SINGAPORE, Sept. 12, 2024 /PRNewswire/ — HTX Ventures, the global investment division of HTX, today released its latest research analysing Bitcoin’s potential and challenges in the field of Bitcoin decentralized finance (BTCFI). The report, titled Exploring the BTCFI Rabbit Hole from the Perspective of Bitcoin’s Programmabilityaims to help readers understand the BTCFI sector better, by exploring the evolutionary path of Bitcoin programming, delving into how Bitcoin programming can support various BTCFI applications, showcasing the current real-world BTCFI implementation scenarios, and explaining the underlying logic of BTCFI’s future growth and adoption.
HTX Ventures has been contributing to BTCFI for a long time. As stated in its 2024 Half-Year Investment ReportBTCFI is highlighted as one of HTX Ventures’ six key investment directions in 2024. Some of HTX Ventures’ portfolio companies in the BTCFI sector include Babylon, BounceBit, COREx, and more.
The new report once again shows HTX Ventures’ interest in BTCFI. It begins with the foundations of the Bitcoin contracts, which were laid fourteen years ago by Satoshi. Understanding the basics of Bitcoin programming involves several concepts, including Transaction Outputs (TXO), Unspent Transaction Output (UTXO), scriptSig, and Opcodes. “Bitcoin script programming is about programming money and enabling a specific amount of money to respond to particular input data. By designing the scriptPubKey, opcodes, and the interaction process between users, we can offer cryptographic guarantees for the key state transitions of Bitcoin contracts, ensuring the contracts’ proper execution,” the report points out.
There are some mechanisms to be used to enable the implementation of different types of transactions, including MultiSig, Timelocks, Hashlocks, Flow Control, and SIGHASH. The report explains, “the basic model of Bitcoin programming is where UTXO locking scripts specify verification conditions, unlocking scripts provide data, and opcodes in locking scripts indicate the verification program. The funds can be spent once the verification program is passed.”
There are some core limitations, however, such as only a few verification programs being available, Bitcoin scripts having no computational power, and UTXO unlocking conditions being completely independent.
Unlike the computation-based Ethereum contracts, Bitcoin contracts are verification-based, which has brought many challenges in developing BTCFI products. Despite the difficulties, “over the ten years of developing Bitcoin contracts, the ingenious use of cryptographic algorithms and signatures has significantly enhanced privacy, efficiency, and decentralization, making BTCFI products possible,” the report states, and starts introducing Bitcoin programming milestones. Innovative tools, such as the Discreet Log Contract (DLC), Partially Signed Bitcoin Transactions (PSBT), and MuSig2 bring new solutions to the problems in Bitcoin programming, driving the development of BTCFI.
The Taproot upgrade activated in November 2021 was revolutionary for the Bitcoin ecosystem, allowing Bitcoin to hold in custody large-scale smart contracts with tens of thousands of signatories while concealing all participants and maintaining the size of a single-signature transaction. This makes more complex on-chain BTCFI operations possible and significantly improves privacy and transaction efficiency.
Such technological innovations pave the way for BTCFI’s further development. Then in January 2023, Ordinals were proposed, which aimed to assign each sat a unique identifier and attribute, so as to transform it into a unique NFT. The creation and trading of Bitcoin NFTs were realized, not only expanding the uses of Bitcoin but also allowing users to directly create and trade digital assets on the Bitcoin blockchain. This led to the introduction of BRC-20, a token system for on-chain recording and off-chain processing that uses JSON data’s ordinal inscriptions to deploy token contracts, mint tokens, and transfer them.
The naissance of Ordinals and BRC-20 created trading demand and blue-chip assets for BTCFI. More importantly, they offered many BTCFI projects new ideas based on indexer programming that enhanced Bitcoin’s contract capabilities.
Bitcoin’s programmability has come a long way and made great progress, forming a thriving BTCFI ecosystem with more and more application scenarios of BTCFI arising. The report lastly lists some notable BTCFI implementations, including BTC staking provider Babylon, asset issuance platforms Unisat and Magic Eden, lending protocol Liquidium, BTCFI scaling solution Fractal Bitcoin, and more.
