Bitcoin has grown from a small project to a frontrunner for a possible global currency thanks to its unrivaled market capitalization, unmatched liquidity pool and reliable infrastructure. The long-term benefits of Bitcoin have ensured its place in the balance sheets of industry giants like Tesla and MicroStrategy as well as some small nation-states, no matter the passing market conditions.
It’s no wonder that all big players in the decentralized finance (DeFi) space are longing for a plunge in Bitcoin’s huge pool of liquidity. However, since DeFi protocols were built on Ethereum or other blockchains, they lack native compatibility with the Bitcoin network, making it more difficult to tap into the BTC liquidity.
Several projects have come up with workarounds to access Bitcoin liquidity over the years, with the most prominent ones being wrapped versions of BTC and token bridges. Numerous reports highlighted that token bridges are too vulnerable to act as DeFi’s gateway to Bitcoin liquidity, with cross-chain bridges accounting for half of all DeFi exploits.
DeFi on Bitcoin: A tricky task
As DeFi struggles to find an ideal way to access Bitcoin liquidity, BTC holders also want their long-term investment to reach its full potential without introducing added vulnerabilities or relying on a centralized third party. Even without the herculean task involved in the technical front, the idea of using the base layer of the Bitcoin blockchain for anything other than peer-to-peer fund transfers triggered mixed reactions from the Bitcoin community.
Despite the misconception that Bitcoin is limited to simple transactions, contracts have been published with Bitcoin script. Users have published the first NFTs, and some even managed to play a retro computer game on the Bitcoin base layer through the Ordinals protocol. Casey Rodarmor, the creator of Ordinals, described it as a way to “Make Bitcoin fun again.”
However, not everyone prefers using the original blockchain in such a way. Bitcoin OGs took no time to weigh in on the topic, pointing out that the base layer is not optimized for uses other than P2P fund transfers. Blockstream CEO Adam Back argued in a tweet that, unless Ordinals were used for something efficient, “it’s another proof of consumption of block-space thingy.”
A potential solution should address the Bitcoin community’s concerns about blockchain congestion without introducing new vulnerabilities or relying on third-party custody. Mintlayer, a Layer-2 solution rooted in the established network of the Bitcoin blockchain, aims to provide an acceptable and credible answer for all parties.
Reliable DeFi? Bitcoin fixes this
The founders of Mintlayer designed the protocol to be as interoperable with the base Bitcoin layer as possible. It uses an unspent transaction output (UTXO) accounting system, much like the Bitcoin blockchain, for superior security and robustness. As a Layer-2 solution built on the Bitcoin network, Mintlayer removes the need for wrapped tokens or token bridges — the primary attack vectors for DeFi hacks — and instead uses atomic swaps for 1:1 transactions from native BTC to tokens on the Mintlayer blockchain.
Mintlayer enables Bitcoin holders to access all types of DeFi instruments as well as a vast ecosystem of decentralized apps with their native BTC.
Instead of competing with Bitcoin, Mintlayer aims to empower the original cryptocurrency by providing a sound infrastructure that expands the use of BTC to new horizons. Speaking about building a decentralized protocol to provide people with new development opportunities, Mintlayer’s CEO Enrico Rubboli said: “Bitcoin is digital gold, and Mintlayer is developed to run on the digital gold standard. We believe that a truly decentralized protocol that is user-friendly and highly interoperable with the largest pool of digital liquidity is the future of decentralized finance.”
Expanding Bitcoin’s reach
Going into the details of the project, developers explain that users are not required to hold ML, the native token of Mintlayer, to pay transaction fees. Users can pay for transactions with any token a block signer accepts. To achieve autonomy, privacy and self-custody — the key pillars of Bitcoin philosophy — the Mintlayer software is optimized to the point that users will be able to run a full node on an average desktop computer.
Aside from removing the friction around using Bitcoin to conduct a financial transaction, Mintlayer also seeks to make using BTC for non-financial projects within the DeFi simple, secure and seamless. By providing a unifying solution to the highly-fragmented state of decentralized finance, Mintlayer encourages developers and users to focus on the growth of a truly inclusive, fair, and transparent financial ecosystem for the benefit of everyone.
The token generation event (TGE) for Mintlayer’s native token ML is scheduled for March 21, 2023. The testnet launch is expected for Q2 shortly thereafter, followed by the mainnet launch in the third quarter. The newly-launched mobile wallet and browser extension for Mintlayer are also available for download.