Why Solana Could Be the Best Blockchain for Earning Yield on Bitcoin
Most profitable crypto buyers 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 respected, and most safe token there may be. But doing so comes at an obstacle as a result of Bitcoin is likely one of the few digital currencies that may not simply be used to generate yield.
That is why a lot of the Bitcoin circulating provide out there is just left idle, sitting within the wallets of numerous customers who do nothing greater than hope the value will improve. This is named “HODL”, and whereas it could possibly be extraordinarily worthwhile prior to now as Bitcoin made some astonishing positive aspects, 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 reasonable positive aspects.
Within the great world of DeFi, there are methods to place Bitcoin to work. One of the crucial fashionable 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 by way of varied Ethereum-based DeFi platforms.
However though wBTC may be rewarding, it’s not an excellent possibility for many who worth the decentralized nature of crypto. The draw back to wBTC is that it’s an especially centralized token. To mint recent wBTC, it’s essential to deposit BTC tokens with an middleman often known as 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 threat, as BitGo has change into a high-value goal for hackers, eager to extract the billions of {dollars} in worth that dwell 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 may misbehave. We all know from the sooner episode with the FTX change that seemingly respected crypto firms can and do stand 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 actual fact is that he was extraordinarily reckless and in the end did precisely that.
A Safer Approach To Use BTC in DeFi
Thankfully, there’s a a lot safer strategy 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 permits zBTC to leverage the safe basis of Bitcoin itself whereas benefiting from the fast transaction throughput of the Solana blockchain. Having just lately validated its first BTC transaction on Solana, Zeus demonstrates the potential to ship a successful mixture, merging probably the most safe blockchain with probably 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. Nevertheless, the distinction is that Zeus doesn’t use any custodians. As an alternative, the tokens are locked up in a wise contract that’s managed by the Zeus protocols’ community of validators and guardians, that means a form of decentralized custody.
The important thing factor to know is that no single validator or guardian can entry any of the deposit BTC. This may solely be completed when the community’s contributors 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 method, together with one thing often known as “bidirectional hooks”. In the meantime, the APOLLO dApp acts as a form of integration layer that makes Solana’s DeFi ecosystem accessible.
The best way it really works is that when a person desires 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 may actually be caught by others, that 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 approach for BTC holders to entry a rising vary of fashionable DeFi dApps on Solana and begin incomes yield on their holdings. Now 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 potentialities. After all, with Zeus locking up their authentic BTC deposits, all of the customers will nonetheless be glad if the value of BTC jumps considerably.
Institutional Demand For BTC Yield
Given the numerous upswing in institutional capital flowing into Bitcoin during the last yr, Zeus is an especially well timed and promising innovation. A number of the largest buyers in Bitcoin lately are the brand new exchange-traded funds or ETFs that emerged final yr, and their institutional backers gained’t be happy with simply sitting and holding the asset when there are doable revenue-generating alternatives available.
Now contemplate 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 lots of accountability 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 big, and it’ll improve if the value of Bitcoin fails to extend considerably, as its ETF prospects predict to see important returns.
Zeus offers establishments uncovered to Bitcoin with an unprecedented alternative, not solely to earn yield however achieve this whereas profiting from Solana’s environment friendly blockchain infrastructure, which boasts the quickest transaction speeds and among the many lowest gasoline 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 increase into Bitcoin-collateralized stablecoins, which is able to present additional alternatives for producing yield. As well as, help for Bitcoin-based NFTs, Ordinals, and Runes can be within the pipeline.
As Zeus expands its capabilities, its affiliation with Solana may be leveraged to place itself because the go-to software for Bitcoin yield technology. And with Solana’s broader DeFi ecosystem itself going from strength-to-strength, there are good causes to assume it is perhaps flooded with Bitcoin-based liquidity within the coming months, bringing advantages to each stakeholder concerned.