The emergence of BTCFI applications indicates that its market potential is becoming evident. With Bitcoin becoming more and more mainstream, the market demand for BTCFI use cases will also increase, fostering a new financial ecosystem centered around Bitcoin. “The formation of this ecosystem will propel Bitcoin further beyond the ‘digital gold’ narrative, establishing it as an indispensable decentralized financial infrastructure in the global economic system,” the report concludes.
To read the full report, please visit: https://square.htx.com/htx-ventures-exploring-the-btcfi-rabbit-hole-from-the-perspective-of-bitcoins-programmability/
About HTX Ventures
HTX Ventures, the global investment division of HTX, integrates investment, incubation, and research to identify the best and brightest teams worldwide. With more than a decade-long history as an industry pioneer, HTX Ventures excels at identifying cutting-edge technologies and emerging business models within the sector. To foster growth within the blockchain ecosystem, we provide comprehensive support to projects, including financing, resources, and strategic advice.
HTX Ventures currently backs over 300 projects spanning multiple blockchain sectors, with select high-quality initiatives already trading on the HTX exchange. Furthermore, as one of the most active FOF (Fund of Funds) funds, HTX Ventures invests in 30 top global funds and collaborates with leading blockchain funds such as Polychain, Dragonfly, Bankless, Gitcoin, Figment, Nomad, Animoca, and Hack VC to jointly build a blockchain ecosystem. Visit us here.
Feel free to contact us for investment and collaboration at VC@htx-inc.com
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Unlocking the Potential of Bitcoin Decentralized Finance: HTX Ventures Releases In-Depth Report
In a recent report titled “Exploring the BTCFI Rabbit Hole from the Perspective of Bitcoin’s Programmability,” HTX Ventures, the global investment division of HTX, delves into the world of Bitcoin decentralized finance (BTCFI) and its vast potential. As a leading investor in the crypto space, HTX Ventures has been contributing to the growth of BTCFI for a long time, and this report marks another significant milestone in its journey.
Understanding Bitcoin Programmability
The report begins by exploring the foundations of Bitcoin contracts, which were laid 14 years ago by Satoshi Nakamoto. It highlights the basics of Bitcoin programming, including concepts such as Transaction Outputs (TXO), Unspent Transaction Output (UTXO), scriptSig, and Opcodes. Bitcoin script programming is about programming money and enabling a specific amount of money to respond to particular input data. By designing the scriptPubKey, opcodes, and the interaction process between users, cryptographic guarantees can be offered for the key state transitions of Bitcoin contracts, ensuring their proper execution.
Mechanisms and Limitations
The report explains various mechanisms used to enable the implementation of different types of transactions, including MultiSig, Timelocks, Hashlocks, Flow Control, and SIGHASH. While these mechanisms provide versatility, there are core limitations, such as only a few verification programs being available, Bitcoin scripts having no computational power, and UTXO unlocking conditions being completely independent.
Bitcoin’s Programmability Milestones
Despite the challenges, innovative tools such as the Discreet Log Contract (DLC), Partially Signed Bitcoin Transactions (PSBT), and MuSig2 have brought new solutions to the problems in Bitcoin programming, driving the development of BTCFI. The Taproot upgrade, activated in November 2021, was revolutionary for the Bitcoin ecosystem, allowing Bitcoin to hold large-scale smart contracts with tens of thousands of signatories while concealing all participants and maintaining the size of a single-signature transaction.
Ordinals and BRC-20: A New Era for BTCFI
In January 2023, Ordinals were proposed, which aimed to assign each sat a unique identifier and attribute, transforming it into a unique NFT. The creation and trading of Bitcoin NFTs were realized, expanding the uses of Bitcoin and allowing users to directly create and trade digital assets on the Bitcoin blockchain. This led to the introduction of BRC-20, a token system for on-chain recording and off-chain processing that uses JSON data’s ordinal inscriptions to deploy token contracts, mint tokens, and transfer them.
The Future of BTCFI
The report concludes that Bitcoin’s programmability has come a long way and made great progress, forming a thriving BTCFI ecosystem with more and more application scenarios of BTCFI arising. The emergence of BTCFI applications indicates that its market potential is becoming evident. With Bitcoin becoming more mainstream, the market demand for BTCFI use cases will increase, fostering a new financial ecosystem centered around Bitcoin.
