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How does bitSmiley "lead the ecosystem with points" and build the BTCfi ecosystem through stablecoins?

How does bitSmiley "lead the ecosystem with points" and build the BTCfi ecosystem through stablecoins?

BlockBeatsBlockBeats2024/11/04 06:00
By:BlockBeats

With Bitcoin’s native stablecoin as the core, unleashing the infinite potential of Bitcoin’s liquidity

Bitcoin, the "mother chain" that accounts for 60% of the total market value of cryptocurrencies, has had too much liquidity that has not been released for many years. Last year, the explosion of the Ordinals protocol reopened the "Pandora's Box" of Bitcoin value exploration. With the emergence of BRC-20, Atomicals, and Runes, the exploration of issuing assets on Bitcoin to release liquidity has temporarily encountered a bottleneck after the "inscription" gameplay went viral and other chains became popular and the entire market followed suit.


In addition to the exploration path of issuing assets, there is another exploration path, which is BTCfi. Compared with direct asset issuance, DeFi on Bitcoin requires longer and more rigorous construction to ensure the security and stability of receiving large amounts of funds. Although there is a probability of getting high multiples of profits by directly participating in the primary and secondary transactions of BRC-20 or runes, for larger funds, it is obvious that they hope to have a safer and more stable way to earn interest, so that the Bitcoin in their hands can be directly turned into a "golden shovel", rather than exchanging their Bitcoin for other assets and risking the loss of Bitcoin.


So, if the development path of "issuing assets directly on Bitcoin" has basically covered all the retail players that the narrative itself can attract, and it is difficult to make a greater breakthrough, the corresponding development path of "releasing the liquidity of Bitcoin itself and making Bitcoin earn interest" is in the ascendant. Many big funds are observing whether BTCfi can show enough security, stability and vitality, and even have begun to intervene in the form of investment projects.


bitSmiley, the first native over-collateralized stablecoin protocol in the Bitcoin ecosystem, is one of the very few projects that are widely recognized by big funds. This conclusion is based on its financing situation. In January this year, bitSmiley completed its first round of financing, led by OKX Ventures and ABCDE, with participation from CMS Holdings, Foresight Ventures, LK Venture, Silvermine Capital, Waterdrip Capital, Blockchain Founders Fund, ArkStream Capital, 7UpDAO, CGV FoF, Momentum Capital, Candaq Funtech, Comma3 Ventures and people from Delphi Digital. A few days ago, bitSmiley announced the completion of a second round of financing of $10 million, with participation from many well-known investment institutions such as MH Ventures, KuCoin Ventures and Skyland Ventures.


Although BTCfi is a track that big funds are more interested in, it does not mean that retail investors have no chance. Retail investors have the advantage of "small ships are easy to turn around". Since they are always at the forefront of the market, they have a good ability to observe and capture projects that have been built with faith from the very early stage of the ecosystem.


After 1 year of silent hard work, bitSmiley, the first native over-collateralized stablecoin protocol in the Bitcoin ecosystem, has already taken the lead in the BTCfi track. At a time when most stablecoin projects in the Bitcoin ecosystem are still in the pre-launch stage, the number of on-chain currency addresses of bitSmiley's stablecoin bitUSD has exceeded 20,000, and the TVL has exceeded 30 million US dollars. It has been integrated with more than 40 applications covering various categories such as Bitcoin Layer2, Oracle, DeFi, GameFi, Wallet, AI, etc.



The potential demonstrated by good narrative and solid construction results makes bitSmiley one of the few BTCfi projects that can be listed on mainstream CEX. The TGE of bitSmiley protocol token SMILE is just around the corner, and it has been launched on the Launchpad of two CEXs, Bybit and Gate.io.


Not only has it occupied a leading position in the native stablecoin track of the Bitcoin ecosystem through steady development, bitSmiley has also established a complete Bitcoin DeFi ecosystem around bitUSD, which can be described as the "MakerDAO + Compound" of the Bitcoin ecosystem.


bitSmiley Ecosystem


bitUSD


bitUSD is the core of the bitSmiley ecosystem. Similar to MakerDAO's $DAI, users need to over-collateralize Bitcoin on the Bitcoin mainnet to mint bitUSD. Correspondingly, when users need to take back the collateralized assets, they also need to destroy bitUSD. In order to meet the minting and destruction needs of bitUSD, bitSmiley has also made optimizations and innovations based on the BRC-20 protocol, using the self-developed enhanced protocol bitRC-20 that is compatible with BRC-20.


