*Forward the Original Title：How Core Chain Releases BTC DEFI’s Market Value of 200 Billion

TLDR：

This article will delve into the significant advantages of CoreDAO in the Bitcoin DeFi sector.

• The current state of the Bitcoin market and its potential value are to be unlocked.
• CoreDAO’s unique “Satoshi Plus” consensus mechanism, which adopts Bitcoin’s PoW mechanism and a 50% hash power staking to jointly ensure the security of the Core chain.
• The upcoming feature of non-custodial Bitcoin staking, safeguarding native Bitcoin assets through a time-lock mechanism while earning CORE rewards, significantly boosting the Total Value Locked (TVL) on the Core chain.
• The innovation of CoreBTC, which is fully decentralized and introduces elements like “custodians,” “carriers,” and “liquidators” through a collateral mechanism and multiple supervisions to prevent malicious activities.
• HTLC atomic swaps facilitate trustless native asset exchanges between the Core chain, Bitcoin, and other EVM blockchains, eliminating the need for central institutions, oracles, or relays.

Since the beginning of 2023, the enthusiasm for the Bitcoin ecosystem has been on the rise, especially with the continuous development of the Ordinals and BRC-20 ecosystems. Inscription technology has even been widely experimented with across various public chains, leading to a significant increase in market value.

More importantly, with the SEC’s approval of the spot Bitcoin ETF listing, a major milestone in the history of cryptocurrencies, the price of Bitcoin has soared, reaching a new high since December 2021 of over $64,000. According to Companies Market Cap data, Bitcoin’s market value has surpassed $1 trillion, overtaking Tesla, TSMC, Eli Lilly, and Berkshire Hathaway, ranking just behind Meta as the world’s tenth most valuable asset.

Data Source: Companies Market Cap

Meanwhile, the total market value of cryptocurrencies has recently surpassed $2 trillion, with Bitcoin’s market share reaching 49.4%, almost the highest point in nearly two years, confirming Bitcoin’s strong dominant position. More traders and investors are “returning to basics,” gravitating back towards the Bitcoin ecosystem.

Data Source: CoinGecko

It is evident that after a new “cooling-off period” for inscriptions, the Bitcoin ecosystem is moving towards a path of diversified development. The community’s demand for more and more advanced infrastructure is growing, and expectations and consensus are continuously strengthening. Especially in the BTCFi ecosystem, including Bitcoin Layer 2, DeFi, and cross-chain tracks, there is great potential in expanding Bitcoin’s functional range, including the implementation of smart contracts and decentralized applications.

Core Chain, the Engine Unleashing Bitcoin’s DeFi Potential

Among the multitude of BTCFi projects, Core DAO has also recognized the growth space and market demand in this track. As a new public chain that is consensus-based on Bitcoin’s PoW and capable of enabling non-custodial Bitcoin staking, Core Chain can unlock the security and usability value of Bitcoin, thereby creating the most prosperous decentralized financial ecosystem for Bitcoin.

Core Chain is the first EVM blockchain highly aligned with Bitcoin, intended to complement Bitcoin while serving as its highly scalable smart contract platform. The launch of Core Chain’s mainnet introduced the “Satoshi Plus” consensus, which, by combining Delegated Proof of Work (DPoW) and Delegated Proof of Stake (DPoS), integrates Bitcoin miners and mining pools into a secure, scalable smart contract platform.

Previous Bitcoin staking, due to the absence of smart contracts on the Bitcoin mainnet, required “wrapping” Bitcoin (transforming it into Wrapped BTC), then bridging it to the target chain, and subsequently custoding it in the smart contracts of the target chain for staking. This process was not only cumbersome but also exposed stakers to potential asset losses due to attacks on the contracts.

