BTCFI: The next frontier of DeFi

Transcript

Hi everyone, my name is Reena. Uh it's a little surprising that a Bitcoiner was allowed at ETCC, but here we are. Um today's presentation is about the evolution of Bitcoin nods that we learned from Ethereum and why I fundamentally believe that Bitcoin will be kind of the biggest opportunity of our lifetime. For a little bit of context for you all, um I'm the COO of STAX. for the largest Bitcoin layer 2 um project on market and I founded a DeFi lending protocol. Um a little more context, I got into Bitcoin 10 years ago. I'm from the energy industry. I started mining Bitcoin in 2012 and started creating the first mining pool in America and then from then on out I did a lot of um DeFi since I launched

True USD. So, if anyone remembers True USD back in the day before we sold the Justin Sun, um that was actually one of my projects and we launched so kind of the first DeFi of Trui and such and so um we've gone through like a big maturation of where um crypto started to where we are now. Why does Bitcoin matter? I think we all know that Bitcoin is what brought us into the industry in the first place. Without it, we wouldn't have trusts without centralization. And this is really the idea of governments failed us, big banks failed us, and Satoshi really saw a vision for a different kind of hard money. And that's why we created Bitcoin. Bitcoin is special because it's finite and scarce. However, it has significant limitations by design. I

think that's partially why most of the community has moved over to Ethereum and such and concepted the idea of we need a little bit more. Just having a peer-to-peer money system wasn't enough for us. And so really thinking about this is the people's money. This is money that we all built together. We all govern together. And how do we protect something that was built by us forever? Al I like we'll die on this hill. Um Bitcoin will be the most valuable asset we will ever have in our lifetime. It will be the most pristine collateral we'll ever have in our lifetime. Nothing will have the value of Bitcoin because it's finite and scarce. because we have the hard coding of Bitcoin and the the math behind it. There won't be a way to

inflate Bitcoin. You can't deflate Bitcoin. We can't change the monetary supply. It is fixed. And so I fundamentally believe that if we believe in all equity asset classes and such, Bitcoin will be the most special and the best one to use in our everyday life as collateral. But a lot of people don't really unlock the potential of Bitcoin. So, a brief kind of state of the union of what Bitcoin looks like right now and what we're kind of going towards. We have two trillion in Bitcoin and about 50 million wallets. This does not include the exchange wallets that aggregate like tens of millions of users and we're kind of in the state of we have Bitcoin integrations. We have kind of Bitcoin mainstream adoption coming through institutions. I think 31% of

institutions now own the Bitcoin supply. So, it's huge, but it's kind of not where where the money supply is supposed to be. We actually wanted something different for Bitcoin. This is the first time in history where retail got it right before Wall Street. We bought, we self-custodied, and now we just hold. But there is more for us to do with our Bitcoin. And so, we fundamentally think that this is the era for retail to unlock productivity on Bitcoin. Okay. But, um, we wouldn't be here without our institutions. So like um in the beginning of kind of our Bitcoin FI era, we started with ETFs. We have 30 40 billion last year in ETF inflows. This year is 80 billion in ETF inflows.

Finally, people can buy Bitcoin who uh didn't know self-custody. So um stock brokers and such can sell Bitcoin. But then we've kind of moved on to like a different era of like the corporate standard of Bitcoin, Bitcoin treasury codes. Everyone is raising debt so that they can buy Bitcoin to inflate their share price. It's a different strategy, but at least this type of strategy leans for something to do onchain. You don't just hold Bitcoin in an ETF with BlackRock. Now you can hold Bitcoin with the public code that actually can do something with the money. They can lend it. They can borrow against it. They can yield on it. And I think this is kind of a real like uh inflection point of where Bitcoin is going. And then obviously it goes without saying that many countries have adopted a Bitcoin standard or a

Bitcoin reserve because quite frankly debts are rising for every country and needs something to consider. How am I going to get myself out? So a lot of kind of different waves of how this is going. And what I think is kind of special in all of this is the policy changes that Bitcoin has forced countries to fix their monetary supply, forced countries like Argentina think about their inflation and bring a different era of money to the countries. I'd say like in the beginning of Bitcoin, we were in this like foundational era of everything started on Bitcoin and then we kind of lost sight of it. So, um, first NFT, rare Pepe on Bitcoin, colored coins on Bitcoin, RWAS on Bitcoin, first stable coin. Shout out for Tether Omni if it

still exists. Um, but everything started on Bitcoin, but it's just the scalability was not there. And so, we had to think about what comes next for Bitcoin. Um, with that being said, um, I don't know how many of you guys have actually participated in the ETH ICO. You had to buy ETH with Bitcoin. So, like think about that. Everything started with Bitcoin, but as an industry, we kind of set it aside and go, leave this money as our checking and savings account and don't touch it. And then we started this experimental era of Bitcoin. A lot of layer twos, a lot of scalability, a lot of kind of progress on how do we keep Bitcoin to be more than just money. We're not just a store of value. Can we be more? And really this era brought in kind of

