The decentralized finance (DEFI) landscape continues to evolve, with Bitcoin-centric solutions gaining momentum. BTCFI is an emerging sector that converts Bitcoin (BTC) from a valuable passive store into Defi’s actively used assets.
New reports from Cointelegraph Research and Elastos delve into ways that Bitcoin security can help create an unreliable, scalable financial ecosystem.
The expansion of Bitcoin’s role in defi
Defi has traditionally been ruled by Ethereum. Ethereum accounts for more than 50% of the sector’s total $175 billion total (TVL). However, Bitcoin’s strong security and liquidity make it an attractive foundation for Defi’s innovation.
Despite its strengths, Bitcoin’s lack of native smart contract capabilities has limited its role in historically decentralized finance. The advent of Bitcoin-centric defi solutions aims to bridge this gap, allowing Bitcoin holders to participate in loans, stablecoin issuance, and cross-chain interoperability without custody risk.
Elastos: Take advantage of Bitcoin security for decentralized applications
Elastos stands out as one of the leading players of this evolution by incorporating merged mining. This is a way to enable secondary blockchains to inherit Bitcoin security.
With approximately 50% of Bitcoin’s total 800 EH/s hashrate protecting Elastos, the platform is deployed as one of the most computationally robust Bitcoin link networks. This ensures that financial applications built on Elastos maintain a level of security similar to the security of Bitcoin itself.
At the heart of Elastos’ infrastructure is the elastic consensus model, a hybrid mechanism that integrates supplementary work proofs, combined proofs, and integrated proofs.
This multi-layered approach allows Elastos to provide secure, scalable financial services and enhance the appeal of Defi applications. Ethereum Virtual Machine compatible sidechain, Elastos Smart Chain accelerates the development of distributed applications (DAPPs) and ensures seamless integration with the broader flawed ecosystem.
BEL2: BTCFI breakthrough
The main highlight of the report is the BEL2 Arbiter network, designed to DEFI unreliable Bitcoin transactions. Bel2 leverages Zero Knowledge Proof (ZKPS) to validate Bitcoin transactions on Elastos and Ethereum networks without relying on centralized custodians.
This mechanism allows Bitcoin to be used in defi protocols that do not have synthetic assets or intermediaries, addressing the long-standing challenges in BTCFI.
This model has already attracted institutional interest. The initiative, led by Harvard students and alumni, is developing a BTC-backed Stablecoin using BEL2. The platform also supports decentralized lending that allows Bitcoin holders to secure stubcoin loans while maintaining exposure to BTC’s price rise.
Elastos’ market position and future possibilities
Elastos’ BTCFI approach competes with established Bitcoin debt solutions such as stacks and rootstocks. Stacks primarily benefit from Bitcoin’s finality, and rootstocks focus on EVM compatibility, but Elastos distinguishes them by combining high security (via merged mining) with cross-chain interoperability. This positions Elastos as a terrifying player in the BTCFI landscape.
However, the report also identifies several challenges, including regulatory uncertainty, ecosystem perceptions, and some technical complexities. Despite these hurdles, Elastos’ combination of Bitcoin security, the implementation of unreliable smart contracts, and institutional support positions it for the potential growth of the evolving BTCFI sector.
Challenges and opportunities in Bitcoin adoption
As the blockchain industry moves towards cross-chain interoperability and decentralized governance, the assets in which Bitcoin is placed are expected to play a key role in reshaping both traditional and decentralized finances.
Elastos’ innovation aims to enhance Bitcoin security, scalability and institutional adoption in Defi, particularly through Bel2 and its decentralized identity (DID) framework.
With Bitcoin-Secured Finance forecast to expand significantly, Elastos’ infrastructure provides a robust foundation for the next wave of decentralized financial applications:
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