The oracle will pass the information on the Bitcoin mainnet to bitSmileyDAO deployed on Bitcoin Layer2. After receiving the oracle information and performing consensus verification, bitSmileyDAO will send back information to the validator of the Bitcoin mainnet, thereby realizing the minting or destruction of bitUSD on the Bitcoin mainnet.




Similar to MakerDAO's liquidation mechanism, bitSmiley's liquidation will also adopt the form of Dutch auction. According to the oracle's offer for the collateral, the bidding starts high and decreases as the auction time progresses. bitSmiley will also use 90% of the stability fee income and auction income as a liquidation buffer. When the liquidation buffer cannot offset the debt, bitSmiley will use the platform's future income as debt for an English auction. After deducting the profit from basic operating expenses, creditors will be repaid first to ensure the stability of the overall ecosystem. This method is superior to the traditional token inflation repayment method and can avoid the disguised dilution of the interests of token holders.


bitLending & bitInsurance


bitLending is the "Compound" part of the bitSmiley ecosystem, providing Bitcoin-native decentralized lending services. bitLending relies on Bitcoin opcodes to generate P2P lending transactions. Users can borrow bitRC-20 tokens including bitUSD by pledging Bitcoin.


Lenders set the type and quantity of bitRC-20 tokens they are willing to provide, the loan term and the loan interest rate to publish offers on bitLending. After the borrower can initiate a loan request, bitLending will match it. Once the offer is matched, the expected repayment block and the principal and interest of the funds will be determined, and a multi-signature wallet will be generated for the handover between the borrower and the lender. Both parties sign the transaction separately, transfer the bitRC-20 assets and Bitcoin to the multi-signature wallet, and after the network confirms it, the borrower can take the loan.


Due to the slow block time of Bitcoin and the inability of the UTXO model to quote on the chain, this poses a challenge to the liquidation process similar to Compound. Therefore, bitSmiley also launched the bitInsurance insurance derivative, introducing a "guarantor" role for both borrowers and lenders. Lenders and borrowers can transfer an additional insurance premium to the multi-signature wallet. When the borrower defaults and fails to repay the Bitcoin, the lender will receive the Bitcoin premium compensation, and the guarantor will receive the borrower's collateral.



bitCow


A Bitcoin native AMM focusing on StableSwap and automated centralized liquidity. By feeding prices from external oracles and concentrating all available liquidity around that fair price, traders can get smaller slippage, while liquidity providers can earn more transaction fees with less capital.


More importantly, the active pricing of the pool by the external oracle enables price changes to be immediately reflected in the pool, eliminating the arbitrage space of arbitrage robots and thus avoiding impermanent loss.


bitCow also introduced a unique dual LP token structure. Taking the BTC-USDT trading pair as an example, the pool will actually have two LP tokens, BTC-LP and USDT-LP. 1 BTC-LP token always corresponds to 1 BTC token, and all trading profits and losses are counted in USDT-LP tokens.


Through this structure, different types of liquidity providers can benefit at the same time. Bitcoin-based liquidity providers can always get back the original amount of Bitcoin, while liquidity providers who want to maintain market neutrality can provide liquidity by borrowing Bitcoin from the lending protocol, and earn transaction fees even when the price of Bitcoin falls sharply.


Since all trading gains and losses are included in the USDT-LP token, the number of USDT exchanged for 1 USDT-LP will become a direct indicator for judging profits and losses. If this indicator is rising, it means that money is being made from obtaining transaction fees. Conversely, the acquisition of transaction fees cannot cover losses. This transparent indicator can intuitively help liquidity providers make decisions on whether to increase or withdraw liquidity.


With bitUSD, the first native stablecoin of the Bitcoin ecosystem, as the core, this point is used as a starting point, and a core point is established to radiate the entire Bitcoin financial ecosystem, building a complete liquidity link for BTCfi. The bitRC-20 protocol not only realizes the minting and destruction of native stablecoins on the Bitcoin mainnet, but also has the ability to issue other assets due to the compatibility of the protocol itself with BRC-20, so that a trustless lending platform can be established on the Bitcoin mainnet.


After establishing the Bitcoin native AMM bitCow and integrating ZetaChain, bitUSD liquidity can be extended to any chain, and the entire bitSmiley ecosystem has the ability to become a "liquidity hub" on Bitcoin.


Tokenomics and expected returns


The total supply of the bitSmiley protocol token SMILE is 210 million, with governance, participation in surplus auctions, stablecoin fee discounts, priority liquidation and other capabilities.


