Bitcoin’s success as a digital store of value is undeniable. However, its utility beyond storage and transfer has been a common point of criticism. One area where Bitcoin lags behind is decentralized finance (DeFi), where Ethereum dominates with about $47.5 billion in total value locked (TVL). In contrast, Bitcoin’s TVL stands at a mere $1.9 billion.
The Challenge of Cross-Chain Interoperability
The Bitcoin ecosystem relies heavily on custodial, exogenous infrastructure to trade, lend against, or issue derivatives of BTC. This is compounded by the fact that cross-chain bridges for the asset may be limited or have high custody risk. Recent technical advances in the Bitcoin L2 ecosystem have spurred a flurry of developer activity, which may lead to an explosion of Bitcoin-native DeFi in coming years.
The Potential for Bitcoin’s DeFi Evolution
If Bitcoin were to capture just 10% of Ethereum’s market share, it could potentially add $4.8 billion in TVL. This highlights the untapped potential of Bitcoin in DeFi and the need for seamless cross-chain interoperability to close the gap.
The Role of Cross-Chain Technologies
Against this backdrop, projects such as Chainlink CCIP, LayerZero, Portal-to-Bitcoin, and Threshold Network aim to bridge disparate blockchain environments. Among these, Portal-to-Bitcoin stands out by facilitating cross-chain operations through atomic swaps, which eliminate some custodial risk.
Portal-to-Bitcoin: A Native Bitcoin Solution for Cross-Chain Non-Custodial Swaps
Portal-to-Bitcoin is a protocol that introduces a solution for swapping native Bitcoin cross-chain without the need for wrapped assets or custodial bridges. Its architecture avoids conventional lock-and-mint models and relies on atomic swaps, specifically Multi-Party Hash Time-Locked Contracts (MP-HTLCs) to facilitate swaps.
How Portal-to-Bitcoin Works
When a user initiates a swap, funds are locked in an HTLC on one blockchain (e.g., Bitcoin network), and the counterparty creates a matching HTLC on another chain (Ethereum network). Both contracts rely on the same cryptographic hash and enforce a time limit for the swap to complete. If either party reveals the shared secret (preimage), the swap finalises; otherwise, both parties recover their assets.
The Automated Dynamic Market Maker (ADMM)
To match users’ swaps, Portal-to-Bitcoin uses an ADMM that is similar to Uniswap v3 but designed to manage liquidity and execute swaps efficiently across chains. This system is also capable of processing range and market orders. The ADMM minimizes costs and front-running risks by batching transactions per block.
The Notary Chain and Validator-Based System
Portal-to-Bitcoin operates a validator-based system that is supported by its unique Notary Chain. The Notary Chain uses a Threshold Signature Scheme (TSS) to ensure that no single validator can control critical cryptographic keys. Although there is still a degree of trust required, the distributed structure ensures that no small subset of validators can misappropriate funds.
Charting a Course for Bitcoin’s DeFi Evolution
By solving the key issues of trust and custody, Portal-to-Bitcoin presents a viable solution for Bitcoin’s broader cross-chain DeFi integration. This potentially unlocks significant value in the space. An in-depth dive into various cross-chain technologies and full insight into Portal to Bitcoin’s unique architecture can be found in the full version of the report.
Conclusion
Portal-to-Bitcoin has introduced a solution for swapping native Bitcoin cross-chain without the need for wrapped assets or custodial bridges. Its use of atomic swaps, ADMM, and validator-based system makes it an attractive option for bridging disparate blockchain environments. By facilitating seamless cross-chain interoperability, Portal-to-Bitcoin can unlock significant value in the space.
Full Report Available
For a more detailed analysis of Portal-to-Bitcoin’s approach to cross-chain swaps and its potential implications on Bitcoin’s DeFi evolution, download the full report for free here.
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About the Author
The author is a seasoned journalist with expertise in blockchain and cryptocurrency technology. Their work has been featured in various publications, including Cointelegraph. They can be reached at author’s email.
References
- Chainlink CCIP: https://chain.link/ccip
- LayerZero: https://layerzero.com
- Portal-to-Bitcoin: https://portal.to-bitcoin.com
- Threshold Network: https://threshold.network