In contrast, Core Chain enables “non-custodial staking,” allowing for the completion of Bitcoin staking without transferring Bitcoins out of one’s address. This can be directly done on the Bitcoin mainnet, making the staking process easy and convenient. Bitcoin holders do not need to bridge their Bitcoins to Core Chain or custody them in smart contracts but can control the staking Bitcoin addresses for “self-custody,” greatly enhancing asset security. Under any circumstances, the staked BTC will not be compromised; even if validators act maliciously leading to penalties, stakers would at most lose their staking rewards, not the staked assets themselves.

“Non-custodial staking” will significantly release the liquidity value of Bitcoin, and more importantly, as Core Chain is an EVM-compatible public chain, it enables the creation of a large-scale dApp ecosystem on the Bitcoin mainnet, which was previously impossible through smart contracts. Numerous well-known dApps have already entered the Core Chain ecosystem, including Metamask, SushiSwap, Ankr, 1RPC, Dapp Radar, etc.

With “non-custodial staking” and EVM compatibility working together, Core Chain elevates Bitcoin’s usability to a new level, unlocking the tremendous potential of Bitcoin DeFi.

Further Reading: “Core: A New Public Chain for BTC 2.0, Exploring the Vast Potential of Bitcoin’s Security and Usability.” Before we delve deeper into Core DAO, let’s first discuss the market space in front of Core DAO and how big it can be.

How big can the potential of Bitcoin DeFi be?

According to CoinGecko data, the market value of DeFi tokens across various chains currently exceeds 90 billion USD (91,513,796,733 USD), with a total value locked (TVL) of over 80 billion USD (82,845,186,234 USD). The DeFi products included here span decentralized lending, decentralized exchanges, decentralized derivatives, and decentralized stablecoins. Among these DeFi products, the ETH chain accounts for 25.4%.

Based on the current market share, Bitcoin’s market share (49.4%) is about three times that of Ethereum (16.5%). Therefore, by conservative estimates, akin to “seeking a sword sunk in a boat,” the market value of Bitcoin DeFi could at least reach three times that of Ethereum DeFi.

What do professionals think about this issue? How much will the market value of DeFi on Bitcoin reach? Franklin Bi, a partner at Pantera Capital, expects that, assuming Bitcoin’s market value remains unchanged, the market scale on Bitcoin will reach 225 billion USD (25% of Bitcoin’s market cap). Over time, it could fluctuate between 72 billion USD and 450 billion USD (8% to 50% of Bitcoin’s market cap).

Pantera Capital analysis states that Ethereum currently dominates the DeFi field and carries most of the activity. Historically, decentralized applications on Ethereum have accounted for 8% to 50% of Ethereum’s market value, with the current figure at about 25%. If estimated by this ratio, the DeFi market value on the Bitcoin network could potentially reach about 225 billion USD.

Related reading: “Pantera Capital: Bitcoin On-chain DeFi Market Size Will Reach 225 Billion USD”

If Bitcoin DeFi develops, it could significantly increase the market value of the entire Bitcoin ecosystem and the entire DeFi sector.

The Most Important Advantage of the “Satoshi Plus” Consensus Mechanism

Let’s return to our discussion on the Core chain. It can be said that a major core of the Core chain is its unique “Satoshi Plus” consensus mechanism.

The Satoshi Plus consensus mechanism leverages Bitcoin’s consensus mechanism to strengthen its consistency. The Core chain incorporates various participants from the Bitcoin network (including miners and holders) into its consensus system. This innovative move allows for the maintenance of Bitcoin’s consensus to occur simultaneously on the Core chain platform. Taking miners as an example, they can delegate their hash power to Core’s validation nodes directly through the Opt-Return field and actively participate in the election process of validation nodes. This seamless integration injects new vitality into the ecosystem of Bitcoin.

Bitcoin holders can also pledge their Bitcoins directly to Core’s validation nodes through time locks without needing custody, and actively participate in the election process of nodes. This not only simplifies the participation process but also enhances the overall decentralization. Similarly, CORE holders can take similar actions to actively participate in the election and block production processes of Core chain validation nodes. The implementation of this series of operations enables the consensus of Bitcoin and the Core chain to be synchronized and coordinated, laying a solid foundation for the stability and sustainable development of the entire network.

