Thursday, June 13, 2024
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DeFi Technologies CEO on the industry’s first Bitcoin yield-bearing ETP caught up with Olivier Roussy Newton, CEO of DeFi Technologies, to explore the Valour Bitcoin Staking ETP, the first product to merge Bitcoin with yield-bearing staking mechanisms.

Bitcoin holders have traditionally missed out on staking opportunities available to other cryptocurrencies due to Bitcoin’s reliance on the 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, substantial computational power is required, which in turn chugs in substantial 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 lets participants earn yields simply by holding and staking their tokens. The process is more energy-efficient and accessible.

In contrast, Bitcoin’s PoW system rewards miners with newly minted coins and transaction fees for solving computational puzzles. However, reward generation is limited to those who can afford the inherent expenses associated with Bitcoin’s approach.

Consequently, Bitcoin holders rely on price appreciation for returns, missing out on the yield-generation mechanisms available in PoS networks.

Recent innovations are addressing this gap by introducing ways to stake Bitcoin. For instance, blockchain networks like Core Chain 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 yields by staking their BTC in a non-custodial manner, maintaining control over their assets while participating in network operations to earn rewards. 

With this, Bitcoin holders get a means to generate passive income from their holdings without compromising the core principles of Bitcoin’s PoW-based security model.

The Valour Bitcoin Staking ETP (exchange-traded products) capitalizes on this technological advancement, providing a secure and regulated avenue for investors to earn staking rewards directly through Bitcoin. 

Newton explains how this could transform the Bitcoin investment landscape.

Can you provide an overview of the Valour Bitcoin Staking ETP and discuss the inspiration behind its launch?

Valour is on the cutting edge of regulated crypto products, accessible to a broad audience. They recognized that one of the issues with BTC products is that they fail to earn yield or have to take on major risks in order to do so. Upon seeing the benefits of Core Chain’s Non-Custodial BTC Staking, Valour realized it could offer its users BTC with yield without involving any new risk assumptions.

How does the BTC staking program on Core Chain function? What ensures its security and efficiency?

BTC staking enables the most valuable digital asset to be used to secure the Core blockchain. Importantly, BTC staking utilizes Bitcoin-native functionalities like absolute time-locks to ensure that staked BTC never leaves the Bitcoin chain. Users simply lock their BTC on the Bitcoin blockchain, use that locked BTC to vote for validators on Core Chain, and then earn rewards from those validators securing Core Chain while their BTC is still locked. So, BTC secures Core Chain without ever leaving the Bitcoin chain. BTC staking is part of Satoshi Plus, which is Core Chain’s consensus mechanism. When Valour stakes BTC with Core Chain, they are participating in the election of trusted validators who then create blocks on Core Chain. 

Given the challenges faced by other yield-generating platforms such as Celsius and BlockFi, what distinguishes the Valour Bitcoin Staking ETP from these offerings?

First, skepticism is always necessary in crypto, and everyone should do their own research. Importantly, Valour has a very different profile when compared to entities like Celsius and BlockFi. Valour is a regulated, publicly traded company with many existing ETPs. Additionally, the source of the yield from this particular product is very clear. The yield for Valour’s Bitcoin Staking ETP is found in Core Chain’s Non-Custodial BTC Staking. “Non-Custodial” BTC Staking means that the BTC held by Valour never needs to change hands. There is no additional counterparty risk. The only counterparty risk comes from Valour, which is the same as a non-yield-bearing Valour BTC ETP.

How do Bitcoin miners contribute to the Core Chain network, and what impact does their participation have on the security and rewards structure?

Just as BTC stakers delegate their BTC to elect validators on Core Chain, Bitcoin miners and mining pools can delegate their hash power to Core Chain to elect validators. In exchange for their participation in Satoshi Plus, Bitcoin miners and mining pools earn CORE rewards. With Bitcoin miners being the decentralized defenders of Bitcoin itself, their involvement in Core Chain further decentralizes validator election and aligns Core Chain with the Bitcoin blockchain.

Lastly, can you elaborate on how the ‘Satoshi Plus’ consensus mechanism refines the traditional Bitcoin Proof of Work, particularly in terms of security and efficiency enhancements for stakers?

Satoshi Plus delivers tangible value back 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 native yield to Bitcoin for the first time in history. Bitcoin now has staking rewards like Ethereum without compromising on any of its design principles.