Interest in Bitcoin is increasing from institutions, retail, and current crypto market participants. This cycle, there are more ways to play $BTC than ever, from onchain perps and options, to tokens like $STX, $ORDI & more…
In today’s edition, we’re briefing you on Botanix, a Bitcoin L2. The project differentiates itself from Bitcoin smart contract solutions like Stacks, as it functions as an EVM and uses $BTC as gas.
Over and out ⬇
News:
- CFTC Proposes FTX-Inspired Rule to Safeguard Customer Funds: In response to FTX's collapse, the U.S. Commodity Futures Trading Commission is considering a rule to prevent derivatives firms from using client funds, aiming to enhance customer protection.
- JPMorgan Predicts Ether's Superior Performance in 2024: Analysts at JPMorgan forecast that Ether will outshine Bitcoin and other cryptocurrencies in 2024, driven by Ethereum's upcoming EIP-4844 upgrade.
- U.S. Judge Accelerates FTX Bankruptcy Proceedings: A federal judge has scheduled a hearing to expedite the resolution of FTX's bankruptcy, focusing on the crypto exchange's tax debt to the IRS, a crucial step in reimbursing FTX's victims.
- Coinbase Listing Boosts Solana's Meme Coin Bonk: Solana-based meme coin bonk (BONK) sees a 40% surge following its listing on Coinbase, marking its rapid adoption in the Solana ecosystem.
- Cronos Labs Launches New Layer-2 Network: Cronos Labs, associated with Crypto.com, introduces a layer-2 network, Cronos zkEVM chain, to enhance its blockchain ecosystem, with a mainnet launch planned for 2024.
- Rulematch: A New Swiss Crypto Exchange for Banks: Rulematch, a Swiss cryptocurrency exchange utilizing Nasdaq technology, launches with seven banks including Spain's BBVA, offering Bitcoin and Ether trading for institutional clients.
Project Updates:
- Tether Freezes Attacker's Wallet in Ledger Phishing Incident: Following a phishing attack on Ledger's code library, Tether freezes the attacker's wallet containing stolen funds, highlighting ongoing security challenges in crypto.
- Arbitrum Proposes Orbit Tech for Celo's Layer-2 Blockchain: In the competitive race to build Celo's new layer-2 blockchain, Arbitrum Foundation suggests its Orbit tech stack, emphasizing its large total value locked and trust in the market.
- Chainlink Integrates with Polygon's zkEVM: Chainlink's data feeds are now available on Polygon's layer 2 zero-knowledge rollup, offering developers enhanced capabilities for DeFi protocols and decentralized exchanges.
- Thetanuts Finance Launches Phase I of v3 Incentivised Alpha: Thetanuts Finance announces the launch of its v3 upgrade, transitioning to a decentralized on-chain options protocol focused on altcoins.
- Redacted Cartel Rolls Out Dinero Mainnet: Redacted Cartel begins the mainnet rollout of Dinero, offering users the option to mint pxETH as part of its Ethereum staking solution.
- Immutable zkEVM Eliminates Gas Fees for Gamers: Immutable announces that its zkEVM and Immutable Passport will remove gas fees for gamers, enhancing the web3 gaming experience.
Alpha from Trace by Revelo:
Inflows
- $GALA leads with over $100k inflows.
- Significant accumulation in $MND (+45%, $20.5M mcap), $GEC (+5%, $13M mcap), and $RSC (+50%, $60M mcap), each with $70k+ inflows.
- Inflows of $50k went into $TOPIA (+8%) and $AVAX.
- Minor inflows were observed in $RLB, $BITCOIN, and $wTAO.
Outflows
- $MUBI (+40%, $132M mcap) and $PRIME (+13%, $272M mcap) experienced large outflows of over $200k.
- $PEAS (-38%, $5M mcap) saw $135k in outflows following an exploit and subsequent recovery.
- $WOLF and $AI each saw $50k in outflows. $WOLF on Avalanche, up 521% today, reached a $12M mcap. $AI, up 311% in the last 24h, now has a $4M mcap on Ethereum.
- Minor outflows occurred in $HYPR (+50%, $14M mcap), $LILA (+3%, $14M mcap), and $OrdiZK OZK (+21%, $4.5M mcap).
Observations
- New tokens with $30k+ smart holdings include: $ENQAI, $WOLF, $AI, $BYTE, $UNIT, $FLASH, $SECT, and $PEAS.
- New coins entering the "high-conviction" cohort with 6+ wallets and $10k+ in core holdings now include $AI, $PEAS, and $OZK.
- $PEAS suffered an exploit, with 90% of the capital later returned. The exploiter is linked to an employee of Kiln.
Background on Botanix
Botanix is an L2 EVM built on top of Bitcoin, allowing for the development of decentralized applications on the Bitcoin network.
Building on $BTC has evolved from Bitcoin to Bitcoin-based L2s and EVMs, Stacks, Ordinals, and the rise of L2s.