Through this method, all participants are committed to maintaining the consensus of Bitcoin and the Core chain. This integration not only promotes synergistic development between the two but also sets an example for progress in the entire blockchain field. The decentralization principle of Bitcoin is strengthened, and Core’s innovative contributions provide strong support for the diversification and healthy development of the blockchain ecosystem. In this collective effort, the consensus of Bitcoin and Core will welcome a more stable and stronger future.

Core Chain’s Implementation of BTC DeFi

Non-custodial Bitcoin Staking

The upcoming feature of non-custodial Bitcoin staking on Core Chain is a notable highlight worth emphasizing. The term “non-custodial” refers to not having to entrust your Bitcoin to a third party for management. Currently, investors participating in various staking activities, including Bitcoin Layer 2 solutions, are predominantly custodial, meaning they compromise the security of their assets.

Core Chain achieves non-custodial staking through a technology similar to the Lightning Network’s “absolute timelock.” This timelock is a native cryptographic feature of Bitcoin that locks the outputs of a transaction for a predefined period, during which these outputs cannot be spent.

By employing timelocks, stakers can participate in consensus and earn CORE token rewards without entrusting their Bitcoin to others. This approach allows for a more comprehensive and effective utilization of Bitcoin’s value while protecting the core value of blockchain decentralization.

To understand the implementation of “absolute timelocks,” consider the following illustrative example: Initially, Alice sends 1 BTC to a new multi-signature address instead of directly to Bob. The BTC at this address can be unlocked in two ways: Bob provides his signature and a secret value, or Alice waits for the CLTV timelock (e.g., two weeks) to expire and signs it herself.

Bob has two weeks to create and broadcast a transaction that includes his signature and the secret value, sending the BTC from the multi-signature address to himself, ensuring he can withdraw Alice’s BTC as long as he provides the secret value. If Bob fails to provide the secret value within the time limit, Alice can reclaim her BTC.

In the network, hash time-locked contracts exist not only between Alice and Bob but also between Bob and Carol. If Bob obtains the secret value from Carol, he can publicly reveal it on the chain, sending it to the hash time-lock contract(HTLCs) with Alice, and then withdraw the BTC from the multi-signature address, effectively linking these two state channels. It’s crucial that Bob obtains the secret value from Carol within the valid period, or else Alice might reclaim the BTC from the multi-signature address. Therefore, the contracts between Bob and Carol must expire before the one between Alice and Bob, explaining why hash time-locked contracts require CheckLockTimeVerify (CLTV, an absolute timelock) rather than CheckSequenceVerify (CSV, a relative timelock).

Therefore, unlike externally staked Bitcoin where holders entrust their BTC to others, stakers on Core Chain only need to place their Bitcoin in absolute timelocks within transactions, which can be designed to return the outputs after a period has elapsed.

Through CORE token rewards and the setting of timelocks, Bitcoin stakers will earn returns on their otherwise passive BTC holdings. Billions of dollars in underutilized Bitcoin value will become effective, rewarding stakers and expanding Bitcoin’s utility while preserving the fundamental spirit of blockchain.

coreBTC

Unlike other chains, the Bitcoin community has a high pursuit of maintaining Bitcoin’s originality, purity, and “halalness.” Compared to Bitcoin fundamentalism, wrapped Bitcoin and WBTC are essentially no different. Therefore, more Bitcoin enthusiasts prefer a more native, purer solution, and wrapped Bitcoin has been widely accepted in various DeFi environments, especially in blockchains compatible with EVM.

Although there are many attempts in the market to solve this problem, very few meet this standard, and coreBTC on the Core chain is the native-wrapped Bitcoin. To achieve better security, decentralization, trustlessness, permissionlessness, and censorship resistance, the Core chain introduces roles such as custodians, porters, guardians, and liquidators in the mechanism of implementing coreBTC.

