The BTC ecosystem is thriving, exploring new opportunities in DeFi

Author: veDAO Research Institute

The outstanding performance of the BTC ecosystem this year has been remarkable, with a wave of new native protocols emerging one after another. The ecosystem surrounding protocols like Ordinals, Atomicals, Stacks, and RGB has rapidly become rich and diverse, with many promising projects worth sharing. More importantly, Bitcoin's strong performance has captured market attention recently, attracting more capital inflow, leading to significant price increases in BRC-20 and BTC ecosystem tokens, and presenting numerous investment opportunities. This issue will analyze the pros and cons of entering the BTC ecosystem market for investment at this time and share a review of potential DeFi projects.

Image source: Coinmarketcap November 21, 2023

Pros and Cons Analysis of the Bitcoin Ecosystem

Advantages Analysis:

1. Market Hotspot Track

In the past month, Bitcoin's price has surged from $25,000 to $37,000, an increase of over 40%. This upward trend is enough to attract market attention in the short term, whether from professional investment institutions, numerous retail investors, or speculative players, leading to a significant influx of capital into the BTC ecosystem track.

2. Market Hot Money & New Market Participants

The sustained rise in Bitcoin's price has drawn attention and discussions, bringing in a large amount of capital for BTC ecosystem projects. This capital not only helps promote the development of existing new projects but also provides essential nutrients for projects that are currently being incubated. Furthermore, with new concepts like Ordinals and BRC20 undergoing market testing for half a year, the recent surge in ecosystem tokens has encouraged more newcomers, who were previously cautious, to enter the market with confidence. The growth of funds and players has enabled the entire BTC ecosystem to operate in a healthy cycle, making it more sustainable.

3. Upgrades of Existing Protocols & Emergence of New Protocols

The BTC ecosystem has been activated by innovations such as the Ordinals protocol and BRC20 tokens since the beginning of the year. Subsequently, protocols like ORC20, Atomicals, Stacks, Lightning Network, RGB, Taproot, BRC100, BRC420, Rootstock, and BEVM have all contributed to the ecosystem's development, demonstrating its vitality and active growth phase. This multidimensional influx of power into the Bitcoin chain suggests that more new protocols will emerge, and many planned protocols can proceed as scheduled, enabling smooth token issuance, enhanced liquidity in DeFi, richer trading pairs, real GameFi implementations attracting more players, and a wider variety of NFT products, along with continuous infrastructure improvements.

4. Low Investment, High Return Opportunities

Firstly, the threshold for participation in investment is relatively low, which is a common advantage in the BTC ecosystem, as many gameplay mechanics are entirely new. For example, the initial inscription engraving allows players to easily experience the latest gameplay while also participating as an investment. For instance, players who participated in minting SATS tokens have seen their prices multiply by ten times, with the highest price increasing by more than fifteen times. Compared to participating in established ecosystems, such high-return opportunities are indeed rare. The BTC ecosystem is in a phase of new development, with a continuous stream of new protocols and gameplay, bringing excitement and more opportunities to the crypto space.

Risk Analysis:

1. The initial stage of ecosystem development lacks sufficient infrastructure, making basic operations like hardware deployment difficult and costly, with most realizable transactions still requiring offline OTC trading;

2. Indirect security issues arise from using offline OTC trading, which carries risks of scams;

3. Poor user experience, as most new protocols require a significant amount of order waiting time, leading to prolonged transaction congestion;

4. The timing of when the hype and market hotspots will fade is a concern; once Bitcoin's price retracts, the impact on the ecosystem and potential bubbles needs careful consideration.

Highlighted Projects Sharing

1. ALEX

ALEX is an open-source Bitcoin DeFi platform based on the Stacks ecosystem and is currently one of the most important protocols on Stacks. As of the date of writing, the TVL on Stacks has reached 18M, with ALEX's TVL accounting for 14M. ALEX offers products including a Credit launchpad, DEX, order book, and futures contracts, functioning like Uniswap on the BTC chain, allowing users to swap, stake, lend, and mine liquidity in a fully decentralized manner.

As a DeFi platform, ALEX also provides risk-free lending, offering users a secure way to lock their assets in contracts to earn interest or execute other financial operations without worrying about liquidation risks from market fluctuations.

With the future development of the Stacks platform and the iteration of Bitcoin technology, more projects will be built on Stacks, and ALEX's Launchpad service provides a starting point for these projects. This is a very forward-looking feature that will significantly enhance the sustainability of ALEX's platform development.

ALEX has launched its governance token $ALEX, currently valued at $36M, with a circulating supply of 600 million tokens, providing users with the opportunity to participate in the platform and enjoy potential future appreciation. The project raised $5.8 million in November 2021 and $2.5 million in March 2023, totaling $8.3 million in funding.

Related URL: https://app.vedao.com/projects/ec1617b8a9b07b64bafc2c00e26512573a6f8f237b0c82a5cc4d2535d8bb0a5f

2. Arkadiko

Protocol Arkadiko is a decentralized liquidity protocol based on Stacks. The project focuses on the need for decentralized stablecoins in every ecosystem, and Arkadiko serves as the stablecoin project for the Bitcoin Stacks ecosystem.