About HTX Ventures
HTX Ventures, the global investment division of HTX, integrates investment, incubation, and research to identify the best and brightest teams worldwide. With over a decade-long history as an industry pioneer, HTX Ventures excels at identifying cutting-edge technologies and emerging business models within the sector. To
What is DeFi
Decentralized Finance (DeFi) and Bitcoin Decentralized Finance (BTCFI): Understanding the Concepts and Potential
Decentralized finance (DeFi) has been gaining significant attention in recent years, and its applications in the Bitcoin ecosystem have the potential to revolutionize the financial sector. In this article, we will delve into the concepts of DeFi and Bitcoin Decentralized Finance (BTCFI), exploring their definitions, mechanics, and potential applications.
What is Decentralized Finance (DeFi)?
Decentralized finance, or DeFi, refers to financial applications built on blockchain technologies, typically using smart contracts [1[1]. These applications aim to provide peer-to-peer financial services on public blockchains, primarily Ethereum [3[3]. DeFi has the potential to democratize access to financial services, increasing efficiency, transparency, and security.
What is Bitcoin Decentralized Finance (BTCFI)?
Bitcoin Decentralized Finance (BTCFI) is a subset of DeFi, specifically focused on the Bitcoin ecosystem. BTCFI aims to develop decentralized financial applications on the Bitcoin blockchain, leveraging its programmability and security. The report “Exploring the BTCFI Rabbit Hole from the Perspective of Bitcoin’s Programmability” highlights the potential of BTCFI, exploring its evolutionary path, and how it can support various BTCFI applications.
Understanding Bitcoin Programming
Bitcoin programming is a crucial aspect of BTCFI. It involves designing scripts that enable specific amounts of money to respond to particular input data, ensuring cryptographic guarantees for key state transitions of Bitcoin contracts [2[2]. The report explains that Bitcoin script programming is about programming money, and that by designing scriptPubKey, opcodes, and the interaction process between users, cryptographic guarantees can be offered for the proper execution of Bitcoin contracts.
Mechanisms and Limitations of Bitcoin Programming
Several mechanisms are used to enable the implementation of different types of transactions in Bitcoin programming, including MultiSig, Timelocks, Hashlocks, Flow Control, and SIGHASH. However, there are some core limitations, such as only a few verification programs being available, Bitcoin scripts having no computational power, and UTXO unlocking conditions being completely independent.
Bitcoin Contracts and BTCFI Applications
Bitcoin contracts are verification-based, which has brought many challenges in developing BTCFI products. Despite these difficulties, the report highlights that over the past decade, the ingenious use of cryptographic algorithms and signatures has significantly enhanced privacy, efficiency, and decentralization, making BTCFI products possible.
Milestones in Bitcoin Programming and BTCFI Development
The report introduces Bitcoin programming milestones, including the Discreet Log Contract (DLC), Partially Signed Bitcoin Transactions (PSBT), and MuSig2, which bring new solutions to the problems in Bitcoin programming, driving the development of BTCFI. The Taproot upgrade, activated in November 2021, was revolutionary for the Bitcoin ecosystem, allowing for large-scale smart contracts with tens of thousands of signatories while concealing all participants and maintaining the size of a single-signature transaction.
Ordinals and BRC-20: A New Era for BTCFI
In January 2023, Ordinals were proposed, aiming to assign each sat a unique identifier and attribute, transforming it into a unique NFT. This led to the introduction of BRC-20, a token system for on-chain recording and off-chain processing that uses JSON data’s ordinal inscriptions to deploy token contracts, mint tokens, and transfer them. The naissance of Ordinals and BRC-20 created trading demand and blue-chip assets for BTCFI, offering many BTCFI projects new ideas based on indexer programming that enhanced Bitcoin’s contract capabilities.
The Future of BTCFI and Its Market Potential
The report lists some notable BTCFI implementations, including BTC staking provider Babylon, asset issuance platforms Unisat and Magic Eden, lending protocol Liquidium, and BTCFI scaling solution Fractal Bitcoin. The emergence of BTCFI applications indicates that its market potential
