Tech
DeFi Technologies CEO Talks Industry’s First Bitcoin Yield ETP
Crypto.news met with Olivier Roussy Newton, CEO of DeFi Technologies, to explore the Valor Bitcoin Staking ETP, the first product that combines Bitcoin with yield-based staking mechanisms.
Bitcoin holders have traditionally missed out on staking opportunities available to other cryptocurrencies due to Bitcoin’s reliance on Proof of Work (PoW) consensus mechanism. PoW requires miners to solve complex mathematical puzzles to validate transactions and secure the network.
Due to the size of the Bitcoin network, significant computing power is required, which in turn draws significant amounts of electricity.
As an alternative, Proof of Stake (PoS) allows users to validate transactions based on the number of coins they hold and stake as collateral. In a PoS system, validators are chosen based on the amount of cryptocurrency they hold and are willing to “stake” as collateral.
This approach allows participants to earn returns simply by holding and staking their tokens. The process is more energy efficient and affordable.
In contrast, Bitcoin’s PoW system rewards miners with freshly minted coins and transaction fees for solving computational puzzles. However, reward generation is limited to those who can afford the inherent expenses associated with the Bitcoin approach.
As a result, Bitcoin holders rely on price appreciation to earn returns, missing out on the return-generating mechanisms available in PoS networks.
Recent innovations are filling this gap by introducing ways to stake Bitcoin. For example, blockchain networks such as Central chain they are enabling Bitcoin staking through mechanisms that combine PoW and PoS elements.
Core Chain’s protocol, known as Satoshi Plus, allows Bitcoin holders to earn returns by staking their BTC non-custodially, maintaining control over their assets, and participating in network operations to earn rewards.
In this way, Bitcoin holders gain a means to generate passive income from their holdings without compromising the core tenets of Bitcoin’s PoW-based security model.
The Valor Bitcoin Staking exchange-traded product (ETP) capitalizes on this technological advancement, providing investors with a safe and regulated path to earn staking rewards directly through Bitcoin.
Newton explains how this could transform the Bitcoin investment landscape.
Can you provide an overview of the Valor Bitcoin Staking ETP and discuss the inspiration behind its launch?
Valor is at the forefront of regulated crypto products accessible to a broad audience. They recognized that one of the problems with BTC products is that they fail to earn returns or have to take on major risks to do so. After seeing the benefits of Core Chain non-custodial BTC staking, Valor realized they could offer their users BTC with yield without involving new risk assumptions.
How does the BTC on Core Chain staking program work? What guarantees its safety and efficiency?
BTC staking allows you to use the most valuable digital asset to secure the Core blockchain. Importantly, BTC staking uses native Bitcoin features such as absolute time locks to ensure that the staked BTC never leaves the Bitcoin chain. Users simply lock their BTC on the Bitcoin blockchain, use the locked BTC to vote for validators on Core Chain, and then earn rewards from those validators who secure Core Chain while their BTC is still locked. Hence, BTC protects the Core Chain without ever leaving the Bitcoin chain. BTC staking is part of Satoshi Plus, which is the Core Chain consensus mechanism. When Valor stakes BTC with Core Chain, it participates in the election of trusted validators who then create blocks on Core Chain.
Given the challenges faced by other yield-generating platforms like Celsius and BlockFi, what sets the Valor Bitcoin Staking ETP apart from these offerings?
First and foremost, skepticism is always necessary in the cryptocurrency industry and everyone should do their own research. Importantly, Valor has a very different profile than entities like Celsius and BlockFi. Valor is a regulated, publicly traded company with many ETPs in existence. Furthermore, the source of the yield of this particular product is very clear. Valour’s Bitcoin Staking ETP yield is found in Core Chain’s non-custodial BTC Staking. “Non-custodial” BTC staking means that the BTC held by Valor must never change hands. There is no additional counterparty risk. The only counterparty risk comes from Valour, which is the same as a no-yield Valor BTC ETP.
How do Bitcoin miners contribute to the Core Chain network and what impact does their participation have on the security and reward structure?
Just as BTC stakers delegate their BTC to elect validators on Core Chain, Bitcoin miners and mining pools can delegate their hash power on Core Chain to elect validators. In exchange for their participation in Satoshi Plus, Bitcoin miners and mining pools earn CORE rewards. Since Bitcoin miners are the decentralized defenders of Bitcoin itself, their involvement in Core Chain further decentralizes the election of validators and aligns Core Chain with the Bitcoin blockchain.
Finally, can you explain how the “Satoshi Plus” consensus mechanism refines traditional Bitcoin Proof of Work, particularly in terms of security and efficiency improvements for stakers?
Satoshi Plus returns tangible value to Bitcoin stakeholders through a variety of means. First, Satoshi Plus rewards Bitcoin miners for delegating their hash power, thus further incentivizing Bitcoin miners to secure the Bitcoin network. Secondly, Satoshi Plus BTC staking brings Bitcoin’s native yield for the first time in history. Bitcoin now has staking rewards like Ethereum without compromising any of its design principles.