Through Arkadiko, users can use their native Stacks token $STX as collateral to mint Arkadiko's own stablecoin USDA, while the project also supports swaps and lending. USDA can be used to farm within the Arkadiko protocol to repay loans, with farming yields generated through participation in the Stacks consensus mechanism known as Proof of Transfer (POX).

Related URL: https://app.vedao.com/projects/4739bc9a8ecb74dc8f25e46080a18c091adc2c0784a4dbaf88d6c8ba1f615559

3. Sovryn

Sovryn is the first non-custodial smart contract application for Bitcoin lending and margin trading on the Rootstock network. Unlike traditional Ethereum DeFi models, Sovryn allows its users to borrow, lend, and leverage Bitcoin's inherent assets without sacrificing key custody. Additionally, users have direct voting rights under the governance of the Bitocracy system protocol. Sovryn also introduces EVM-compatible Ethereum-style smart contracts to Bitcoin, a significant innovation as developers believe Bitcoin is the center of cryptocurrency, with more users and liquidity, and is utilized by major institutions.

Sovryn provides users with the following specific services:

• Lending pools: Users can earn interest by lending their tokens to borrowers and margin traders;

• Margin trading: Users can create long and short trades with leverage up to 5x;

• Spot exchange: The platform acts as an automated market maker (AMM), allowing for instant trading between different tokens at low cost and low slippage;

• Fast BTC relay: Users can instantly utilize Bitcoin with any BTC wallet through smart contracts and other decentralized products.

The project has a token SOV, currently valued at $11 million, with a circulating supply of 37 million tokens. The project raised $2.1 million in 2020, followed by three rounds of funding in 2021 totaling $25 million, $10 million, and $9 million, and $5.4 million in 2022, amounting to a total of $29 million in funding.

Related URL: https://app.vedao.com/projects/d58aeeb08941cc23cac2a10b7b0ad001af4ca82d12ba6fddc6272aeb97e7a631

4. MoneyOnchain

MoneyOnChain is a decentralized, Bitcoin-backed stablecoin protocol built on RSK. Supported by Bitcoin, the protocol consists of four tokens, providing several use cases for Bitcoin holders, including leveraged Bitcoin operations.

• The first token is Dollar on Chain (DOC). DOC is a stablecoin pegged to the US dollar, allowing users to quickly send and receive any amount of DOC.

• The second token is BitPRO (BPRO), designed specifically for Bitcoin holders to earn passive income from their tokens. BPRO holders have several income sources: they receive a proportion of the fees charged by the platform, interest rates, and small leverage from Bitcoin price movements. BPRO absorbs unwanted Bitcoin volatility from DOC and sells it to BTC2X.

• The third token is BTC2X, which is prepared for traders who wish to bet on Bitcoin's price doubling. Traders pay interest on these long positions, which goes to BitPro, which also earns a proportion of the platform fees and receives subsidies in the form of MOC tokens.

• Money On Chain (MoC Token) is the fourth token. It is designed to manage a decentralized autonomous organization (DAO) and can also be used to pay for platform usage fees, which are lower than BTC. MoC holders will also be able to earn rewards for providing services to the platform. MoC token holders will vote on contract modifications and new features. At a fundamental level, the DAO decides whether to update the smart contract code.

Related URL: https://app.vedao.com/projects/8e91a9755178d698483a2770b9727a0038573fa645cbde5dad9bc6747d0338a6

5. BEVM

BEVM is an EVM-compatible BTC Layer 2, with the core goal of expanding the smart contract landscape for Bitcoin, allowing BTC to break free from the constraints of being non-Turing complete and not supporting smart contracts on the Bitcoin blockchain, enabling the construction of decentralized applications with BTC as the native GAS on BEVM Layer 2.

The design philosophy of BEVM is to utilize Bitcoin's native technology to achieve a decentralized BTC Layer 2 without altering Bitcoin's original technical framework. This is achieved through Musig2 multi-signature technology and Bitcoin light nodes, enabling decentralized cross-chain transactions from BTC to Layer 2. Since Layer 2 is fully EVM-compatible, it allows for the easy implementation of various decentralized applications using BTC.

Because BEVM is an EVM-compatible Layer 2, all decentralized applications that can be deployed on the ETH EVM, such as DeFi, GameFi, SocialFi, and NFTFi, can also be deployed on BEVM. The only difference is that ETH Layer 2 uses ETH as GAS, while BTC Layer 2 uses BTC as GAS. Each transaction on BTC Layer 2 will be packaged to BTC Layer 1 at a ratio of 10:1 by a sequencer, allowing BTC Layer 2 to share the security of BTC Layer 1. In the long run, this BTC Layer 2 solution aims to enhance scalability, reduce costs, and foster a more secure and decentralized financial ecosystem, which is significant for Bitcoin's long-term development.

