Author: Yala
TL;DR
The original design of Bitcoin prioritizes security and decentralization over complex functionalities such as smart contracts and DeFi applications. Therefore, Yala has created a modular architecture on the Ordinals protocol, integrating decentralized indexer networks and Oracles to introduce smart contract capabilities to Bitcoin, thereby issuing the stablecoin $YU. Based on this modular design, $YU can freely participate in any on-chain DeFi activities, unlocking Bitcoin's massive liquidity.
Yala aims to establish a modular DeFi yield aggregator for Bitcoin, ensuring security and decentralization through mechanisms such as federated voting indexers (ultimately building a fully decentralized indexer) and a Bitcoin insurance vault with threshold signatures, while ensuring democratic participation and decentralized governance through the community. By achieving widespread adoption of decentralized finance on the most resilient blockchain globally—Bitcoin, while maintaining its core principles of security and decentralization, Yala hopes to become the preferred path and solution.
Limitations of Bitcoin in Smart Contracts and DeFi Development
Bitcoin is the most pioneering decentralized cryptocurrency, with its design emphasizing security and decentralization. Its script language was initially intended to facilitate simple peer-to-peer value transfer, rather than complex financial functions. While the DeFi ecosystem flourishes on more flexible blockchains like Ethereum, Bitcoin's architectural limitations, including block size and frequency restrictions, prevent it from serving as infrastructure to meet its demands.
The blockchain scalability dilemma highlights the challenge of balancing security, decentralization, and scalability, all of which are crucial for DeFi applications. Bitcoin prioritizes the first two, thus unable to meet the high transaction volume and real-time requirements of DeFi. Undoubtedly, Bitcoin holders need a secure and seamless mechanism to participate in the growing DeFi ecosystem, a need that has long been met for users of Ethereum and other EVM-compatible blockchains.
Ethereum has already implemented scalability solutions such as sharding, Rollups, and modularity, while Bitcoin, without compromising its principles, has conservatively explored second-layer scaling solutions. However, to fully embrace DeFi and generate returns for holders, Bitcoin must consider the following strategies:
Enhance DeFi capabilities: Bitcoin can also explore scalability solutions such as sharding, Rollups, and others to enhance its DeFi capabilities while maintaining its fundamental principles of security and decentralization. Careful implementation and rigorous testing will ensure the integrity and decentralization of the network are not compromised.
Embrace modularity: Modular design principles can introduce new features and functionalities tailored for DeFi without compromising the security and decentralization of the core protocol. This will enable Bitcoin to evolve and adapt to the ever-changing DeFi environment, providing opportunities for Bitcoin holders to generate returns and participate in the DeFi ecosystem.
Second-layer scaling solutions: Bitcoin developers focus on second-layer solutions such as the Lightning Network and sidechains to enhance scalability outside the main chain. However, these solutions add complexity and dependence on independent governance protocols. To truly embrace DeFi and provide a smooth yield-generating experience for Bitcoin holders, Bitcoin may need to explore more integrated and user-friendly solutions.
As the DeFi ecosystem evolves, Bitcoin must maintain flexibility and innovation to provide its holders with the same opportunities as users in other ecosystems, participating in the rapidly developing DeFi ecosystem. This requires innovators in the ecosystem to formulate strategies that understand and anticipate the needs of the rapidly evolving DeFi ecosystem while remaining consistent with Bitcoin's core principles. Typically, this requires a decentralized, accessible, and economically empowering approach for individuals.
$YU: Cross-Chain Yield Stablecoin Based on Bitcoin
The rise of DeFi has opened up new opportunities for financial innovation, but Bitcoin's architectural limitations hinder its full participation in this rapidly growing ecosystem. Yala's solution is to leverage Bitcoin's unique properties to introduce DeFi capabilities, with a focus on providing a stablecoin backed by Bitcoin that can earn native yields across multiple chains.
Ordinals Protocol: Opportunities for Bitcoin DeFi
Inscriptions are a groundbreaking innovation enabled by the Ordinals protocol, allowing the direct issuance and management of digital assets on the Bitcoin blockchain. By assigning a unique identifier to each satoshi (the smallest unit of Bitcoin), inscriptions enable the creation of non-fungible tokens (NFTs) and other digital assets on the Bitcoin network, including Yala's Bitcoin-backed stablecoin.
