Can Bitcoin Really Do DeFi? A New Protocol Aims to Find Out

A caller protocol launching this week aims to yet bring existent decentralized concern straight onto Bitcoin’s basal layer, allowing trading, token issuance, and different applications to tally done modular Bitcoin transactions.

According to the project’s founders, the extremity is to marque Bitcoin itself the location for DeFi alternatively than routing liquidity done sidechains, bridges, oregon wrapped assets.

Chad Master, co-founder and main concern serviceman of OP_NET, told Decrypt that the squad built the protocol astir the thought that Bitcoin’s existing liquidity should stay connected the web itself.

“We were seeing transportation decks for each these so‑called layer‑two solutions, and nary of them were appealing to america arsenic investors,” Master said. “When you truly interruption it down, 99% of the solutions that person travel crossed truthful acold person been extractive to Bitcoin.”

The bulk of alleged Bitcoin DeFi products necessitate users to span their Bitcoin to different blockchain oregon wrapper it into synthetic assets, specified arsenic the Ethereum-based Wrapped_BTC.

OP_NET claims to connection a antithetic attack by embedding smart contract interactions into mean Bitcoin transactions confirmed by miners.

Smart contracts are self‑executing programs connected a blockchain that automatically tally erstwhile predefined conditions are met; they were popularized connected Ethereum, whose web was built for analyzable programmable logic, whereas Bitcoin’s plan focuses connected simple, unafraid transactions, alternatively than general‑purpose applications.

“When we deploy a contract, we're utilizing Bitcoin’s autochthonal scripting to make a caller code that holds the declaration arsenic the archetypal transaction wrong that address,” Master explained. “Users, erstwhile interacting with that astute contract, nonstop their declaration telephone information done a Bitcoin transaction. The declaration telephone information is embedded wrong the Bitcoin transaction.”

The protocol uses a web of nodes that scan Bitcoin blocks for contract-related information and execute the associated logic utilizing a virtual instrumentality environment. The resulting authorities is compared crossed nodes to support statement portion keeping transaction colony connected Bitcoin itself.

Danny Plainview, OP_NET’s co-founder and CEO, said the strategy builds connected ideas that gained attraction during the emergence of Bitcoin Ordinals successful 2023, erstwhile developers began experimenting with storing images, videos, and adjacent video games wrong Bitcoin transactions.

“In 2023, is erstwhile ordinals truly started to instrumentality off,” Plainview told Decrypt. “When we dug into the tech, it became precise wide that determination is nary state token for this stuff—everything is paid successful Bitcoin, everything is simply a Bitcoin transaction.”

Unlike Ordinals-based systems, which leverage Bitcoin’s SegWit and Taproot upgrades to spot inscription information successful transaction witnesser fields and trust connected off‑chain indexers to way and construe that data, Plainview explained, OP_NET introduces a statement mechanics crossed nodes that way declaration execution.

“What we created is that indexing—people telephone them meta protocols, but we similar to telephone it a statement protocol—because OP_Net is the archetypal indexing protocol that has a statement mechanics betwixt the indexers that does not necessitate a abstracted state token,” helium explained.

According to Plainview, expanding Bitcoin’s functionality is cardinal to its semipermanent success.

“It's perfectly mind‑boggling to maine that the civilization successful the Bitcoin abstraction says Bitcoin is truthful large due to the fact that it tin lone beryllium utilized arsenic money, but the concatenation isn’t scalable and not everyone tin usage it,” helium said. “We deliberation Bitcoiners should beryllium allowed to bash thing they privation with it—if you tin imagination it, you tin physique it.”