Mintlayer Is Opening Bitcoin To Decentralized Finance

Until now, users could only spend, sell, or hold Bitcoin, whereas the Ethereum and decentralized finance (DeFi) space has moved far beyond this by offering a vast number of new use cases. Decentralized exchanges, lending, staking, and Smart Contracts are rapidly taking over the financial world. However, as the prime mover of the crypto ecosystem, Bitcoin has been left behind with so much unharnessed potential.

As the most Liquid and trusted form of digital gold, Bitcoin needs to evolve.

Just as the Lightning Network answered the question: “How do we make payments with Bitcoin a reality?”

Mintlayer answers the question: “How do we make DeFi with Bitcoin a reality?”

Even the Ethereum ecosystem has been widely adopted because of its adaptability to smart contracts, but can Bitcoin do more? Therefore, Mintlayer is here to solve the missing piece of the puzzle.

What is Mintlayer?

Mintlayer is a layer-2 scaling solution that allows Decentralized Finance, Smart Contracts, applications, and NFTs to build on Bitcoin. With Mintlayer, users can do more than hold, spend, and sell their Bitcoin outside the centralized ecosystem. Mintlayer gives decentralized ecosystems access to more utility on Bitcoin by introducing real-world financial use cases using DeFi technology and layer-2.

What Is Mintlayer Doing Differently?

Mintlayer allows native Bitcoin integration, enabling direct swap of Bitcoin for other assets and other DeFi activities, like staking. It is possible to directly swap tokenized assets minted on Mintlayer with native Bitcoin on the main chain without intermediaries like peg-in, wrapped tokens, or federated coins. Also, trading Bitcoin for financial instruments without a counterparty or intermediary is easy on Mintlayer.

Mintlayer aims to enable DeFi for Bitcoin. It aims to allow the building of smart contracts and decentralized exchange (DEX) that utilizes the Lightning Network. The Bitcoin ecosystem is yet to reach its full potential, and adding Smart Contracts to Bitcoin can trigger this tremendous growth.

The decentralized exchange would allow a direct swap of assets on the Bitcoin Chain with assets on Mintlayer. Also, on-chain transactions on Mintlayer can be privacy enabled – making them confidential and promoting privacy. Mintlayer is the only layer-2 solution and DeFi platform directly interoperable with native BTC. Other Bitcoin side chains use wrapped BTC, peg-in, or federated coins.

The progress of a blockchain ecosystem does not solely lie within speedy transactions or increasing block size but in the ability to revolutionize the finance system. Mintlayer is here to cause that change. It holds the key to unlocking native BTC atomic swaps, fully compliant stock token issuance, confidentiality, and much more.

Tokenization On Mintlayer

Bitcoin must surmount some challenges as it approaches mainstream adoption. Issuing stock tokens, stablecoins, securities, and assets on the Bitcoin blockchain is complex. Regulations compliance and congestion struggles among institutions and DeFi projects, plus users’ growing need for privacy, are top challenges to Bitcoin mainstream adoption. Any alternative Bitcoin use case has to compete for space inside Bitcoin transactions, making it difficult for Smart Contracts and financial applications to run.

Mintlayer seeks to solve these problems by turning Bitcoin into a protocol that can handle any financial use case without compromising compliance and user privacy. Mintlayer combines the Bitcoin blockchain with a new layer dedicated to tokenization, smart contracts, and finance. Mintlayer has three tokenization standards such as MLS-01, MLS-02, and MLS-03.

MLS-01 enables features for an optional access control list. In MLS-01, transactions can be limited according to set rules determined by the token issuer or a designated third party. An example of such a designated third party is a service provider that knows traders’ identities without leaking the information to anyone. MLS-01 is a new tokenization standard that can digitize stocks, stablecoins, and more. It can provide the much-needed expansion to Bitcoin’s versatility.

MLS-02 token standard has in-built support for confidential transactions. It provides access to new levels of privacy and allows the issuance of pegged “Confidential Versions” of other crypto assets such as Bitcoin and Ethereum.

MLS-03 is the new token standard that supports non-fungible tokens.

Advantages of Using Mintlayer Over Other Layer 2 Solutions

Mintlayer will focus on creating a decentralized exchange (DEX) that will enable Decentralized finance on Bitcoin. The Mintlayer DEX will allow for 1:1 atomic swaps with native Bitcoin for other tokenized assets in the ecosystem. Unlike other competitors, these atomic swaps on the network are unique because there are no intermediaries, peg-in, wrapped, or federated tokens. Because the atomic swaps allow for native Bitcoin, it removes counterparty or intermediary risk or the users.

It’s Bitcoin-like UTXO architecture combined with Schnor signatures allows for more efficient transaction aggregation. The aggregation helps to reduce payment sizes by up to 70% while enhancing privacy and increasing transaction throughput.

Compared to account-based blockchains like Ethereum, it offers more privacy and a native tokenization standard with high confidentiality. Mintlayer gains scaling capabilities such as lightning network swaps or decentralized exchange (DEX) transactions from Bitcoin. These scaling capabilities prevent congestion and increased fees even when trading volume is high.

Compared to other Bitcoin Side Chains, Mintlayer is more decentralized and requires a stake to participate in blockchain governance. By replacing the traditional gas token system with a system that allows block signers to choose which tokens to accept for fees, Mintlayer provides the highest versatility and an ecosystem where users can pay for transactions using any token. It allows multi-token usability, cross-chain transfers, several token transaction grouping, and hassle-free peg-in/out across the network.

Virtually anyone can run a Mintlayer node on a personal computer, further supporting its decentralization. You don’t need large server farms and resources to run a node on Mintlayer. That is a different experience from what you get from mainstream blockchains that require powerful hardware or cloud services. Also, it allows peer-to-peer transactions without interference.

Bottom Line

The Mintlayer protocol paves the way for developers and DeFi projects to build on Bitcoin. By enabling the use of smart contracts and a DEX for atomic swaps, it begins to lay the building blocks to open Bitcoin to an entire Decentralized Finance ecosystem. Mintlayer utilizes both Bitcoin and lightning network’s best traits to discover the full potential of Bitcoin.

Mintlayer.org
Join Telegram Community
Twitter