CRYPTO MOVERS AND PRICES
Ethereum (ETH) and UniSwap (UNI) were outperforming in the Top 10 this morning and were up 9% and 21%, respectively. BTC was unchanged on below-average volumes.
Crypto Story of the Day
Recent interest in DeFi applications has mostly been limited to those on Ethereum while upcoming BTC layer-2 applications have largely been overlooked. We review recent progress to RSK, a smart contract blockchain secured by the bitcoin network.
RSK is a BTC-sidechain network launched in 2018, aimed at adding “value and functionality to the [BTC] ecosystem by enabling smart-contracts, near-instant payments, and higher-scalability.”
RSK is connected to the BTC network via “merged mining,” a technique that allows miners to secure both networks “with the same infrastructure and energy consumption.” BTC is transferred from the native blockchain to RSK via “2-way pegs.” This involves sending BTC to a special address on the BTC network, where funds are locked, while simultaneously being released on the RSK network.
A reverse operation allows users to withdraw BTC from the RSK network. No single entity controls 2-way pegs, instead, transfers are processed via the same proof-of-work that secures the BTC network.
The RSK network has seen practical uptake in the past year. For example, in December 2020, decentralized BTC lending and trading platform Sovryn launched on the network. Sovryn is described as a “decentralized finance platform that requires no permissions and it will never take custody of your coins.” The platform announced that it had raised USD 9 million earlier in the month. Sovryn users are able to trade with up to 5x leverage and earn interest on their BTC.
Other notable projects being developed on RSK include: RSK Swap, a fork of the Uniswap Protocol adapted to RSK; TEX, a decentralized peer-to-peer exchange on top of RSK; and Defiant, a wallet that allows users to exchange RSK-based tokens with Ethereum-based tokens. RSK also has developed an “ETH token bridge” which “allows to move ERC20 tokens between one chain and the other.”
We’ve previously written about advances to BTC scaling and second layer functions and how they’ve consistently been overlooked as alt-coins like Polkadot (DOT) and ETH have outperformed— BTC dominance has fallen to a current 3-year low on the back of alt-coin outperformance.
At the same time, RSK has arguably greater functionality and technical maturity than smart-contract platforms such Cardano. Moreover, RSK’s reliance on BTC mining, which employs more computing power than any other network, puts the network in stark contrast to other blockchains that have only begun to develop a staking/validating ecosystem based on largely untested proof-of-stake mechanisms.
An under-expressed benefit of RSK is that it’s underpinned by the economics of BTC and the network effect therein. In contrast to a network like ADA, of which nearly every component is new and relatively untested, RSK is built on top of the largest network in the ecosystem.