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Bitcoin (BTC) DeFi: An Oxymoron or Blossoming Industry? A Look Into Rootstock and Sovryn

By Michael @ CryptoEQ | CryptoEQ | 13 Jan 2023

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Rootstock and RSK

The Rootstock blockchain was launched in 2017 by IOV Labs with the goal of enabling smart contracts on Bitcoin and making transactions on the network cheaper, faster, and more accessible. RSK is an EVM-compatible protocol that exists on top of Bitcoin. Therefore, it supports programming languages such as Solidity, Julia, and even Vyper. RSK inherits some of Bitcoin’s security features through merge mining, which is why the team boasts its blockchain as being the most secure and censorship-resistant smart contract platform. 

RSK’s native utility token is RBTC. RBTC pays for smart contract fees similar to ETH on Ethereum. Through merge mining, users are enabled to bridge their BTC to RBTC 1:1 pegged token and then put that RBTC towards Ethereum-like smart contracts. This two-way peg was bootstrapped using a federation of nodes managing a Bitcoin multi-signature. However, RSK has transitioned its federation to a PowPeg, a multi-signature management system where nodes have no direct access or control over private keys. Keys are controlled by tamper-proof hardware security modules (HSMs). These HSMs run lightweight RSK nodes, which obey commands originating from an RSK smart contract called the Bridge that orchestrates peg-outs. Only when these commands are confirmed by thousands of blocks produced by the mining network does the HSM then proceed to sign peg-outs requests. This PowPeg security protection greatly reduces the attack surface for the most common security breaches. 

In terms of scalability, RSK currently has an average block rate of one block/30s. A simple RBTC transaction consumes 21K gas, so the platform can execute 11 transactions/s. As the first “official” Bitcoin sidechain, RSK has seen a lot of growth and activity. 



As you can see, RSK has a large ecosystem with a wide variety of financial services spanning from stablecoins, staking, and wallet support. One of the largest DeFi apps on RSK is Sovryn. Sovryn essentially acts as a one-stop shop when it comes to DeFi activity. The app allows one to conduct borrowing, lending, LPing, margin trading, staking, and swapping. (And even ZERO percent interest loans!) The protocol is non-custodial, censorship-resistant, and purely runs on smart contracts. Their team also recently announced the launch of a stablecoin, Sovryn Dollar, which looks to combine the decentralization of Bitcoin with the consistency of a stablecoin. With these services, Sovryn and the larger RSK community certainly show signs of promise. 

However, promising projects still contain tradeoffs. Current Bitcoin bridges, such as RSK, still have centralized trust components that can lead to potential points of failure. Merge-mined sidechains could potentially be attacked by malicious Bitcoin miners. As such, Bitcoin holders may reject RSK altogether since the exposure to additional risk may outweigh all of the benefits.

It will certainly be intriguing to follow RSK going forward. Their team is currently working on an integration with Litecoin and, in the past, has worked to present a drivechain proposal to the Bitcoin mailing list for evaluation in 2016. They failed to achieve consensus about sidechain integration as those were turbulent times for the Bitcoin community. Although promising, time is needed for the BTC DeFi ecosystem to mature and projects like RSK to flourish. 

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.

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