Most profitable crypto traders will agree that it’s at all times good to carry a considerable quantity of Bitcoin in your digital asset portfolio, because it’s the oldest, most dear, and most safe token there may be. But doing so comes at an obstacle as a result of Bitcoin is without doubt one of the few digital currencies that may not simply be used to generate yield.
This is the reason a lot of the Bitcoin circulating provide out there is solely left idle, sitting within the wallets of numerous customers who do nothing greater than hope the worth will improve. This is called “HODL”, and whereas it may very well be extraordinarily worthwhile up to now as Bitcoin made some astonishing features, most consider these days are lengthy gone.
With Bitcoin now valued at round $100,000, it’s unlikely to shoot up prefer it did within the early days of crypto. However that doesn’t imply Bitcoin holders need to be content material with simply average features.
Within the fantastic world of DeFi, there are methods to place Bitcoin to work. Some of the well-liked strategies is to make use of Bitcoin to mint wBTC, or “wrapped Bitcoin”, which is an ERC-20 token on the Ethereum blockchain. It’s doable to swap your BTC for wBTC on a 1:1 foundation, after which use these wBTC tokens to take part in actions like lending, borrowing, and liquidity provision through varied Ethereum-based DeFi platforms.
However though wBTC might be rewarding, it’s not an excellent possibility for individuals who worth the decentralized nature of crypto. The draw back to wBTC is that it’s a particularly centralized token. To mint contemporary wBTC, it’s essential to deposit BTC tokens with an middleman often called BitGo, which acts as a custodian for the entire collateral that backs the wBTC in circulation. That is essential to prop up the worth of wBTC, however it creates an infinite danger, as BitGo has change into a high-value goal for hackers, eager to extract the billions of {dollars} in worth that reside inside its wallets.
Admittedly the chance of BitGo being hacked is small, because it has efficiently prevented doing so up to now. However simply because it has not been hacked but doesn’t assure it’s 100% protected sooner or later. Add to that, there may be at all times the chance that BitGo would possibly misbehave. We all know from the sooner episode with the FTX change that seemingly respected crypto corporations can and do rise up to no good, utilizing their buyer’s deposits to make dangerous investments and so forth. Whereas FTX’s founder Sam Bankman-Fried didn’t deliberately lose his buyer’s funds, the very fact is that he was extraordinarily reckless and finally did precisely that.
A Safer Approach To Use BTC in DeFi
Happily, there’s a a lot safer method to generate yield on Bitcoin with out accepting the dangers of centralization. Due to advances in Bitcoin’s programmability, BTC holders now have the choice to place their capital to work in Solana’s DeFi ecosystem, whereas avoiding counting on any intermediaries or custodians.
That is all because of a brand new protocol known as Zeus Network, which has created a permissionless gateway that unlocks better potentials for BTC on the Solana blockchain, the place it’s represented as zBTC token. Customers can swap their BTC for zBTC, and use it to take part in a DeFi ecosystem that’s quick catching up with that of Ethereum.
Zeus has constructed a pluggable structure that allows zBTC to leverage the safe basis of Bitcoin itself whereas benefiting from the speedy transaction throughput of the Solana blockchain. Having lately validated its first BTC transaction on Solana, Zeus demonstrates the potential to ship a successful mixture, merging essentially the most safe blockchain with essentially the most environment friendly of all of them.
The bottom line is Zeus’ APOLLO dApp, which simplifies the method of transferring BTC to Solana. To make use of it, merely join your Bitcoin pockets and deposit BTC into the dApp, and it’ll mint an equal variety of zBTC tokens. As a result of the deposit acts as collateral, it means zBTC’s worth is at all times pegged to that of BTC, just like how wBTC is. Nonetheless, the distinction is that Zeus doesn’t use any custodians. As a substitute, the tokens are locked up in a sensible contract that’s managed by the Zeus protocols’ community of validators and guardians, which means a type of decentralized custody.
The important thing factor to grasp is that no single validator or guardian can entry any of the deposit BTC. This will solely be finished when the community’s members attain a consensus, and in flip, that may solely occur when the rightful proprietor of the BTC burns the zBTC tokens they initially minted.
Zeus created quite a lot of technological improvements to facilitate this technique, together with one thing often called “bidirectional hooks”. In the meantime, the APOLLO dApp acts as a type of integration layer that makes Solana’s DeFi ecosystem accessible.
The best way it really works is that when a person needs to deposit BTC to mint zBTC, nodes will suggest a transaction and submit it to a program state. This creates a programmable signature, after which the nodes relay signed transactions to the Solana community. When any nodes attempt to act maliciously, they are going to actually be caught by others, which means their SOL deposits can be slashed as punishment. This course of ensures that Zeus’s protocol is at all times protected.
It’s a easy, elegant manner for BTC holders to entry a rising vary of well-liked DeFi dApps on Solana and begin incomes yield on their holdings. Not should they be happy with mere “HODLing”, for they’ll take their capital to dApps like MarginFI, Solend, and Kamino Finance and discover quite a few yield-generating prospects. In fact, with Zeus locking up their authentic BTC deposits, all of the customers will nonetheless be blissful if the worth of BTC jumps considerably.
Institutional Demand For BTC Yield
Given the numerous upswing in institutional capital flowing into Bitcoin over the past 12 months, Zeus is a particularly well timed and promising innovation. A number of the greatest traders in Bitcoin nowadays are the brand new exchange-traded funds or ETFs that emerged final 12 months, and their institutional backers received’t be happy with simply sitting and holding the asset when there are doable revenue-generating alternatives available.
Now take into account this – Blackrock’s iShares Bitcoin Belief ETF alone held greater than $59 billion worth of BTC belongings on the time of writing. That’s an terrible lot of capital and a number of duty on the shoulders of BlackRock’s representatives.
The temptation to make use of a noncustodial communication layer like Zeus to earn a yield on these deposits is large, and it’ll improve if the worth of Bitcoin fails to extend considerably, as its ETF prospects predict to see vital returns.
Zeus offers establishments uncovered to Bitcoin with an unprecedented alternative, not solely to earn yield however achieve this whereas benefiting from Solana’s environment friendly blockchain infrastructure, which boasts the quickest transaction speeds and among the many lowest fuel charges of any decentralized community. By using Solana-based DeFi as a substitute of Ethereum, establishments can keep away from the bottlenecks related to conventional DeFi and maximize their yield-generating methods.
What’s all of the extra compelling is that Zeus isn’t sitting nonetheless, for it has plans to broaden into Bitcoin-collateralized stablecoins, which can present additional alternatives for producing yield. As well as, help for Bitcoin-based NFTs, Ordinals, and Runes can also be within the pipeline.
As Zeus expands its capabilities, its affiliation with Solana might be leveraged to place itself because the go-to instrument for Bitcoin yield era. And with Solana’s broader DeFi ecosystem itself going from strength-to-strength, there are good causes to assume it may be flooded with Bitcoin-based liquidity within the coming months, bringing advantages to each stakeholder concerned.