The Meta protocol based on Ordinals (BRC-20, BRC-100, BRC-420, etc.) enables the integration of indexers into the Bitcoin network, paving the way for a true DeFi ecosystem on Bitcoin.
Yala's Bitcoin-backed stablecoin: Earning Cross-Chain Yields
Yala's modular design introduces programmable smart contracts and DeFi applications to Bitcoin, including the ability to earn yields on multiple chains with the Bitcoin-native stablecoin $YU. For detailed technical design, please refer to Yala's whitepaper. By leveraging a robust security framework similar to Ethereum or Solana, Yala's stablecoin products, including lending/borrowing protocols, liquidity pools, and governance contracts, have formal verification support to ensure mathematical correctness.
Through the Bitcoin-native stablecoin $YU, users can participate in DeFi opportunities across various blockchain networks, earning yields without sacrificing the security and decentralization principles of the Bitcoin network.
Robust Security and Decentralization
Yala's solution prioritizes security and decentralization, consistent with Bitcoin's core principles. The federated voting indexer implemented by the indexer network mitigates the risk of centralized BRC-20 indexing, while rigorous data validation and consensus protocols ensure the reliability and integrity of maintained token balance information. It is worth noting that the federated voting indexer is a transitional solution, and Yala will strive to promote the construction of a decentralized indexer.
Collaboration with Nubit provides additional data availability verification for indexer behavior, while the separation of BRC-20 black-and-white modules ensures the security of deposit and withdrawal transactions.
Execution Layer and Oracle Network
At the execution layer, Bitcoin asset management utilizes a Bitcoin insurance vault with threshold signatures to ensure strong security without single points of failure. Yala's decentralized Oracle network also provides tamper-resistant real-time price data, crucial for managing clearing and maintaining stablecoin pegs.
By introducing a Bitcoin-backed stablecoin that can earn yields across multiple chains, Yala is unlocking the potential of Bitcoin in the rapidly growing DeFi ecosystem. This approach combines Bitcoin's strong security and decentralization with DeFi's innovation and flexibility, creating a powerful, user-centric blockchain ecosystem for a diverse digital economy.
Establishing a True DeFi Ecosystem for Bitcoin
At Yala, our vision is to create a thriving, open ecosystem, unlocking the full potential of Bitcoin DeFi.
Unlocking untapped potential of Bitcoin assets: Yala is committed to unlocking the full potential of DeFi on Bitcoin. With the Bitcoin-backed stablecoin $YU, we will provide Bitcoin holders with native yields across all other chains.
Promoting Democratic Participation in DeFi: Our vision is to promote the democratization of DeFi, allowing individuals and organizations to participate in a transparent, autonomous, and decentralized financial system. Our goal is to establish an open ecosystem where various DeFi applications can seamlessly interact and combine, driving innovation, collaboration, and value creation.
Supporting Decentralized Governance for Lending Protocols: We are committed to decentralization and community governance, transforming the governance structure of our lending protocols into a decentralized autonomous organization (DAO), enabling a broader community to actively participate in the evolution of the Yala ecosystem. We aspire to create a self-sustaining, flexible, and evolving DeFi ecosystem on Bitcoin through openness and collaboration.
Pioneering the DeFi Space on Bitcoin: Yala's ultimate goal is to establish itself as a premier DeFi infrastructure on Bitcoin. We envision a future where individuals and organizations can access a wide range of secure, transparent, and decentralized financial services, products, and opportunities within the Bitcoin ecosystem.
Together, we will establish a true DeFi ecosystem on the world's most secure and resilient blockchain—Bitcoin, driving widespread adoption of decentralized finance and opening a world full of opportunities.
About Yala
Yala is a decentralized financial protocol that bridges Bitcoin liquidity with the native stablecoin YU. As a powerful asset and liquidity enhancement tool, the stablecoin $YU operates across multiple ecosystems, improving efficiency without the need for bridging or reconfiguring the underlying Bitcoin. Yala empowers Bitcoin holders and ecosystem participants while maintaining the security of the Bitcoin infrastructure, unlocking its liquidity.
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