The protocol was conceived a year and a half ago, a time when the crypto space was clearly trending towards dApps being developed outside Bitcoin due to its limited infrastructure.
Willem Schroe is the Founder of Botanix, and the Spider chain.
Believing that the EVM is the key to dApps’ success, Botanix's concept involves building an EVM as a second layer on Bitcoin, distinguishing it from Stacks, which uses the STX token.
Botanix runs entirely on Bitcoin, with $BTC being the gas token similar to how Ethereum L2s like Arbitrum and Optimism operate.
The Spider Chain ensures a two-way peg between Bitcoin and Botanix, turning Bitcoin into a native currency on the EVM.
The EVM is secured through a proof of stake system on Bitcoin, with gas fees accruing back to the stakers.
Botanix can potentially bring the extensive ecosystem of dApps and developers from existing EVM ecosystems, over to Bitcoin
How The Spider Chain Works
The Spider Chain is a network of decentralized multisigs, larger in size compared to the two-out-of-two multisigs used in the Lightning Network.
It functions as a platform where users stake a fixed amount of Bitcoin to run full Botanix nodes, which include EVM nodes.
Custody is distributed among decentralized node operators.
Multi-sigs are created, randomly selected from a pool of stakers, to secure the Bitcoin.
Willem Schroe has addressed security concerns, explaining that the Spider Chain's design prevents large-scale collusion.
It implements the concept of forward security, which ensures that even if a majority of stakers become malicious, they cannot access the Bitcoin in multisigs created before their takeover.
This system enhances the chain's security as it grows in size.
Every orchestrator, also known as a node runner, operates both the Spider Chain and the EVM, providing them control and visibility over the entire tech stack.
Most L2 EVMs have a centralized sequencer, prompting a discussion on this topic.
Their aim is to address centralization in L2s, highlighting that even with decentralized sequencers, control often remains centralized through a single multisig setup.
This topic has gotten more scrutiny recently with Blast growing to over $800M in TVL despite being controlled by a 3/5 multisig.
Botanix uses a ‘chain of decentralized multisigs’ rather than just one
There are challenges in moving away from this centralized control, such as the loss of upgradeability and code modification risks.
Willem talks about the Spider Chain concept, describing it as a highly decentralized L2 solution.
He highlights its immediate decentralization through proof of stake consensus and the ability for anyone to run a full node, thereby reducing risks related to code changes and potential government crackdowns.
He explains that Botanixs allows the launching of new ERC-20 assets and plans to build bridges for Bitcoin and Ethereum.
He notes the ease of creating EVM-EVM bridges once an EVM is established on Bitcoin, facilitating a decentralized web of Bitcoin on Ethereum and vice versa.
Having an EVM allows for easy creation of a decentralized Botanix Bitcoin bridge via EVM-EVM bridges.
He highlights the game-changing potential of Botanix, highlighting its ample capital availability, improved user experience, and compatibility with classic bridging solutions.
Sam says he envisions starting with Ethereum, possibly swapping for Botanix, and then moving to Botanix's EVM through Spider Chain.
Validators on the Spider Chain will earn Bitcoin yield, marking a first in decentralized native Bitcoin yield generation.
Lightning yields bring the possibility of earning up to 11% in $BTC on a well-run lightning node, although Willem acknowledges the difficulty of achieving success with lightning nodes.
Willem sees the possibility of integrating lightning with Botanix, envisioning atomic swaps between lightning and Botanix nodes.
Botanix's Bitcoin-Backed Stablecoin and Mainnet Development
Plans have been revealed for a Bitcoin-backed stablecoin, facilitated by deploying MakerDAO within the Botanix ecosystem, expressing excitement about this application in the Bitcoin domain.
Taro is another protocol focused on brining assets to Bitcoin and Bitcoin Lightning, including stablecoins.
Willem mentions that Taro has been in development for a significant duration.
Botanix has been in internal testing for a month, yielding the discovery of interesting bugs, and the plan for an improved Testnet version.
He expresses satisfaction with the user engagement and mentions a DEX called Avocado Swap that allows token trading.
The project is in discussions with several bridge providers but haven't finalized a single party for collaboration yet.
Testnet was taken down for maintenance due to issues with bots, and is planned to be re-launched.
Mainnet launch should be within a few months.
There are plans for the initial version of the mainnet featuring a dynamic federation, including strategies for security, and staking with reliable providers.
Willem discusses the transition towards more permissionless systems and highlights the focus on business development and partnerships, aiming for full decentralization by the end of 2025.
The team has conducted modeling for expected yields, noting that initial yields could be high, ranging from 20 to 50%, but eventually settling around 6-8%, slightly higher than Ethereum's safe yield options.
Hardware requirements are similar to those for an Ethereum full node, with an easier setup process.
Users who do not wish to run a node can stake their Bitcoin through liquid staking providers, who will manage the node and share the staking rewards.
Willem highlights the massive market potential for Botanix, highlighting the ability to do anything on Bitcoin that can be done on Ethereum thanks to the EVM.
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