The cryptocurrency market heavily relies on Bitcoin, yet its design lacks mechanisms to fuel Bitcoin-centric DeFi directly. Most of DeFi in the market uses its own native in their ecosystem that poses users’ funds at risk. If any DeFi uses Bitcoin products, it involves Bitcoin wrapping or giving up asset control in other ways, such as WBTC and RENBTC. Side Protocol addresses these challenges by enabling secure, native Bitcoin-based DeFi without compromising asset control.

What is Side Protocol?

Side Protocol is a Bitcoin-compatible Layer 1 blockchain designed to enhance the Bitcoin financial ecosystem. It focuses on native Bitcoin integration, cross-chain interoperability, and serving as a DeFi hub for assets like BTC, Ordinals, Runes, and other assets. The platform emphasizes scalability, enabling developers to create next-generation Bitcoin-centric applications. Side Protocol aims to make decentralized on-chain banking infrastructure and put Bitcoin as a global currency. It offers tools like Side Wallet, Side Bridge, and Side Hub to enhance user and developer experiences.

Side Protocol Backgrounds

Founded in 2021 with major background team experience from Web2 to Web3 companies such as Meta, Cunan, and Google. In July 2023, Side Protocol collected $1.50 million in a funding round and $30.9 million in a public sale. Investors include HashKey Capital, Symbolic Capital, KR1, Continue Capital, Archway, and Informal Systems. Most team members have no public identity, excluding Shane Qui as cofounder and Dave Hrycyszyn as CTO.

Side Protocol Features

Side Protocol combines Bitcoin’s security features with innovative solutions to enable decentralized applications. Key features include:

• User-Friendly Ecosystem: Includes products like Side Wallet, Bridge, and DEX for seamless integration.
• BTC as a Native Gas Token: The protocol uses Bitcoin as a native gas fee, so users don’t have to convert tokens like other protocols.
• Cross-Chain Interoperability: It facilitates transactions and bridging between Bitcoin and other blockchain networks.
• Bitcoin-Centric Design: Supports Bitcoin-native assets with advanced tools like Taproot and Schnorr signatures.
• BTC as Native Collateral: BTC can be used as collateral to borrow other assets.
• Secure BTC Collateral: It uses 2-of-2 multisig combined with a Hash Time-Locked Contract (HTLC) so no one can transfer BTC collateral without borrowers confirmations.
• Threshold Signature: Side Protocol uses selected validators for Side Bridge, making it more transparent than most other Bitcoin bridges.

Side Protocol’s Main Products

Side Protocol offers several products customized to enhance the Bitcoin-centric ecosystem. It includes:

Side Chain

Side Chain is a scalable and lower transaction fee solution on the Bitcoin blockchain. It integrates a WASM-based smart contract that supports various applications such as AI, DePIN, and DeFi, with multiple interoperable connectivity options such as Ethereum, Solana, Cosmos, and beyond. By utilizing CometBFT, the Side Chain architecture enables fast transactions and high throughput, making Dapp increase confirmation time. Using BTC as its native gas token, it offers Bitcoin address and wallet compatibility, interoperability through protocols like IBC, and decentralized exchange capabilities.

Side Bridge

The Side Bridge allows cross-chain interaction between Bitcoin and Bitcoin-native assets like Runes. The bridge is operated by 21 trusted validators using threshold signatures to ensure transparency, functionality and reliability, as long as a minimum of 15 validators are active. The minimum threshold signatures increase some trust and are designed to be more transparent than traditional Bitcoin bridges, where multisignature validators are unclear. Because validators play a crucial role in maintaining bridges, they are selected from reputable entities with proven records of managing billions of dollars across other networks. Users can test the bridge on Side Hub and monitor transactions on Side Station. For more trust-minimized options, Side Protocol plans to introduce solutions like Side Finance.

Side Station

Side Station is an all-in-one platform for exploring Side Chain. It provides tools like the Side Chain Explorer for tracking blocks, transactions, and addresses, as well as features for staking, governance, and interacting with the Side Bridge. Users can also monitor cross-chain transactions and access testnet resources, including a faucet. Using the testnet faucet, users can get SIDE test tokens to see how the platform works.

Side Hub

Side Hub helps crypto enthusiasts build Web3 applications on Bitcoin and Side Chain that can be accessed worldwide. The Side Hub supports all types of DeFi applications, including native DeFi, without the need for bridging. In case of need of bridging, it has also integrated features like Side Bridge for asset bridging and decentralized trading of Bitcoin-native and Web3 ecosystem assets. Future plans include native stablecoins and lending. As of now, Side Hub supports BTC-related assets, including Bitcoin, Runes, and Side.

Side Wallet

The Side Wallet is a self-custody solution designed to manage both Bitcoin and Bitcoin-native assets securely and efficiently. It supports advanced features like Taproot, Native Segwit, and compatibility with Side Protocol’s ecosystem, including Side Chain, Side Bridge, Side Station and DEX. Users can manage multiple wallets, explore testnets and mainnets, and access additional features like auto-lock and multi-accounts. With a wallet, users can send and receive BTC, Runs and other native tokens.

Side Finance

Side Finance is a decentralized subprotocol of Side Protocol. It helps to increase capital efficiencies and utilization of Bitcoin by offering a non-custodial, liquidity pool-based lending solution that does not require third-party custody of the native BTC used as collateral. The subprotocol provides loans to Bitcoin holders and generates returns that are distributed to loan providers. To borrow funds from pools, users must deposit BTC in smart contracts and agree to a calculated APR. The BTC collateral remains securely locked in the collateral vault until the loan reaches maturity time. Like other DeFi, Side Finance also follows liquidation scenarios to maintain the pool funds. On the Side Finance liquidation can occur in two ways: first, if the oracle reports a drop in the BTC price that causes the loan’s health factor to fall below 1, collateral must be liquidated. Second, if the loan is not repaid by the maturity date, the borrower is considered to be in default.

What is the SIDE Token?

Besides Bitcoin being the primary asset of Side Protocol, it also has a native token called the SIDE token. As a utility token, it can be used to buy back and burn $SIDE, creating a deflationary model. It can be used for gas fees, rewards staking participants in the proof-of-stake, and allows holders to vote on governance decisions. Its features include:

• Paying Fee: Beside BTC, the SIDE token can be used to pay a gas fee for all network operations, rewarding participants.
• Value Accrual: Side Protocol has adopted a revenue model that adds value to the SIDE token. This model will use fees generated from Side Protocol products such as Side Finance, Side Chain, Side Hub, and Side Bridge to buy back and burn SIDE tokens.
• Staking: Users can delegate their $SIDE tokens to Side Chain validators, earning a share of staking rewards.
• On-chain Governance: SIDE tokens can be used to participate in decentralized governance.

Side Protocol will launch SIDE in two phases. Initially, it will use Solana’s SPL standard. After the Side Chain mainnet launch (expected in January 2025), SPL tokens will convert to native SIDE tokens, enabling staking and governance participation. The total supply of SIDE will be one billion, with 229 million initial circulating supplies.

Conclusion

It’s rare to have any project development using Bitcoin as a native token. And maybe Side Protocol is the first DeFi to provide a loan agreement in Bitcoin with its original features without requiring wrapping or asset conversion. This approach maintains Bitcoin’s integrity while expanding its financial utility.