The Rise of Rising Stars in the BTCFi Track: Analyzing the Innovation and Potential of Bitcoin Stablecoin Projects

Recently, a high-profile Bitcoin stablecoin project received a new round of funding of $10 million, aiming to accelerate the implementation of its bitUSD stablecoin. What is so unique about this BTCFi project, affectionately known as the “Smiley Face” in the industry? What is its core technical framework? Why is the BTCFi market so widely favored? Let’s dive into these questions together.

Core Components of the Project

Drawing on the successful experience of the Ethereum DeFi ecosystem, the project combines the advantages of algorithmic stablecoins and lending platforms to launch three core components:

1. bitUSD: This is an over-collateralized stablecoin protocol, similar to DAI. Users can mint bitUSD by depositing Bitcoin. The protocol uses the bitRC20 standard, which ensures a high degree of transparency, and works with cross-chain solutions to enable circulation in a full-chain environment.

2. bitLending: This is a decentralized lending protocol that uses a peer-to-peer model and atomic swap technology to enable transaction matching. At the same time, it has also introduced an insurance system to optimize the clearing process in traditional lending.

3. Credit Default Swap (CDS): This is an innovative derivatives protocol that integrates NFT cutting CDS technology and uses an aggregated bidding method to improve the efficiency and fairness of the CDS market.

Core Technology Highlights

1. Native cross-chain technology: The project works with a POS blockchain based on the Cosmos SDK and Tendermint PBFT consensus engine to provide a series of interoperability solutions. Since Bitcoin does not have a smart contract function, this cross-chain technology enables the effective tracking and management of Bitcoin UTXOs by deploying light nodes and performing multi-signature operations based on the ECDSA signature algorithm, thus ensuring secure cross-chain operations.

2. bitRC20 standard: This is an innovative asset standard that borrows from Bitcoin inscription technology. When users need to overcollateralize BTC, they can bridge assets through the official one. The project’s Layer 2 chain will pass the instruction to mint bitUSD to the Bitcoin mainnet after confirming the user’s collateral assets and conducting consensus verification. Unlike traditional BRC20 inscriptions, the bitRC20 standard adds Mint and Burn operations to meet the needs of stablecoins to dynamically adjust their supply.

The attractiveness of the BTCFi market

There are two main reasons why the BTCFi market has attracted so much attention:

1. Huge market potential: Currently, the total locked value of the Bitcoin network accounts for only 0.14% of its total market value, leaving 50-100 times the growth potential compared to networks like Ethereum and Solana. In addition, the funding sources for BTCFi are not limited to on-chain but also include the vast off-chain demand behind the BTC+ETH ETF funds.

2. Strategic Layout: Mastering the applications of core BTC assets such as stablecoins, lending, and derivatives can not only secure a favorable position in the BTCFi field but also radiate across the entire blockchain environment. This layout is expected to invigorate and lead the innovation of DeFi models, bringing more value to users.

As the BTCFi project continues to grow and improve, we can expect to see more innovative solutions and use cases emerge, which will bring new vitality and opportunities to the entire cryptocurrency ecosystem.