- Governance: $SMILE holders can participate in decentralized governance, can adjust key protocol parameters such as collateral type and LTV ratio, and also initiate emergency closures when the protocol is attacked uncontrollably.


- Participate in the Surplus Auction: When the platform surplus exceeds the threshold, it will be auctioned at a price lower than the market price, and $SMILE holders can participate exclusively.


- Fee Discount: Users can use $SMILE to pay transaction fees and will enjoy discounts.


- Priority Liquidation: The right to prioritize the liquidation of platform bad debts.


- Pledge: Holders can earn ecological assets by staking $SMILE.


$SMILE is about to conduct TGE, which is very likely to be the first "big hair" in the BTCfi track, because all paths to obtain airdrops have high thresholds. For example, the test network is a targeted invitation system, and the test coins are only airdropped to bitDisc Black NFT holders and real users who have participated in community activities and have been verified. The participation threshold for the points activity on the mainnet is 0.1 Bitcoin. There are 3 large-scale airdrop activities in Pre Season, Season 1 and Harvest Season, all of which have rich and diverse user tasks with clear goals, which have greatly helped to deliver the airdrop to long-term supporters of bitSmiley.


Currently, $SMILE has been launched on Bybit Launchpool. Staking $USDT or $MNT can share 2.1 million SMILE for free. At the same time, $SMILE is also the latest Startup Prime project of Gate.io, which will be open for subscription on November 4, 2024, Beijing time.


Potential and Outlook


The past six months can be described as an independent market for Bitcoin. BTC.D (the proportion of Bitcoin's market value in the total market value of cryptocurrencies) has risen from 54% to 60%, and the currency price performance is unique compared with other mainstream altcoins. There is no doubt that the Bitcoin ecosystem will be one of the biggest opportunities in this bull market, and BTCFi will also become the most attractive DeFi narrative in this bull market. It is very likely that, like Bitcoin itself, it will have an independent DeFi market in the crypto market.


With the continuous expansion of the Bitcoin ETF fund scale, it is very likely that compliant funds will enter Bitcoin through the Bitcoin ETF and spill over into the BTCfi track. Compared with BRC-20, Runes and other "coin issuance speculation" that are more suitable for retail investors to participate in, BTCfi can better undertake the entry of large funds, whether it is for crypto whales who want to make their Bitcoin "alive" or for the new compliant increments that have entered the currency circle, for BTCfi leaders such as bitSmiley, there is still too much potential to be revealed in the future.


At present, BTCfi is very similar to the early DeFi ecosystem of Ethereum, and various projects are competing to become the leader in the track. bitSmiley has taken the lead in the over-collateralized stablecoin track. Compared with AMM and lending, it has more Matthew effect and first-mover advantage, similar to the fact that after the Ethereum over-collateralized stablecoin track was occupied by MakerDAO, there was no other protocol to challenge. Compared with MakerDAO's nearly $4 billion TVL and more than 500,000 coin holding addresses on the chain, bitSmiely still has a relatively large room for growth.


According to CoinGecko data, the current market value of stablecoins has exceeded $176.7 billion, and USDT, as one of the earliest stablecoins, was first issued on the Bitcoin network through the Omni Layer protocol. After the vigorous development of the Ordinals protocol from 2023 to now, the Bitcoin ecosystem has shown signs of turning from conservative to open. As the most indisputable and unchallengeable consensus layer in Crypto, the stablecoin on the Bitcoin mainnet will surely present a more stable value, and it is also an indispensable core part of the era of Bitcoin liquidity release. If we can mint stablecoins by over-collateralizing Bitcoin directly on the mainnet, there is no need to work hard to package and bridge precious Bitcoins to other chains at the risk of security, and "go far away" to conduct DeFi transactions, while enjoying the most stable stablecoins.


If we divert the value of the Bitcoin ecosystem flowing to MakerDAO back to the Bitcoin mainnet and establish a Bitcoin-native Bitcoin ecosystem, then the market value gap in the figure below is not a gap, but the infinite possibilities of bitSmiley.



Only when Bitcoin has its own native stablecoin can BTCfi flourish, the application scenarios of the Bitcoin ecosystem can be infinitely expanded, and its appeal to the traditional financial market will be further enhanced.


Starting with the Bitcoin native stablecoin protocol, the Bitcoin DeFi ecosystem has been built around this core. Combined with the plan that bitUSD will be able to support casting on other Layer1 and Layer2 networks, we can clearly see bitSmiley's ambition - to release the infinite potential of Bitcoin liquidity and bring Bitcoin liquidity to every chain in the crypto world.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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