and derivatives protocols, aiming to provide a new financial ecosystem for Bitcoin. Previously, bitSmiley was selected as a quality project in the BTC hackathon jointly organized by ABCDE and OKX Ventures in November 2023.

On January 28, 2024, it was announced that the first round of token financing was completed, with OKX Ventures and ABCDE leading the investment, and CMS Holdings, Satoshi Lab, Foresight Ventures, LK Venture, Silvermine Capital, as well as relevant individuals from Delphi Digital and Particle Network participating. On February 2, LK Venture, under the Hong Kong-listed company Blueport Interactive, announced on platform X that it had participated in the first round of financing for bitSmiley through the Bitcoin network ecological investment management fund BTC NEXT. On March 4, KuCoin Ventures tweeted to announce a strategic investment in the Bitcoin DeFi ecological project bitSmiley.

bitSmiley is a Bitcoin native stablecoin project based on the Fintegra framework. It consists of the decentralized over-collateralized stablecoin bitUSD and the native trustless lending protocol (bitLending). bitUSD is based on bitRC-20, which is a modified version of BRC-20, and is compatible with BRC-20. bitUSD has introduced Mint and Burn operations to meet the needs of stablecoin minting and burning.

bitSmiley launched a new DeFi inscription protocol called bitRC-20 in January. The protocol's first asset, OG PASS NFT, is also known as bitDisc. bitDisc is divided into two levels: Gold Card and Black Card, with Gold Cards allocated to Bitcoin OGs and industry leaders, totaling fewer than 40 holders. Starting from February 4, the Black Card will be made available to the public through a whitelist event and public minting event in the form of BRC-20 inscriptions, causing temporary on-chain congestion. Subsequently, the project team announced that they would compensate for unsuccessful inscriptions.

$bitUSD stablecoin operating mechanism:

The operation mechanism of $bitUSD is similar to that of $DAI. First, users over-collateralize, and then the bitSmileyDAO on L2 issues a Mint bitRC-20 message to the BTC mainnet after receiving oracle information and conducting consensus verification.

The logic of liquidation and redemption is similar to that of MakerDAO, with liquidation taking the form of a Dutch auction.

bitSmiley will launch Alphanet on BitLayer on May 1, 2024. Among them, the maximum loan-to-value ratio of ( LTV ) is 50%. To prevent users from being liquidated, a relatively low LTV ratio has been set. As the adoption rate of bitUSD increases, the project team will gradually raise the LTV.

bitSmiley and the Merlin community will launch an exclusive liquidity incentive grant starting from May 15, 2024, to increase the liquidity of bitUSD. The detailed rules are as follows:

bitSmiley will provide up to 3,150,000 $BIT tokens as rewards to members of the Merlin community. The rewards will be unlocked based on user behavior in the Merlin community. Season One duration: May 15, 2024 --- August 15, 2024.

Reward method: The incentive is provided through two ways: reaching the target for minting bitUSD and adding liquidity to the bitUSD pool on bitCow. The liquidity incentive fund will be distributed based on the bitPoints obtained by users on the Merlin chain. The more points users earn, the more token incentives they will receive.

(# Project Two, Bamk.fi)NUSD###

The Bamk.fi protocol is the issuer of NUSD ( Nakamoto Dollar ), NUSD is a synthetic dollar on Bitcoin L1. NUSD circulates on the BRC 20-5 byte and Runes protocol (, and currently both are equivalent ).

The project design has two phases. In the first phase, NUSD is supported by USDe at a 1:1 ratio. Holding NUSD allows for the accumulation of BAMK### in each block; the earlier you have NUSD, the more BAMK( you can obtain. In the second phase, NUSD will be fully supported by delta-neutral Bitcoin positions and will earn native yields, namely "Bitcoin bonds", while initiating BTC-based minting and exchange. However, the current minting method provided on the official website is a 1:1 minting with USDT.

The project token BAMK mentioned above is in the form of runes, with the rune code BAMK•OF•NAKAMOTO•DOLLAR, minted on April 21, 2024, with a maximum supply of 21,000,000,000)210 billion(. Of this, 6.25% of the supply has been provided as rewards to all NUSD holders. You only need to purchase NUSD and keep it in your wallet to start accumulating BAMK tokens. Each block between 844,492 and 886,454 - a total of 41,972 blocks will accumulate 31,250 BAMK, proportionally distributed to users based on the total NUSD TVL divided by the block height.

)# Project Three, Yala Labs

Yala, through its self-built modular infrastructure, enables its stablecoin $YU to flow freely and securely across various ecosystems, releasing BTC liquidity and bringing significant capital vitality to the entire crypto ecosystem.

Core products include:

• Over-collateralized stablecoin $YU: This stablecoin is generated through over-collateralization of Bitcoin, and the infrastructure is not only based on the native Bitcoin protocol but can also be deployed freely and securely in EVM and other ecosystems.

• Metamint: The core component of $YU that enables users to conveniently mint $YU using native Bitcoin across various ecosystems, injecting Bitcoin's liquidity into these ecosystems.

• Insurance Derivatives: Providing comprehensive insurance solutions within the DeFi ecosystem, creating arbitrage opportunities for users.

To facilitate users in utilizing $YU across various ecosystems, the Metamint solution has been launched. Whether using native Bitcoin or wrapped BTC on EVM as collateral, users can easily mint $YU on any target chain. To lower the usage threshold, users do not need to manually package Bitcoin; they simply need to collateralize BTC, and the system will automatically generate the required wrapped BTC for the target chain in the background, thus minting $YU on the target chain.

Through this seamless asset conversion solution, users can participate in various DeFi protocols across ecosystems, including cross-chain yield farming, staking, and other DeFi activities, opening up new earning opportunities. This multi-chain solution significantly enhances users' potential to achieve greater returns. Unlike traditional stablecoin companies that concentrate profits, Yala returns system-generated fees to core $YU holders, ensuring that users can directly benefit from the growth of the ecosystem.

Features and Advantages:

1. Use Bitcoin as the primary collateral while also enjoying the security and resilience of the Bitcoin network.

2. Users can participate in various DeFi activities and earn returns through $YU.

3. Yala follows a user-centric decentralized governance structure, and the revenue will also be returned to core users.

Through collaboration with outstanding projects, Yala provides users with various earning opportunities while ensuring security. For example, through cooperation with Babylon, Yala users can over-collateralize BTC on the platform and mint the stablecoin $YU, and then further stake these collateral on the Babylon platform to achieve multiple earnings. Since the Babylon staking protocol does not require third-party custody, this integration guarantees the absolute safety of user assets while enhancing earnings.

Yala's roadmap focuses on building a robust liquidity layer that connects Bitcoin to the outstanding Layer 1 and Layer 2 ecosystems in the market. To ensure security and optimal user experience, Yala will launch its mainnet and testnet in phases:

• Testnet V0: $YU stablecoin issuance, Pro mode, oracle and oracle;

• Testnet V1: Lightweight mode of $YU stablecoin with meta yield;

• V1 Release: Insurance Module and Security Upgrade.

• V2 Launch: Governance Framework Initiated.

The launch of the test network is approaching gradually, and Yala has already received support from first-line funds. Please look forward to the announcement of recent financing news regarding specific institutions and valuation.

(# Project Four, Satoshi Protocol

The first CDP stablecoin protocol in the BTC ecosystem, based on the BEVM ecosystem.

Satoshi Protocol announced the completion of the seed on March 26, 2024.