Yala: Link Bitcoin Liquidity with Interest-Bearing Stablecoins

TL;DR

Bitcoin's initial design prioritized security and decentralization over complex features like smart contracts and DeFi applications. Therefore, Yala created a modular architecture on the Ordinals protocol, integrating decentralized indexer networks and Oracles to introduce smart contract capabilities to Bitcoin, thereby issuing the stablecoin $YU. With this modular design, $YU can freely participate in DeFi activities on any chain, unlocking Bitcoin's significant liquidity.

Yala aims to establish a modular DeFi yield aggregator for Bitcoin, ensuring security and decentralization through mechanisms like federated voting indexers (ultimately building a fully decentralized indexer) and Bitcoin insurance vaults with threshold signatures, while ensuring democratic participation and decentralized governance through the community. By enabling the widespread adoption of decentralized finance on the most resilient blockchain globally—Bitcoin, while maintaining its core principles of security and decentralization, Yala hopes to become the preferred path and solution.

Limitations of Bitcoin in Smart Contracts and DeFi Development

Bitcoin is the most groundbreaking decentralized cryptocurrency, emphasizing security and decentralization in its design. Its script language was initially intended to facilitate simple peer-to-peer value transfers rather than complex financial functions. While the DeFi ecosystem thrives on more flexible blockchains like Ethereum, Bitcoin, due to its architectural limitations including block size and frequency constraints, cannot meet its demands as infrastructure.

The blockchain scalability dilemma highlights the challenge of balancing security, decentralization, and scalability, all of which are crucial for DeFi applications. Bitcoin prioritizes the former two, thus unable to meet the capacity for high transaction volumes and real-time requirements of DeFi. Undoubtedly, Bitcoin holders need a secure and seamless mechanism to participate in the growing DeFi ecosystem, a need long met by Ethereum and other EVM-compatible blockchains' users.

Ethereum has implemented scalability solutions like sharding, Rollups, and modularity, while Bitcoin, without compromising its principles, has more conservatively explored layer-two scaling solutions. However, to fully embrace DeFi, generate returns for holders, Bitcoin must consider the following strategies:

1. Enhance DeFi capabilities: Bitcoin can explore sharding, Rollups, and other scalability solutions to enhance its DeFi capabilities while maintaining its security and decentralization principles. Careful implementation and rigorous testing will ensure the network's integrity and decentralization are not compromised.

2. Embrace modularity: Modular design principles can introduce new features and functionalities tailored for DeFi without compromising the security and decentralization of the core protocol. This will enable Bitcoin to evolve and adapt to the ever-changing DeFi landscape, providing opportunities for Bitcoin holders to generate returns and participate in the DeFi ecosystem.

3. Layer-two scaling solutions: Bitcoin developers focus on layer-two solutions like the Lightning Network and sidechains to enhance scalability off the main chain. However, these solutions add complexity and dependence on separate governance protocols. To truly embrace DeFi and provide a smooth income-generating experience for Bitcoin holders, Bitcoin may need to explore more integrated and user-friendly solutions.

As the DeFi ecosystem evolves, Bitcoin must maintain flexibility and innovation to provide its holders with the same opportunities as users in other ecosystems, enabling them to participate in the ever-growing DeFi ecosystem. This requires innovators in the ecosystem to formulate strategies that understand and anticipate the rapidly evolving needs of the DeFi ecosystem while remaining aligned with Bitcoin's core principles. Typically, this requires a decentralized, accessible, and economically empowering way for individuals.

$YU: Cross-Chain Yield Stablecoin Based on Bitcoin

The rise of DeFi has opened up new opportunities for financial innovation, but Bitcoin's architectural limitations hinder its full participation in this rapidly evolving ecosystem. Yala's solution is to leverage Bitcoin's unique properties, introduce DeFi functionalities, with a focus on providing a stablecoin backed by Bitcoin that can earn native yields across multiple chains.

Ordinals Protocol: Opportunities for Bitcoin DeFi

Inscriptions are a groundbreaking innovation enabled by the Ordinals protocol, allowing the direct issuance and management of digital assets on the Bitcoin blockchain. By assigning a unique identifier to each satoshi (the smallest unit of Bitcoin), inscriptions enable the creation of non-fungible tokens (NFTs) and other digital assets on the Bitcoin network, including Yala's Bitcoin-based stablecoin.