Related URL: https://app.vedao.com/projects/68762f34fb71dd6c2fb59b5cb7b2b590828b9d2eb3a05f9fe0ebae2fe52a53c4

6. HOTFI

HOTFI is a liquidity solution built on the ordinal protocol and EVM protocol, constructed on BRC20 standard tokens, which will introduce Launchpad functionality to promote the launch of high-quality projects, aiming to provide continuous development momentum for the DeFi ecosystem within ordinals.

HOTFI offers the following features for ordinal users:

• Decentralized peer-to-peer matching trading functionality for BRC20 standard tokens;

• Real-time swap functionality;

• Allows users to provide liquidity through AMM and earn passive income;

• Stake section, where users can deposit their BRC20 tokens and earn farming rewards;

• Community support and open DAO governance, collaboratively building the DEFI ecosystem with users.

The DeFi functionalities provided by HOTFI cover almost all common user needs, and based on this, through more community participation and DAO governance mechanisms, as well as attention to and introduction of future high-quality projects, it progressively accumulates strength for the Ordi ecosystem. As the BTC ecosystem and BRC20 tokens continue to grow and develop, HOTFI is expected to become a crucial part of the ecosystem.

Related URL: https://app.vedao.com/projects/a918b86f73d85939b7dcbe82d57baeb26685e273ce559a95cded8e2295e07060

7. Orders

Exchange Orders is the first fully operational DEX on the Bitcoin network, with its order book entirely running on the Bitcoin network. Orders aims to witness a trustless order book DEX, liquidity pool, exchange DEX, and LaunchPad, fully leveraging the potential of Bitcoin Layer 1, supported by the ordinal protocol, PSBT technology, Bitcoin scripts, and the revolutionary Nostr protocol.

Highlights of Orders:

• Orders cleverly learns from the NFT gameplay of blur, presenting a chain-based DEX system for the currently complex and hard-to-trade BRC20 tokens;

• Combines liquidity mining, order book, and buy-sell mechanisms (Ask & Bid) - with a simple and user-friendly interface, very similar to blur's gameplay, making it easy to use;

• The project token RDEX has practical application value and offers excellent liquidity as a trading pair;

• The team has a deep-rooted professional background, and their technical capabilities can be verified from the white paper.

Currently, Orders has released a Beta version, which is already available for use, with actual landing scenarios and usage demands. The team's professional capabilities reflected in the white paper also inspire confidence in the project's development. However, as the first DEX on the Bitcoin network, the project certainly has many mechanisms to optimize in the future, and based on the token distribution mechanism, there are potential risks similar to future dumps, so it is recommended to consider investing in RDEX tokens after gaining interest and understanding.

Related URL: https://app.vedao.com/projects/2ab96b9fe98ac1bb44c7ecf1725728d04e43c42d3f3389033ed39559d9a6129f

8. MultiBit

MultiBit is the first-ever bi-directional bridge designed for cross-network transfers between BRC20 and ERC20 tokens. Its most significant advantage lies in the liquidity of BRC20 tokens, breaking down barriers between different blockchain networks. This innovative design also enhances token accessibility, allowing users to transfer more conveniently and flexibly between different networks.

MultiBit simplifies the token transfer process between Bitcoin BRC20 and EVM networks. First, users transfer BRC20 tokens to a dedicated BRC20 address. Once confirmed, these tokens are ready to be minted on the EVM network. However, MultiBit's uniqueness lies in its dual bridging functionality, enabling seamless transfers back to Bitcoin from the EVM network.

Undoubtedly, MultiBit breaks the barriers between BRC20 and the outside world, significantly promoting the development of the BTC ecosystem, which is foreseeable and commendable. Additionally, MultiBit emphasizes promoting the liquidity and accessibility of BRC and ERC tokens in a secure and user-friendly manner, providing users with a trustworthy and reassuring environment for use. The realization and assurance of this will endow MultiBit with more development potential, as security and convenience are essential qualities for a cross-chain project to thrive and endure.

Related URL: https://app.vedao.com/projects/61a2110e7fda9645ccd1ee03e7db376c044c009dcc115b0aa9900e1eaa451150

9. Bitlight Labs (Cosminmart)

Bitlight Labs develops infrastructure based on the RGB protocol and deploys multiple applications on the Lightning Network. Among them are Bitswap and Bitlight wallets, establishing an ecosystem that provides users with more trading and interaction methods, achieving faster and maximized transactions.

Its features include:

• A smart contract system capable of managing rich states;

• Using Peter Todd's client verification example: data is held by "national owners" (such as asset owners) rather than public recognition;

• Graph operations above Bitcoin transactions, which can come from Lightning channels on the Bitcoin blockchain;

• Scripts can be written using Blockstream's Turing-verified Simplicity scripting language.

Lightning Labs' open-source, secure, and scalable Lightning system enables users to send and receive funds more efficiently than ever before. Lightning Labs also offers a range of verifiable, non-custodial financial services based on the Lightning Network.

Related URL: https://app.vedao.com/projects/305adabf878756efea2ebb55de51eb5f6d564e1657b01820ed8635f36b19a3dd