Author: Yala

TL; DR

Bitcoin's initial design prioritized security and decentralization over complex features like smart contracts and DeFi applications. Therefore, Yala has created a modular architecture on the Ordinals protocol, integrating a decentralized indexing network and Oracles to introduce smart contract capabilities to Bitcoin, thereby issuing the stablecoin $YU. Based on this modular design, $YU can freely participate in any DeFi activities across chains, unlocking Bitcoin's immense liquidity.

Yala aims to establish a modular DeFi yield aggregator for Bitcoin, ensuring security and decentralization through mechanisms such as federated voting indexers (ultimately leading to a fully decentralized indexer) and Bitcoin vaults with threshold signatures, while guaranteeing democratic participation and decentralized governance through the community. By achieving large-scale adoption of decentralized finance on the world's most resilient blockchain—Bitcoin—while maintaining its core principles of security and decentralization, Yala hopes to become the preferred path and solution.

Limitations of Bitcoin in Smart Contracts and DeFi Development

Bitcoin is the most groundbreaking decentralized cryptocurrency, designed with an emphasis on security and decentralization. Its scripting language was initially intended to facilitate simple peer-to-peer value transfers rather than complex financial functions. As the DeFi ecosystem flourished on more flexible blockchains like Ethereum, Bitcoin was unable to serve as the infrastructure to meet its demands due to architectural limitations, including block size and frequency restrictions.

The blockchain scalability dilemma highlights the challenges of balancing security, decentralization, and scalability, where each aspect is crucial for DeFi applications. Bitcoin prioritizes the first two, thus failing to meet the high transaction volume and real-time requirements of DeFi. Undoubtedly, Bitcoin holders need a secure and seamless mechanism to participate in the growing DeFi ecosystem, a need that has long been met for users of Ethereum and other EVM-compatible blockchains.

Ethereum has implemented scalability solutions such as sharding, Rollups, and modularity, while Bitcoin has more conservatively explored layer two solutions for scaling without compromising its ideals. However, to fully embrace DeFi and provide yields for holders, Bitcoin must consider the following strategies:

1. Enhance DeFi Functionality: Bitcoin can also explore sharding, Rollups, and other scalability solutions to enhance its DeFi functionality while maintaining its core principles of security and decentralization. Careful implementation and rigorous testing will ensure that the integrity and decentralization of the network are not compromised.

2. Embrace Modularity: Modular design principles can introduce new features and functionalities tailored for DeFi without compromising the security and decentralization of the core protocol. This will enable Bitcoin to evolve and adapt to the changing DeFi landscape, providing Bitcoin holders with opportunities to generate yields and participate in the DeFi ecosystem.

3. Layer Two Scaling Solutions: Bitcoin developers are focusing on second-layer solutions, such as the Lightning Network and sidechains, to enhance scalability outside the main chain. However, these solutions add complexity and reliance on independent governance protocols. To truly embrace DeFi and provide Bitcoin holders with a smooth yield-generating experience, Bitcoin may need to explore more integrated and user-friendly solutions.

As the DeFi ecosystem evolves, Bitcoin must remain flexible and innovative to offer its holders the same opportunities as users in other ecosystems to participate in the ever-developing DeFi landscape. This requires innovators within the ecosystem to understand and anticipate the rapidly evolving demands of the DeFi ecosystem while remaining aligned with Bitcoin's core principles. Typically, this necessitates a decentralized, accessible, and economically empowering approach for individuals.

$YU: A Cross-Chain Yield Stablecoin Based on Bitcoin

The rise of DeFi has opened new opportunities for financial innovation, but Bitcoin's architectural limitations hinder its full participation in this rapidly evolving ecosystem. Yala's solution is to leverage Bitcoin's unique attributes to introduce DeFi functionalities, focusing on providing a Bitcoin-backed stablecoin that can earn yields natively across multiple chains.

Ordinals Protocol: Opportunities for Bitcoin DeFi

Inscriptions are a groundbreaking innovation enabled by the Ordinals protocol, allowing for the direct issuance and management of digital assets on the Bitcoin blockchain. By assigning a unique identifier to each satoshi (the smallest unit of Bitcoin), inscriptions enable the creation of non-fungible tokens (NFTs) and other digital assets on the Bitcoin network, including Yala's Bitcoin-backed stablecoin.

