Harvard Students Propose Bitcoin-Backed Stablecoin Using Elastos Technology
12/19/2024 04:11
The BeL2 protocol sets itself apart from other Bitcoin Layer 2 solutions like the Lightning Network or Stacks.
A team of Harvard students and alumni, operating under the banner of New Bretton Woods (NBW) Labs, have proposed a Bitcoin-backed stablecoin.
The whitepaper, released in late November, details the development of a Bitcoin-backed stablecoin, the Native Bitcoin Stablecoin (NBS), built on the Bitcoin-Elastos Layer 2 (BeL2) protocol.
In an exclusive interview with The StreetRoundtable, the NBW team and Sasha Mitchell, Head of Operations at Bitcoin Elastos Layer 2, discussed the vision for NBS.
This comes as Bitcoin hits a new all-time high of $107,000 on Dec. 17, buoyed by optimism surrounding President-elect Donald Trump’s pro-crypto policies.
The Native Bitcoin Stablecoin, pegged 1:1 to the U.S. dollar, gives Bitcoin holders the ability to use their assets without selling them. This means they can mint NBS by using Bitcoin as collateral and then use the stablecoin for lending, borrowing, or liquidity provision on DeFi platforms.
“A Bitcoin-backed stablecoin represents both an opportunity and a necessity. Utilizing Bitcoin as collateral offers a stable and secure financial instrument while adhering to principles of decentralization,” said Jacob Li, Head of Operations at NBW Labs.
This is not the first project to introduce a Bitcoin-backed stablecoin. DoC, a stablecoin collateralized by Bitcoin and introduced by Money On Chain in July, has a market cap of $2.88 million. In comparison, Tether (USDT), the largest stablecoin, holds a market cap of $167 billion.
The BeL2 protocol sets itself apart from other Bitcoin Layer 2 solutions like the Lightning Network or Stacks.
While these layer 2 solutions focus primarily on payments, BeL2 goes further by enabling smart contracts and DeFi operations while keeping Bitcoin on its main chain.
Mitchell explained, “Where Lightning Network primarily focuses on payment functionality, BeL2 enables comprehensive smart contract capabilities and DeFi operations while maintaining Bitcoin's robust security model. This allows users to participate in sophisticated financial operations without moving their BTC off the main chain.”
Another key innovation is the Arbitrator Network, which adds an extra layer of security. Arbitrators stake Elastos tokens (ELA) as collateral, creating economic incentives for honest behavior and protecting cross-chain operations.
Mitchell outlined a multi-layered approach to safeguard asset transfers between Bitcoin and EVM-compatible chains.
“The zero-knowledge verification layer represents the foundation of our security model. All Bitcoin transactions require valid zero-knowledge proofs generated through our Cairo Circuit, which are then independently verified by multiple Arbitrator Nodes,” Mitchell added.
One of the most compelling aspects of the NBS stablecoin is its potential to unlock dormant Bitcoin value. The NBW team envisions Bitcoin becoming a central player in decentralized finance, providing an alternative to inflation-prone fiat currencies.
“The potential to unlock dormant Bitcoin value through stablecoins opens new possibilities for decentralized finance while maintaining Bitcoin’s robust security,” the NBW team said.
This feature makes NBS especially appealing to long-term Bitcoin investors who want to hold onto their assets but still take advantage of opportunities in DeFi.
The team also wants to make it easier for developers to build apps that use Bitcoin. To do this, they’ve created a toolkit that simplifies the process.
“The SDK abstracts the complexities of cross-chain development, enabling developers to use familiar EVM tools while tapping into Bitcoin’s liquidity and security,” said a spokesperson from NBW.
The team is also launching grants and hackathons to encourage more developers to get involved.
“While NBW's current focus is firmly centered on perfecting EVM chain compatibility and establishing a robust foundation for the BeL2 protocol, we maintain an open architecture that doesn't preclude future expansion to other blockchain ecosystems. Our immediate priority is ensuring seamless integration with EVM-compatible chains,” the team added.