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.