Opinion by: Bob Bodily, co-founder and CEO of Bioniq
One of the biggest problems holding back broader adoption of the Web3 world is liquidity fragmentation. So much space is locked on certain networks. There is perhaps no more significant example than Bitcoin (BTC).
Despite all the good done in the broader decentralized finance (DeFi) space, there’s no good way to connect the single largest asset by market capitalization to most of these services. Until now, existing solutions have struggled with Bitcoin’s lack of native smart contract support, security concerns with wrapped tokens, and the tradeoffs of integrating with Bitcoin’s unique architecture.
Implementing a new “layer 0” network, designed to leverage smart contracts to sign Bitcoin transactions, is the key to finally solving this problem.
Fragmentation remains a problem
Liquidity and user fragmentation can be seen across layer-1 blockchains, sidechains and layer 2s (L2s), sometimes even within a single protocol. As new networks, assets and services increase, this issue only worsens because every new infrastructure in this ecosystem needs its users, developers and liquidity.
Multiple solutions are already being explored to bridge different blockchain networks. Still, these services don’t work with the biggest, most robust blockchain of all: Bitcoin. That is an unfortunate situation because the implementation of Segregated Witness, Schnorr signatures and Taproot have paved the way for Ordinals, BRC-20 tokens, Runes, and Atomicals, which expand the possibilities for tokens and financial products on Bitcoin itself. Users and markets have seen increased demand for assets that offer real utility, not just speculative value.
Unfortunately, because Bitcoin’s native smart contract capabilities are minimal, connecting these assets to most crosschain solutions is challenging. Even technology being built to enable interoperability on other chains will only be genuinely functional if adopted by the entire community, which is unlikely at best.
The technology exists to solve this
Fortunately, a practical solution to this fundamental problem comes from…
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