Stacks Feature: Bitflow Finance

If given the opportunity to receive $1,000,000 USD or 53 Bitcoin (approx 1million USD) to hold for the next 20 years, which one would you choose? If you are a Bitcoiner the answer is a no-brainer, of course you would choose the Bitcoin. We believe that Bitcoin will prove to be a safer store of value than fiat currency, and with the state of the fiat economy you can rest assured that many more will join our ranks in the coming years.

Seeing as though we just established that we believe that Bitcoin is a superior means to store and build wealth it stands to reason that demand for financial products related to Bitcoin will arise. Bitflow Finance is such a product, but before we get into Bitflow, lets talk a bit about DeFi.

The Early Days of DeFi

Chances are you have heard the term 'Decentralized Finance' or DeFi before. The first DeFi products appeared on the Ethereum Blockchain as early as 2014, and hit their stride in the Summer of 2020. This period of time is affectionately known as DeFi Summer by crypto natives, and during that time various protocols had a combined total valued lock in excess of two-hundred billion USD. At the time these applications were found primarily on the Ethereum blockchain, and while an argument can be made that Bitcoin was the first ever DeFi experiment, DeFi as we know it is only possible via the use of smart contracts.

With DeFi the crypto investor was introduced to many new concepts as the Ethereum ecosystem experimented with these first generation financial products. Unfortunately many people found themselves to be unprofitable due to attractive, but unrealistic APY (annual percentage yield) promises, and more than a few rug pulls and hacks.

The initial euphoria wore off as token prices lost value, and as the first NFT bull run started many market participants had written off the idea of DeFi as a viable financial product for the crytpo economy (much less for real world adoption).

Despite the Ethereum DeFi bust, some very valuable lessons were learned about this new use case for smart contracts. New ways of trading within the crypto ecosystem were popularized such as:

• The Decentralized Exchange aka a DEX

• The Automatic Market Maker aka AMM

• The idea that just by holding a crypto asset one could earn passive income aka yield

We also learned that in order for DeFi to be successful security of users funds would be of the utmost importance. While Ethereum is a technological marvel, its programming language is far too complex for the layperson to read, and this alone has led to billions of dollars in losses for Ethereum users. Bitcoin on the other hand has never been hacked, and it is universally recognized as the most secure blockchain in existence. While Bitcoin is an amazing financial and technological invention, it is not a smart contract. If a DeFi application was going to utilize Bitcoin, it would have to be built on Bitcoin.

This is where Stacks comes in.

Stacks

Stacks is a Layer 1 blockchain that brings smart contracts and decentralized applications to Bitcoin via a consensus algorithm called Proof of Transfer. If you haven't already read the Stacks 2.0 Whitepaper, you can do so here. Through Stacks we find ourselves in the position to have decentralized finance applications secured by the world's strongest blockchain: Bitcoin.

Stacks utilizes a non-Turing complete computer language called Clarity. This means that when a user interacts with a smart contract they can plainly read what action is about to take place without the necessity of being a programmer. This coupled with all Stacks transactions being settled on the Bitcoin blockchain equals a level of security that just isn't possible with Ethereum smart contracts.

Now that we have established that Stacks can allow for safer DeFi protocols to be built, we will get into how Bitflow intends on making DeFi on Bitcoin a viable financial product for the masses.

Bitflow Finance - a Decentralized Stablecoin Exchange Designed to Reward Bitcoin Holders

Bitflow Finance is a stable swap DEX that will allow users to earn real yield in two ways: 

Users can provide liquidity in the form of price stable assets to the DEX and in return get yield as a percentage of the trading fees generated by the DEX. At launch the protocol will offer swaps in xUSD and USDA. Additional stablecoins will be subsequently added to the protocol over time. The more active the pool, the more real yield earned. 

 In addition to being a liquidity provider, Bitflow Finance clients will also have the option to earn yield by locking Bitcoin in non-custodial escrow through DLC Link. This means that your Bitcoin never gets transferred to the Bitflow Finance contract. Not only does Bitflow provide yield in stable crypto assets, but it does so in the safest way possible. Greater yield can be earned by the investor who opts to be a liquidity provider and escrow their Bitcoin via DLC Link.

In other words, Bitflow Finance allows Bitcoin holders to earn a yield without giving up custody of their Bitcoin. By utilizing stable coins and Bitcoin we see the evolution of a more mature DeFi that the market clearly has an appetite for. No more promises of 1000% yield paid out in an ever inflating token that eventually becomes worthless. Bitflow Finance allows for a meaningful way for investors to grow their wealth in a safe, decentralized, manner. By offering users low fees, we can see a situation in which the entire Stacks ecosystem benefits by virtue of the Bitflow Finance protocol.

Follow Bitflow Finance on Twitter, and visit their website to register for Beta Access and stay up to date with the latest news and developments.

Thanks for reading as always, I hope you enjoyed it. As always a like, follow, and retweet go far. Until next time, Jack.