By Bob Bodily, Co-Founder and CEO of Bioniq
The Web3 world is still in its nascent stages, and one of the biggest hurdles holding it back from broader adoption is liquidity fragmentation. The space is filled with various networks, each with its own unique architecture, making it difficult for users to seamlessly interact across different platforms.
A Problematic Example: Bitcoin’s Limited Interoperability
No asset in the Web3 space is more significant than Bitcoin (BTC), yet its lack of native smart contract support has made it a challenging task to integrate it with most decentralized finance (DeFi) services. The existing solutions have struggled with:
- Security Concerns: Wrapped tokens often compromise on security, which can lead to vulnerabilities in the system.
- Native Smart Contract Support: Bitcoin’s architecture is not conducive to native smart contract support, making it difficult for developers to create seamless interactions across platforms.
The Solution: A Layer 0 Network
A new ‘layer 0’ network that leverages smart contracts to sign Bitcoin transactions can finally solve this problem. This innovative approach allows developers to:
- Create Programmable Assets: By using threshold signing subnets, developers can create programmable assets on top of the Bitcoin blockchain.
- Unlock New Use Cases: The integration of Bitcoin with Ethereum-compatible protocols through ‘Bitcoin EVMs’ opens up new use cases for Bitcoin that weren’t possible before.
The Power of Threshold Signing Subnets
Threshold signing subnets are a crucial component of this layer 0 network. They allow for the creation of crosschain signatures, enabling seamless interactions between different platforms.
- Native Integration: These subnets can be natively integrated into smart contracts on other blockchains, making it possible to interact with Bitcoin assets without external bridges.
- Universal Interoperability: The same technology used in threshold signing subnets can also be applied to make Bitcoin compatible with virtually any other type of blockchain.
The Benefits of a Layer 0 Protocol
Implementing a layer 0 protocol like this has numerous benefits, including:
- Unlocking True ‘BTCFi’ in Web3: This technology opens up new use cases for Bitcoin that weren’t possible before.
- Increased Interoperability: By making it easier to interact with Bitcoin assets across different platforms, we can unlock the true potential of DeFi.
Layer-0 Services: Already Here
Services like Ordinals, Runes, and threshold-signing subnets are already working with this technology to achieve interoperability with Bitcoin. This is a significant step towards creating seamless interactions between different platforms.
The Future of Mining BTC: A New Model?
Layer-0 technology also brings the possibility of overhauling the process of mining BTC. Interoperability with DeFi can allow for a new model that enables miners to sell their future hashrate now, hedging against price volatility. Retail investors can acquire BTC at cheaper prices by providing liquidity to miners.
Conclusion
The Web3 ecosystem is still in its early stages, and one of the biggest hurdles holding it back from broader adoption is liquidity fragmentation. A layer 0 protocol that leverages smart contracts to sign Bitcoin transactions can finally solve this problem. By making it easier to interact with Bitcoin assets across different platforms, we can unlock the true potential of DeFi.
About the Author
Bob Bodily is the co-founder and CEO of Bioniq. His desire is to help users do more with their Bitcoin assets, focusing on education, interoperability, trading, and games.
