30 Sep Crypto Market Roundup: DeFi for Bitcoin and Structured Products for Retail Investors
Ethereum may be at the center of the DeFi craze, but it isn’t the only early mover in the space. In 2015, RSK, the first smart contract platform secured by the Bitcoin network, was blazing its own trail. They have been building their DeFi ecosystem ever since.
RSK is a second-layer solution that combines the benefits of Ethereum smart contract capabilities with the security of the Bitcoin blockchain. It is a dynamic that also fuels Money on Chain, which is behind a bitcoin-fueled stablecoin.
Gabriel Kurman, master advocate at IOV Labs, the company powering Bitcoin-fueled RSK, discussed how far the company has come and where it is today. He explained how the company launched an Ethereum bridge with RSK through which high -profile projects like Chainlink and Dai are now making their tokens available on the RSK ecosystem. Kurman also discussed the company’s latest milestone surrounding Bitcoin merge mining, saying,
“From a technical standpoint, we reached around 50% of total Bitcoin merge mining, securing the RSK blockchain. So this is a huge milestone and we’re always super grateful to all the Bitcoin miners that are ultra securing smart contracts and enabling DeFi for bitcoin because this is them providing the security.
Money on Chain is also involved in the DeFi for Bitcoin space. It is behind bitcoin-collateralized stablecoin dubbed Dollar on Chain (DOC), which is a model that DeFi market participants know well, only involving ERC-20 tokens.
Manuel Ferrari, co-founder of Money On Chain, explained how DOC boasts a completely different financial model behind the smart contracts compared to Dai and MakerDAO. First, it runs on RSK. Additionally, it has three components, the first of which is the stablecoin. Ferrari explained the other two pieces, saying,
“Then we have a token which is a liquidity token which is called BPRO. The BPRO is a token which is meant for bitcoin holders and it has a little bit of leverage that usually is between 1.05 and 1.20. So it has free leverage, which is actually something that anyone would like in a token like bitcoin if you are bullish on bitcoin — well, why not get free leverage on a bullish asset? And on top of that it has what we call, passive income. It gets part of the fees of using the platform — anyone who uses the platform has to pay a very small fee. Part of that goes to the liquidity providers, which are the BPRO holders, and also it gets also part of the governance token…So it has several income sources to be a very interesting token for bitcoiners. So it’s a DeFi token meant for bitcoin holders.”
It’s no secret that Ethereum has been suffering from scalability issues that have directly affected projects including those in DeFi and their users. Chief among the problems lately has been sky-high gas fees. Teana Baker-Taylor asked IOV Labs’ Kurman about how the upcoming release of Ethereum 2.0 will impact projects, in response to which he said,
“It’s quite interesting now. It’s super challenging for Ethereum to move to 2.0 and change completely from proof-of-work to proof-of-stake. And I know for a fact that many projects running only on Ethereum are quite concerned about how that will affect their projects. In that sense, RSK has been built following Satoshi’s advice and way of seeing the world. So we believe in immutability and not rolling back a blockchain but also not changing the rules in the proof-of-work for the projects deciding to build..on-chain on top of RSK. Absolutely, RSK can be an option. It’s an option now. And we don’t see the world that you have to choose between one or the other. We believe that very important projects in the DeFi ecosystem should hedge themselves, make sure that the projects and the users are safe regardless of what happens at an infrastructure level.”
Crypto Trading in Asia
Another trend in the cryptocurrency space is structured products, such as bitcoin futures and options. Matrixport, a spinoff from blockchain and crypto mining giant Bitmain, is active in this market. Cynthia Wu and Daniel Yan, both of Matrixport, spoke with Nisa Amoils about the state of crypto trading in the Asian markets, their strategy for retail investors and the climate for bitcoin in China. Daniel Yan, who is Matrixport’s chief operating officer, explained the company’s strategy for retail investors, saying,
“The futures product is much more natural for them because it is just a leveraged spot of that; just think from retail’s perspective, it’s a linear transformation. But options, given the linearity, it can get a little confusing. So at this moment, I think not only with us, with everyone, all the retail products in the cryptocurrency world, I think most of the retail customers, they understand how to use structured products to earn money, which is embedded with options. But it’s generally difficult for them to understand how to just use options as a product to trade and how to trade it. It’s generally, very few people know. So that is definitely a big workload we need to focus on in the next year in part of our retail strategy, that is we need to provide quality content to help retailers understand how to use this product.”
Matrixport’s Cynthia Wu explained how in China, bitcoin is not looked upon as money but instead is defined as a liquid asset and is grouped in the virtual commodity bucket. She explained that this perception marks an important difference vs. other jurisdictions that are still pushing for the crypto payments use case, which she says explains a lot about the stance of the Chinese government, adding:
“I would say that China has not prohibited crypto outright, and actually in November last year the authority of the Chinese government actually said that bitcoin mining will not be an illegal industry in the country, which I think gives relief to people worried about the sustainability of bitcoin mining in China. But China prohibits token funding and also trading platforms from engaging in…business between the legal tender of the country and the cryptocurrencies. So I think that’s still going to be the case going forward.”