Bitcoin’s DeFi Journey Forges Ahead as Velar and Bitlayer Devise World's First BTC-based PerpDex

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The past year and a half has been quite the journey for Bitcoin, the world's largest cryptocurrency by total market capitalization. After starting 2023 at a valuation of around $25,000, Bitcoin has surged by over 165+% to its current valuation of $66,000 as of mid-May 2024. 

As its price has soared, the pioneering digital currency has also seen its utility rapidly expand. What was once primarily used as a store of value and for simple peer-to-peer transactions now boasts a rapidly growing decentralized finance (DeFi) ecosystem. In fact, in one of the latest major milestones for Bitcoin DeFi, leading BTC-liquidity protocol Velar recently announced a partnership with Bitlayer, a layer 2 network built atop the BitVM — thereby offering Bitcoin-equivalent security while being Turing-complete. 

A closer look at the collaboration

The collaboration between Velar and Bitlayer has helped birth ‘Velar Artha,’ the world's first perpetual decentralized exchange (PerpDex) on the Bitcoin network. Since its mainstream inception, Velar has been on a mission to unlock Bitcoin’s potential by developing a suite of powerful tools.

To elaborate, Velar realizes the full value of Bitcoin-based assets within an ecosystem anchored by strong transaction finality and unrivaled security. The creation of Velar Artha, hosted on Bitlayer’s EVM-compatible Bitcoin Layer 2, marks Velar's first partnership outside of Stacks and signifies a major milestone as Velar expands the rollout of its PerpDex to other strategic partners.

Similarly, as mentioned earlier, Bitlayer is the first Bitcoin security-equivalent Layer 2 built using the BitVM. It supports multiple virtual machines (VMs), allowing for a fully EVM-compatible environment. This makes it easier for developers to create DeFi applications that harness the robust tooling synonymous with Solidity (the native programming language for ETH smart contracts) while leveraging Bitcoin’s unmatched security. 

Circling back to Velar Artha, it bears mentioning that perpetual contracts — tools that provide leveraged exposure to trading various crypto assets without an expiry date — have been popular DeFi products but have only been available on non-Bitcoin blockchains until now. 

By building PerpDex atop Bitlayer’s operational framework, Velar Artha seeks to unlock numerous perpetual trading capabilities for investors while harnessing Bitcoin's unmatched idle capital (estimated to be worth billions of dollars), security, and decentralization. This can allow Bitcoin holders to participate in the various DeFi activities without bearing any custodial risks. Regarding the partnership, Velar CEO Mithil Thakore was quoted as saying: 

“Charlie Hu [Bitlayer’s co-founder] and I share a common vision for Bitcoin’s potential as the foundation for a new financial infrastructure and I couldn't be more excited to work with someone who truly understands and shares that vision. Together, we are not just building products, but paving the way for the future of finance on Bitcoin.”

A similar sentiment was echoed by Hu, who believes that the integration of Velar on Bitlayer can help unlock a myriad of “asymmetric opportunities” within Bitcoin’s rapidly expanding DeFi ecosystem. “Bitlayer is excited to support Velar’s perpetual DEX DeFi product to meet the on-chain perpetual trading demand in the Bitcoin community,” he said.

The rise of Bitcoin DeFi

While DeFi first gained a foothold on blockchain networks like Ethereum starting in 2020, Bitcoin was largely left behind due to its lack of smart contract functionality. That has changed thanks to new technical developments like the BRC-20 token standard, which allows tokenization on the Bitcoin network.

Another key driver of this growth has been Ordinals, Bitcoin's version of NFTs that are stored entirely on-chain. Ordinals have unlocked new use cases like gaming and metaverse worlds being built directly on Bitcoin. In fact, major players like Animoca's Darewise Entertainment subsidiary have already started working on a host of Bitcoin-based metaverse experiences.

Therefore, as the crypto sector continues to mature, it stands to reason that the various innovations surrounding the Bitcoin network will help lay the groundwork for its associated ecosystem. Fifteen years after its inception, Bitcoin seems to be finally realizing its full potential.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.