Until recently, the majority of Bitcoin (BTC) lending took place on centralized platforms. This was predominantly because of the cumbersome process involved in tokenizing Bitcoin into a wrapped ERC-20 version before it could be deposited on the Ethereum (ETH) network.
The resulting implication of this inconvenience was not just the additional transaction fees and slippage incurred but a fragmented decentralized finance (DeFi) ecosystem. Currently, only 1% of Bitcoin is circulating on Ethereum.
BiFi is a platform that facilitates real Bitcoin lending on DeFi by connecting the Bitcoin and Ethereum networks directly. The platform describes itself as “like Compound or Aave, but with real, native Bitcoin.” Instead of going through the process of wrapping their Bitcoin, users can use their native BTC from their Bitcoin wallet to lend and borrow ERC-20 assets.
With BiFi’s native Bitcoin lending service, Bitcoiners can engage with DeFi protocols without the need for third-party custodians and merchants. In eliminating the need for wrapped BTC, BiFi expects “a massive influx of BTC holders into DeFi” that will shape the future of the industry.
Multichain lending with maximum security
BiFi claims to have been designed with a “security-first mindset.” Using BIFROST’s multichain technology and a combination of cryptographic proofs, BiFi ensures the security of its protocol.
The key aspect here is the fact that the Bitcoin and Ethereum networks are connected directly. Both these blockchains already have a large number of nodes ensuring their computational integrity.
“We build cryptographic proofs to verify the accuracy of transactions that occurred on the Bitcoin network and verify it on-chain on Ethereum smart contracts. It may be more expensive to perform on-chain verifications, but this computational integrity technique is the most secure way thus far,” said BiFi in a blog post.
The platform also makes use of fraud proofs to verify that the actions of the relayer are correct. It does this by creating cryptographic proofs and verifying them on-chain.
A DeFi future without fragmented liquidity
Since its launch in January 2021, BiFi’s Total Value Locked across staking, lending and pooling services has crossed $219 million. The platform also has a flash loan-based leveraged yield farming and trading service — BiFi X.
"Connecting Bitcoin and Ethereum network is a huge step forward. Yet BIFROST will connect more networks and BiFi will offer lending and financial services to expand the DeFi ecosystem to turn DeFi into future finance," commented Dohyun Pak, the CEO of BiFi and BIFROST.
The project’s next launch will be a multichain wallet, which it expects to release in Q3 2021. Users will be able to store BTC, ETH, BNB, ERC-20 tokens and BEP-20 tokens.
In 2022, BiFi aims to expand to more networks for multichain DeFi lending from EVM to non-EVM. Through a “Multichain Dev Suite,” developers will be able to operate DApps among all cross-EVM and non-EVM networks, expanding the multichain DeFi ecosystem.
Ultimately, BIFROST envisions a future without isolated capital markets on numerous chains. To make this happen with the main goal of solving one of DeFi’s biggest challenges – interoperability – the project allows capital to flow freely between blockchains without any wrapping, bridging or custodians. Built upon its “Universal Multichain Middleware,” BiFi is the multichain DeFi platform that will not isolate capital markets on numerous chains.
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