Bitcoin Omnichain Lending
Currently, there are two key problems with the lending business of Bitcoin as follows.
Bitcoin accounts for almost half of the total market capitalization of the crypto market, but the lending business around Bitcoin has been largely dominated by centralized institutions. Obviously, this trust-based lending model is very fragile, especially in a bear market, where centralized financial institutions are likely to get into liquidity difficulties due to their own operational problems, thus making it impossible for users to complete even the most basic withdrawal operations.
Existing lending behavior can only be performed on the same chain. While Compound and AAVE offer some bitcoin lending business in a decentralized manner, users who want to mortgage their bitcoin and borrow stable coins on Ethereum, Avalanche, or polygon must first cross-chain WBTC to the Ethereum, Avalanche, or polygon network. The cross-chain process must rely on some third-party cross-chain bridges outside of the lending platform, which increases operational complexity and also brings more security risks.
Based on the above mentioned problems, we address the following two main aspects.
ChainX is a Bitcoin Layer 2 network, a Wasm+EVM smart contract platform. ChainX provides Bitcoin-based compilability and provides the infrastructure to enable Bitcoin decentralized lending. We will deploy The Lending Protocol(Maker DAO Protocol) on ChainX EVM to put all lending activity on the chain, achieving truly decentralized lending. In addition, ChainX further enhances the security and decentralization of Bitcoin on the ChainX network by using Taproot technology, combined with the multsig2 protocol, the Signal privacy communication protocol. Users can confidently top up their bitcoin across chains to the ChainX network and mortgage it for subsequent bitcoin lending process.
Common messaging (which can be any type of message, such as smart contract calls) can be implemented between any chain that has deployed LayerZero end point. Therefore, based on LayerZero, users can borrow any stable coin (e.g. USDT/USDC/BUSD) on any chain (e.g. Ether/BSC/L2) directly after mortgaging bitcoin on the ChainX network without additional cross-chain operations, thus completing the omnichain lending of bitcoin in one click.
As shown in the diagram, we will integrate the lending protocol (MakerDAO protocol) and LayerZero protocol on ChainX and create pools of stablecoins on each chain. This way, users will be able to borrow various stablecoins from each chain directly after mortgaging their bitcoin on the ChainX network. Providing liquidity to each chain’s pool of stablecoins will earn interest in stablecoins as a settlement and is expected to yield more than the market average.
After the development of the bitcoin omnichain lending business is completed, it will be deployed on Soswap and launched to the public. At that time, SoSwap will become an omnichain financial platform with two core functions:
- Omnichain swap
- Bitcoin omnichain lending.
Just like the concept of ‘cross-chain’ three years ago, ‘omnichain’ will detonate in the next three years. If you missed Polkadot in 2019 because you didn’t understand it, then here will be another brand new opportunity.