The Ordinals-based Meta protocols (BRC-20, BRC-100, BRC-420, etc.) allow the Bitcoin network to integrate indexers, paving the way for the development of a true DeFi ecosystem on Bitcoin.

Yala's Bitcoin-Backed Stablecoin: Earning Yields Across Chains

Yala's modular design introduces programmable smart contracts and DeFi applications to Bitcoin, including the Bitcoin-native stablecoin $YU, which can earn yields across multiple chains. For detailed technical design, please refer to Yala's white paper. By leveraging robust security frameworks without EVM, such as those found in Ethereum or Solana, Yala's stablecoin products, including lending/borrowing protocols, liquidity pools, and governance contracts, are formally verified to ensure mathematical correctness.

With the Bitcoin-native stablecoin $YU, users can participate in DeFi opportunities across various blockchain networks, earning yields without sacrificing the security and decentralization principles of the Bitcoin network.

Robust Security and Decentralization

Yala's solution prioritizes security and decentralization, aligning with Bitcoin's core principles. The federated voting indexer network mitigates the risks of centralized BRC-20 indexing, while strict data validation and consensus protocols ensure the reliability and integrity of maintained token balance information. Notably, the federated voting indexer is a transitional solution, and Yala is committed to promoting the construction of decentralized indexers.

Collaboration with Nubit provides additional data availability verification for indexing actions, while the BRC-20 black-and-white module separates deposit and withdrawal transactions to ensure security.

Execution Layer and Oracle Network

At the execution layer, Bitcoin asset management utilizes Bitcoin vaults with threshold signatures to ensure robust security without single points of failure. Yala's decentralized Oracle network also provides tamper-proof real-time price data, which is crucial for managing liquidations and maintaining stablecoin pegs.

By introducing a Bitcoin-backed stablecoin that can earn yields across multiple chains, Yala is unlocking Bitcoin's potential in the rapidly evolving DeFi ecosystem. This approach combines Bitcoin's strong security and decentralization with the innovation and flexibility of DeFi, creating a powerful, user-centric blockchain ecosystem for a diverse digital economy.

Building a True DeFi Ecosystem for Bitcoin

At Yala, our vision is to create a thriving, open ecosystem that unleashes the full potential of Bitcoin DeFi.

1. Unlocking the Untapped Potential of Bitcoin Assets: Yala is committed to unlocking the full potential of DeFi on Bitcoin. With the Bitcoin-backed stablecoin $YU, we will provide Bitcoin holders with native yields from all other chains.

2. Promoting the Democratization of DeFi Participation: Our vision is to promote the democratization of DeFi, enabling any individual or organization to participate in a transparent, autonomous, and decentralized financial system. Our goal is to build an open ecosystem where various DeFi applications can seamlessly interact and combine, driving innovation, collaboration, and shared value creation.

3. Supporting Decentralized Governance of Lending Protocols: We will strive for decentralization and community governance, transforming the governance structure of our lending protocol into a decentralized autonomous organization (DAO) to enable broader community participation in the evolution of the Yala ecosystem. We aspire to create a self-sustaining, resilient, and continuously evolving DeFi ecosystem on Bitcoin through openness and collaboration.

4. Expanding the DeFi Landscape for Bitcoin: Yala's ultimate goal is to establish itself as the premier DeFi infrastructure for Bitcoin. We envision a future where individuals and organizations can access a wide range of secure, transparent, and decentralized financial services, products, and opportunities within the Bitcoin ecosystem.

Together, we will build a true DeFi ecosystem on the world's most secure and resilient blockchain—Bitcoin—driving large-scale adoption of decentralized finance and opening a world full of opportunities.

About Yala

Yala is a decentralized finance protocol based on the Bitcoin-native stablecoin YU, bridging Bitcoin liquidity. As a powerful asset and liquidity enhancement tool, the stablecoin $YU operates across multiple ecosystems, improving efficiency without the need for bridging or reconfiguring the underlying Bitcoin. Yala empowers Bitcoin holders and ecosystem participants while maintaining the security of Bitcoin's infrastructure, unlocking its liquidity.