institutional adoption obviously from ETFs and like macroeconomics but really like more innovations on different styles of scaling solutions and L2s. Some built kind of as rollups on top of Bitcoin like stacks, some built more kind of EVM friendly like botanics and rootstocks and some kind of in a L1 environment only. So a lot of experimentation in Bitcoin but now we're in the area of Bitcoin is money. Bitcoin is a store of value and Bitcoin can be productive. And so how do we think about that? How do we think about native Bitcoin DeFi or L2 Bitcoin DeFi, Bitcoin staking, we don't have proof of stake in Bitcoin, but what if we use the economic security of the most expensive

blockchain to hack in the world and use that to back your own protocol. And so really thinking about we have Bitcoin capital and we want to kind of adopt and awake it awaken it so that it can be productive for everyone just like uh zooming out a little bit on the global macro landscape. There is $9 billion kind of in Bitcoin right now in Bitcoin thi if you think of that it's a drop in the budget bucket to the $900 trillion in all of the equities markets. What happened if we got Bitcoin into that and brought all of that onchain?

Maybe it's on Bitcoin chain, maybe it's on L2, maybe it's on EVM. It really doesn't matter. But the the picture is that there is more money in real estate, bonds, RWAs, all gold and alts and equities that we haven't brought on chain, but Bitcoin could be the kind of the guideway to get us there. The opportunities. So, um, this is my fa favorite thing. It's an iceberg. So the value of Ethereum markets right now of what we see on top let's just call it ETH as an asset about you know a couple hundred billion dollars but the value under of what we've created with ETH and the economies we've built stable coins L2s DAPs lend borrow AMMs everything is the value below the surface what we

don't see now with Bitcoin it's a little bit different we have a lot of money in Bitcoin as an asset like couple trillion two trillion 2.1 trillion but we haven't even built the Bitcoin economy of DeFi, L2s, stable coins, like it's just starting now. So, it's a it's essentially an untapped market that we've never touched until now. I think there's tremendous room for DeFi and RWAs to come into Bitcoin and use that asset and actually take it out of cold storage and make it productive. I'd say Bitcoin DeFi is a little bit different for than ETH DeFi. We are um risk adverse. Um, we value safety and so we're not necessarily yield farming or chasing it, but we're looking for

sustainable returns to create an income stream on top of our Bitcoin. The entire goal is to never have to sell your Bitcoin and use your Bitcoin productively. And so, DeFi are some means to be able to borrow against your Bitcoin to kind of access um other opportunities whether it is Bitcoin staking and such, but primarily maintaining self-custody. This is the most important thing for every bitcoiner is not your keys, not your coins. And so making sure that DeFi in this ecosystem is architected with that in mind. But we wouldn't be here without you all from Ethereum. I'll say that Bitcoin might have started our industry, but Ethereum is what accelerated it. and all the lessons learned from the nods from um security AMMs, how to actually

architect proper markets so that you can have pools of liquidity that flow across chain is what brought us to what now allows us to build a Bitcoin uh DeFi world. I'd say that um without kind of all of these lessons, we would not be here. And it's like because of Ethereum and because of EVM and the idea of having execution environments that anyone can code in is actually what's going to let allow Bitcoin to flourish. I'll say there's some fun new developments around Bitcoin. I don't know how many of you guys keep up with Bitcoin, but there is a fungeible token standard now on the L1. It's called runes. So you can create a tick token directly on the Bitcoin network. Um you can also create NFTts on the Bitcoin

networks. They're called ordinals, but they're not quite like standard JPEG. You can inscribe any data file on Bitcoin and inscribe it into the block space so it lives forever. So, most people think NFTs like JPEG monkeys or what, but some of us use ordinals in a different way. I have pictures of my departed father now inscribed. So, my dad's picture lives forever because I don't want to lose my dad's picture. I have my dad's voicemails inscribed on Bitcoin. So as long as someone runs a Bitcoin node, my dad's voice will be accessed. So it's a different way of paying for decentralized data storage to stay permanent. And then lastly on kind of the L2 side, um we've purposely chosen to develop with STAX. It's the

largest Bitcoin layer 2. And the idea is that Bitcoin needed smart contracts. We needed an execution environment, but we didn't want to sacrifice proof of work. So you wanted to roll up proof of work and allow it to have the Bitcoin finality and scalability needed with that. Obviously, if you're going to want to use Bitcoin, you have to create a Bitcoin derivative. And so we have launched SBDC. It is a Bitcoin derivative on the STAX chain that is a onetoone representation of Bitcoin, but you maintain the UTXL, you remain self-custody, and most importantly, it's decentralized.

