• Tue. Aug 2nd, 2022

Bitcoin Network Extends DeFi Horizon Through RSK Smart Contract Functionality and Interoperability

Ethereum has grown in popularity as a cryptocurrency and as a platform supporting a myriad of decentralized applications (dApps) and decentralized finance (DeFi) protocols, mainly due to its smart contract capabilities and of its tokenization features.

As a result, hundreds of blockchain and DeFi-based projects have started using the Ethereum network, resulting in several issues such as slow transactions, inconsistent and inflated gas costs, and security concerns. For example, the Ethereum chain faced processing power issues with multiple dApps hosted in its chain. The network was also the victim of a high-profile DAO attack, highlighting potential security vulnerabilities inherent in its smart contracts.

These headwinds have triggered an increase in demand for alternative platforms, in some ways increasing the need for DeFi on the Bitcoin network. To face these changing winds, RSK introduced smart contract functionality to Bitcoin, extending the capabilities of the legacy network to support new features such as cross-chain transactions, faster throughput, merged mining and DeFi – all backed by security proven track record of Bitcoin.

Bitcoin has gained the attention of the general public over the past year, fueled by El Salvador’s acceptance of the seminal cryptocurrency as legal tender. There is a good chance that other South American countries will sooner or later follow suit. As such, the Bitcoin network urgently needed a solution that could compete with Ethereum’s hegemony over DeFi.

With RSK’s scaling solution, a growing suite of products, and developer-friendly tools, the Bitcoin network can evolve into a full-fledged ecosystem that provides users with options to trade, borrow, lend and earn interest on their crypto holdings without jumping between the two. blockchains.

A must-have scaling solution for the Bitcoin network

RSK extends the capabilities of the Bitcoin network, enabling it to support a plethora of real-world use cases. At this point, RSK smart contracts are already being used for various use cases, given the confidence of leading companies and regulatory agencies in the underlying security and transparency of the Bitcoin network.

For example, Argentina’s gas regulator, Enargas, relies on RSK smart contracts to develop digital identities, thereby streamlining end-to-end gas registration, installation and distribution processes while ensuring transparency. total and operational efficiency. Likewise, Banco Davivienda, one of the largest Colombian banks, uses RSK to support a micro-payment wallet to provide fast and secure execution of bank transfers to users at significantly lower fees than the systems. traditional financial institutions.

In addition to these, RSK smart contracts also power several DeFi applications like Money on Chain (MOC), Sovryn, Kripton Market, and more on the Bitcoin network. The platform recently hit a major milestone, crossing over 2,500 BTC in Total Locked Value (TVL). With this feat, RSK overtook Lightning Network, the TVL of another Bitcoin-based scaling solution, further highlighting the insatiable appetite for DeFi over Bitcoin.

By digging even deeper, RSK smart contracts can power non-fungible tokens (NFTs). Nifty Labs, the Blockchain and Open Finance business creator, takes advantage of the RSK blockchain to build their market platform solution. Since RSK has proven to be a more profitable medium than Ethereum due to its low transaction fees, it has emerged as an answer capable of hitting and trading NFTs at an affordable price.

Beyond the use mentioned above, RSK also allows DAI holders to move their assets from one wallet to another on its chain at minimal fees compared to what they would usually pay on Ethereum. RSK allows DAI users to transfer their coins to the RSK chain and convert them to rDAI, a fungible token tied at a 1: 1 ratio with DAI. This way, even though the asset is still pegged to DAI, it relies on the RSK blockchain, allowing users to take advantage of faster transaction times and lower gas costs.

One of the notable features of the RSK network is that it is a side chain of the Bitcoin network, which means that it does not consume energy from Bitcoin. Notably, it is connected to the Bitcoin network via a two-way anchor, allowing transparent cross-chain transactions. Put simply, RSK has become one of the few blockchain projects that tackles all areas of the infamous blockchain trilemma: scalability, decentralization, and security.

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