Nodes that securely hold users’ Bitcoin on the Bitcoin blockchain are called Lockers (custodians). Anyone can register as a custodian on the Core chain by locking collateral, and Core DAO itself will run one of the many custodians provided.

The assets and collateral ratio pledged by the custodians are determined by Core DAO. If the price of Bitcoin changes relative to the value of the collateral, the custodian must adjust the collateral to avoid potential liquidation. Collateral acts as a deterrent to malicious behavior, and unauthorized transfer of Bitcoin or failure to return Bitcoin in time may result in collateral reduction. Custodians can deregister and retrieve collateral, as long as there are no unlocked Bitcoins and unfulfilled unlock requests. In return, custodians receive a small fee.

The process of minting coreBTC includes users sending Bitcoin to a legitimate custodian, a Porter (porter) monitors transactions at the custodian’s address and submits them to a smart contract on the Core chain. Upon receiving the request, the coreBTC smart contract calls the Bitcoin light client to verify the authenticity and finality of the related Bitcoin transaction, then mints the corresponding amount of coreBTC.

To exchange coreBTC for Bitcoin, users send a request to the Core chain smart contract and burn a specified amount of coreBTC, the smart contract notifies the custodian to release Bitcoin to the user’s address. The custodian unlocks and transfers Bitcoin to the Core chain, ultimately verified by the Bitcoin light client.

Throughout the minting, redemption, and intermediate process, entities acting as liquidators monitor the health (i.e., collateral ratio) of all custodians. As the value of collateral falls relative to the value of the locked Bitcoin, liquidators begin to forcibly liquidate collateral. In this process, liquidators use coreBTC to purchase pledged CORE tokens at a discount price and burn coreBTC. This drives up the collateral ratio and restores the custodian to a healthy state.

In addition to liquidation, reduction is another key component to maintaining the value of coreBTC. If the custodian fails to fulfill the redemption request by the deadline, the Guardian (guardian) can trigger the Core chain smart contract to reduce the custodian’s collateral, a portion of which will be transferred to the user and reward the reducer.

If the custodian fails to fulfill the redemption request by the deadline, guardians can trigger the Core chain smart contract to reduce the custodian’s collateral, a portion of which will be transferred to the user and reward the reducer. This process ensures that each coreBTC is backed by an equivalent value of Bitcoin and disincentivizes malicious behavior.

HTLC Atomic Swap Technology

Atomic swap technology is a method for directly exchanging different cryptocurrencies between two parallel chains. One of the most important features of this technology is the implementation of trustless peer-to-peer native asset exchanges between the Core chain and other blockchains, especially Bitcoin, without the need for central authorities or intermediaries. This technology ensures that the exchange between two users is atomic, meaning it is all or nothing. It eliminates the need for trust or a third party, providing a more secure and efficient way of trading for users.

It can be said that atomic swap technology is one of the earliest directions and technologies that Bitcoin DeFi started to research and try, with teams such as Summa, Liquality, SparkSwap, and Swap Online researching this. They began building experiments to implement cross-chain exchange methods between 2017 and 2018.

HTLC (Hashed Time Lock Contract) atomic swaps combine cryptographic hash functions with a time-lock mechanism to ensure that one of the following outcomes is simultaneously satisfied on two linked chains:

1) Both parties can access each other’s funds at the same time,

2) Neither party can access the funds.

The implementation of this scheme is based on the Hashed Time Lock Contract (HTLC), a cryptographic technology that uses hash functions and time locks to lock transactions.

The elegance of this system lies in the fact that any participant can invoke it in a completely trustless manner, making access and participation more democratized. It not only expands the practicality of HTLC, enhancing efficiency and user experience but also maintains the decentralization and trustlessness of the Bitcoin blockchain.

Furthermore, market makers are incentivized to provide liquidity because they can earn transaction fees in exchange for settling swaps. This innovative mechanism has played a key role in the development of Bitcoin DeFi, offering users a more secure and convenient way to exchange assets.