um why we needed programmable Bitcoin. It's just we needed something slightly more Bitcoin native to use in our DeFi economy. And what I like about stacks is that we recycle proof of work. So we're recycling the 100% hash power of Bitcoin. So essentially it is almost impossible to reorg stacks because you must reorg Bitcoin first. So we fork with Bitcoin. I'd say that if you were coding on Bitcoin Core like 10 years ago, it was pretty difficult. You had to still be limited of 10 10 to 20 minute block times, no kind of smart contracts, limited functions, though we might get more through like OPCAT or a kind of other soft forks of Bitcoin. But now we're seeing a really like almost EVM

like acquire environment in Bitcoin, but still staying true to proof of work because that's what Bitcoiners care about. I'd say we really just want to see like um seamless flows in and out of L1 and L2, but most importantly, we want the flows to transact back to the L1. So, I don't know how many of you guys think about like uh Bitcoin on chain, but there's actually not that many transactions in the meool. And so having rollups create transactions to the memp pool keeps Bitcoin secure and validators and miners incentivized to keep the Bitcoin network alive because at the end of the day we want Bitcoin to have value and increase in value and the miners need to be incentivized.

I'll say that with um kind of the assets there a lot of Bitcoin derivative assets we've chosen to kind of go forward with SBDC mostly because it offers a native yield as part of SBTC. So SBDC is one of the few kind of Bitcoin assets where you can deter uh earn a bitcoin yield. But really what this means is that we've started with kind of the basics of Bitcoin on lending and such, but now we have institutions like Coinbase, Bitcoin fund. Um a lot of funds are predominantly in Bitcoin, but now they're looking for how to make returns besides the basis carry trade. And so it's kind of a new era of Bitcoin Capital Unlocked.

Again, with SBDC, you can earn a yield. It is a staking yield. It's one of the few protocols that actually is Bitcoin in, Bitcoin out for earnings. So, you're not getting a different token. It all stays in Bitcoin. Um, I'll say that a Bitcoin ecosystem is growing. We're really proud of having a lot more DAPs on Bitcoin because that's what we want to see. And my favorite DAP is the one that I'm lucky enough to contribute to. It's called Granite. It is one really one of the first lending markets on Bitcoin using the stack cell 2 where you can safely and securely borrow your against your Bitcoin in a riskadverse way. I'd say the team has taken painstaking ways to make sure that we're protecting people's principle because Bitcoin is emotional. We want to make

sure your Bitcoin is protected. Um, and you have like, you know, rates for lending and borrowing that feel more kind of like it's like more kind of like Trady. If you ever imagined like what happened with BlockFi or Genesis or um, Celsius, Granite is basically the opposite of that. Transparent onchain but staying native to Bitcoin. What I'd say is like the coolest part about Granite is that if you are borrowing against your Bitcoin and Bitcoin value continues to raise uh in continues to rise, you don't have to worry about repaying your loan because your loan to value ratio is in the green. Granite is really special and it was took a very much borrower friendly approach that you would have expected in

Tradfi that you don't currently see in DeFi today. soft liquidations. You don't get full margin called because we don't want you to have to lose your Bitcoin collateral at all. And then my favorite part is that I never get notifications from my wallets when my positions are about to be wrecked. But Granite does do that. We have Telegram notifications so you can monitor your position at all time. I'll end with this. I don't want anyone to ever have to sell their Bitcoin. Everybody should feel like Michael Sailor every day. of my Bitcoin is my life savings. It's going to continue to acrue generational wealth and I need to live off it. And so I'm proud of what kind of Bitcoin DeFi has brought us.

Thank you. [Applause] We still have some time for some questions. Does this have anybody? Uh, when do you think treasury companies might start doing things with their Bitcoin outside of simply holding it? I think the time is already starting now. Um, there was a public announcement by Nakamoto, which is David Bailey's kind of treasury conglomerate that they are lending against their Bitcoin. So what I think is like kind of the next era of we've had ICO booms and ETFs, but Bitcoin treasury companies have room to

actually use their Bitcoin and bring it on chain and have it let it be productive, whereas an ETF will just stay cold for SPDC. How do you how do you handle the not your keys, not your coins paradigma? We have seen before a lot of the rapper ideas. Now we started seeing more of like the time log component that it's being used by by others. How do you handle it? It's a little bit more similar that I'd say to like the lightning network. So you in kind of the future end state of SBTC maintain the UTXO of what you bridged in. So you have the unilateral exit at all times and the protocol the protocol does not actually keep your Bitcoin.

We care about these things. I don't really want anyone to lose their Bitcoin. Thank you for presentation. Um, how will you incentivize liquidity for the bridge because the other players have deep liquidity already? How will you We're lucky enough to have quite a few institutions, some in the room that are providing liquidity because they believe in Bitcoin and they want to see Bitcoin Fi take off. And so, um, institutions have already bridged in 5,000 Bitcoin.

So, we have half a billion dollars already on the Sax chain directly in Bitcoin. You're welcome. Where is the coming from? Oh, where is the yield coming from? It comes from a proof of burn mechanism. It's it's in STAX it's called proof of transfer but essentially when miners bid to to win a STAX block and they must commit in Bitcoin. So they have straight up bidding in Bitcoin and that gets redistributed to everyone who is staking not artificial like it's actually coming from miners committing but I appreciate the question.

I think nobody else have any questions. Yeah, I think that is Thank you.