The Meta protocol based on Ordinals (BRC-20, BRC-100, BRC-420, etc.) allows the Bitcoin network to integrate indexers, paving the way for the development of a true DeFi ecosystem on Bitcoin.

Yala's Bitcoin-Based Stablecoin: Earn Cross-Chain Yields

Yala's modular design introduces programmable smart contracts and DeFi applications to Bitcoin, including the Bitcoin-native stablecoin $YU, which can earn yields across multiple chains. For detailed technical design, please refer to Yala's whitepaper. By leveraging a robust security framework like Ethereum or Solana without EVM, Yala's stablecoin products, including lending/borrowing protocols, liquidity pools, and governance contracts, have formal verification support to ensure mathematical correctness.

Through the Bitcoin-native stablecoin $YU, users can participate in DeFi opportunities across various blockchain networks, earning returns without compromising the security and decentralization principles of the Bitcoin network.

Strong Security and Decentralization

Yala's solution prioritizes security and decentralization, aligning with Bitcoin's core principles. The federated voting indexer implemented indexer network reduces the risk of centralized BRC-20 indexes, while strict data validation and consensus protocols ensure the reliability and integrity of maintained token balance information. It is worth noting that the federated voting indexer is a transitional solution, and Yala will strive to promote the construction of decentralized indexers.

Collaboration with Nubit provides additional data availability verification for indexer behavior, while the BRC-20 black-and-white module separation ensures the security of deposit and withdrawal transactions.

Execution Layer and Oracle Network

At the execution layer, Bitcoin asset management utilizes the Bitcoin insurance vault with threshold signatures to ensure robust security without single points of failure. Yala's decentralized Oracle network also provides tamper-proof real-time price data, crucial for managing clearing and maintaining stablecoin anchoring.

By introducing a Bitcoin-based stablecoin that can earn yields across multiple chains, Yala is unlocking Bitcoin's potential in the rapidly evolving DeFi ecosystem. This approach combines Bitcoin's strong security and decentralization with DeFi's innovation and flexibility, creating a powerful, user-centric blockchain ecosystem for a diverse digital economy.

Building a True DeFi Ecosystem for Bitcoin

At Yala, our vision is to create a thriving, open ecosystem, unleashing the full potential of Bitcoin DeFi.

1. Unlocking untapped potential of Bitcoin assets: Yala is committed to unlocking the full potential of DeFi on Bitcoin. With the Bitcoin-backed stablecoin $YU, we will provide Bitcoin holders with native yields across all other chains.

2. Promoting democratization of DeFi participation: Our vision is to promote the democratization of DeFi, enabling individuals and organizations to participate in a transparent, autonomous, and decentralized financial system. Our goal is to build an open ecosystem where various DeFi applications can interact seamlessly, driving innovation, collaboration, and shared value creation.

3. Supporting decentralized governance of lending protocols: We will continuously strive for decentralization and community governance, transforming the governance structure of our lending protocols into a decentralized autonomous organization (DAO), allowing a broader community to actively participate in the evolution of the Yala ecosystem. We aspire to create a self-sustaining, resilient, and evolving DeFi ecosystem on Bitcoin through openness and collaboration.

4. Pioneering in the DeFi space of Bitcoin: Yala's ultimate goal is to establish itself as a premier DeFi infrastructure for Bitcoin. We envision a future where individuals and organizations can access a wide range of secure, transparent, and decentralized financial services, products, and opportunities within the Bitcoin ecosystem.

Together, we will build a true DeFi ecosystem for Bitcoin on the world's most secure and resilient blockchain—Bitcoin, driving the widespread adoption of decentralized finance and ushering in a world full of opportunities.

About Yala

Yala is a decentralized financial protocol bridging Bitcoin liquidity with the Bitcoin-native stablecoin YU. As a powerful asset and liquidity enhancement tool, the stablecoin $YU operates across multiple ecosystems, enhancing efficiency without the need for bridging or reconfiguring the underlying Bitcoin.