Compared with Other BTC DeFi Projects

After introducing the unique advantages of Core Chain in building a DeFi ecosystem based on Bitcoin, let’s now compare Core Chain with other protocols with similar ambitions.

Stacks

Although Stacks is a second-layer protocol for Bitcoin, it shares a similar goal with Core Chain, aiming to introduce the concept of DeFi ecosystems to Bitcoin. As of February 16th, the total value locked (TVL) in Stacks has surpassed $100 million. However, the lack of EVM compatibility is a key bottleneck for Stacks. In contrast, Core Chain offers developers a more flexible and barrier-free building environment through EVM compatibility. Moreover, Core Chain maintains a clear advantage in block time and transactions per second (TPS).

Rootstock

Rootstock is considered an established Bitcoin sidechain, but since it is an EVM equivalent rather than EVM compatible, it faces great challenges in supporting Bitcoin DeFi, similar to Stacks. It has yet to attract a significant number of developers and users. In comparison, Core Chain’s block time is ten times faster than that of Rootstock, and its TPS is several times the theoretical maximum of Rootstock, showing superior performance in block time and TPS.

Botanix

Looking at Botanix attempts to bring the advantages of the Ethereum Virtual Machine (EVM) to Bitcoin through the Spiderchain primitive. However, like Rootstock, Botanix is EVM equivalent rather than EVM compatible, presenting additional challenges to developers. Its experimental nature and multi-signature-based structure also pose potential risks, whereas Core Chain is more robust in these areas.

Sovereign Rollups

Unlike the previous solutions, Sovereign Rollups process transactions off-chain and anchor summaries or proofs to the Bitcoin blockchain, thereby increasing transaction throughput and smart contract capabilities. However, this relies on a single sequencing model and may face issues with fraud-proof. In contrast, the Core Chain emphasizes decentralized trust and is more mature in implementing smart contract capabilities.

Babylon

As a Bitcoin re-staking protocol, Babylon allows users to stake idle Bitcoin without using bridges or relying on trusted intermediaries, in exchange for yields in alternative tokens. However, its goal is not to create a DeFi ecosystem supported by Bitcoin. Core Chain’s “Satoshi Plus” consensus mechanism and potential support for re-staking position it to more comprehensively meet user needs in the future.

Overall, Core Chain’s design in EVM compatibility, block time, TPS, and decentralized trust gives it a competitive edge in the Bitcoin DeFi space.

Summary

In the future, governance of the Core chain may expand to include Bitcoin holders and miners over time. This could further enhance the consistency between Bitcoin and the Core chain, making asset bridging easier. Expanding the governance structure is expected to encourage more Bitcoin holders to actively participate, injecting more momentum into the development of the Core chain. Future updates may also directly distribute Bitcoin as a reward to its holders.

Moreover, the Core chain might introduce a native fee market to make Bitcoin transactions faster, more predictable, and more economical. This aims to achieve Bitcoin’s original vision of fast, low-cost, predictable, and scalable transactions. By integrating the Core chain’s consensus mechanism with multi-signature wallets, the trustless nature of coreBTC will be enhanced, while providing more collateral options for lockers and expanding the range of potential lockers.

The Core chain will also modify its staking mechanism to allow holders to participate in decentralized finance (DeFi) without the need for wrapping, thereby enabling users to retain their assets in their native form.

As the Core chain continues to evolve, we look forward to seeing more significant breakthroughs in the realm of decentralized finance with Bitcoin, offering users more options and a more convenient experience. The Bitcoin ecosystem is set to continue flourishing, with the Core chain playing a key role in its future development.

Disclaimer：

1. This article is reprinted from [theblockbeats], Forward the Original Title‘ How Core Chain Releases BTC DEFI’s Market Value of 200 Billion’,All copyrights belong to the original author [theblockbeats]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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