Welcome to BitcoinFi Weekly. We cover where people use their BTC and what is changing in the Bitcoin world.

August is dead. Long live September. The ground beneath BitcoinFi is shifting, and with it, the rules we’ve come to rely on. This week, we witness the clash of titans and the birth of new paradigms. A battle unfolds as tBTC challenges wBTC's dominance, while Bitcoin miners watch the clock run down on their machines, and the old four-year cycle flickers like a distant memory. Yet amid this uncertainty, new horizons emerge. BVM rolls out the tools of tomorrow, and zkTLS quietly rewrites the rules of trust, connecting the past with the future.

Buckle up, folks

Here’s this week’s rundown:

• 🛠️ Save wBTC
• ⛏️ Bitcoin Mining Oversupply
• 💀 Is the 4 Year Cycle Dead?
• 🧩 BVM Unveils New Bitcoin RaaS Products
• 🔐 zkTLS & Bitcoin (soon™️)

Feature Piece: Save wBTC

The tBTC vs wBTC saga echoes of David vs Goliath. If, for whatever reason, you’ve been living under a rock, you can catch up on how this entire thing started here. Now, the Threshold DAO has unveiled a bold proposal: merge wBTC’s liquidity and integrations with tBTC’s decentralized security to create a Bitcoin bridge that marries the best of both worlds.

The proposal would allow Threshold DAO to mint and redeem wBTC. Other wBTC merchants would be removed from the system, and the DAO would assume control of the wBTC freeze function and other administrative powers. tBTC minting would be paused, and current tBTC holders would be allowed to redeem their tokens 1:1 for wBTC (or native Bitcoin). From there, the TVL of wBTC would gradually migrate to Threshold’s decentralized custody in phases, spreading the funds across multiple wallets.

In addition,  Threshold is offering to mint an additional 15% of its total token supply (1.65 billion new T tokens) as a grant for BitGo, a package worth over $36 million at current prices.

Of course, no proposal is without risk, and Threshold has a contingency plan. If BitGo declines to participate, the Threshold DAO suggests an orderly offboarding of wBTC from the DeFi ecosystem. They propose using the new token mint to subsidize the transition for protocols and users alike. Whether it’s covering redemption fees or helping DeFi protocols rework their infrastructure to support tBTC, the Treasury Guild has a roadmap to minimize the impact of wBTC’s decline.

A groundswell of support for the proposal has emerged from the depths of the DeFi community. Major players like Curve, Wormhole, Synthetix, and Ajna have rallied behind the #saveWBTC movement, echoing a unified message: The future of WBTC is uncertain. Bitcoin's values aren't.

In the coming weeks, the DeFi ecosystem faces a pivotal decision: stick with a system that, despite its widespread support, may no longer fully align with the decentralized values the space was built on or embrace a newer, more decentralized model.

BitcoinFi Updates

Bitcoin Mining Oversupply

The ASIC mining market is facing a supply glut, with industry leader Bitmain struggling to sell its latest models. Despite controlling an estimated 80% of the market, Bitmain is encountering resistance from miners as new, more efficient models quickly outpace older ones, and low Bitcoin prices squeeze profit margins. The hashprice has hit a historic low of around $40 per PH/s, making it difficult for miners to justify new purchases.

Bitmain's situation is further complicated by pressure from its chip supplier, TSMC, to maintain production volumes. This has led to a flood of new, increasingly powerful models like the S21 Pro and the rumored U3S21EXPH can perform 860 trillion hash operations per second while consuming only 13 joules of energy per trillion hashes - a significant leap in power and efficiency. Miners are now caught between the need to stay competitive and the risk of their equipment becoming obsolete before it's even operational. Some are opting to delay purchases or explore alternative cost-cutting measures until market conditions improve.

Is the 4 Year Cycle Dead?

The debate over Bitcoin's four-year halving cycle has intensified following the latest halving event. Outlier Ventures, a prominent Web3 accelerator, has challenged the traditional view of the cycle's impact on Bitcoin's price. According to their analysis, Bitcoin is experiencing its worst post-halving price performance to date, with a decline of around 8% 125 days after the event. This contrasts sharply with previous cycles, which saw gains of 739% (2012), 10% (2016), and 22% (2020) in the same timeframe. Outlier Ventures argues that the halving's influence on Bitcoin's price has diminished since 2016, attributed to the maturing cryptocurrency market and the reduced significance of miners' block rewards. They suggest that even if all miners were to instantly sell their rewards, it would only account for 0.17% of current trading volume, compared to 1-5% impact before mid-2017.

Despite this, the halving still holds psychological significance for many market participants. Some analysts believe history may repeat itself, predicting the traditional post-halving cycle will formally begin later this September with similar patterns of pre-halving price pumps and a subsequent lull before eventual market recovery.

BVM Unveils New Bitcoin RaaS Products

Bitcoin Virtual Machine (BVM) is a development platform for Bitcoin. BVM has introduced two new Rollup-as-a-Service (RaaS) products: Supersonic and Hybridsonic.

Supersonic offers a ZK rollup with 100% Bitcoin-based DA for $149 (352 $BVM) per day, while Hybridsonic provides a more cost-efficient ZK rollup using hybrid DA layers, priced at $39 (92 $BVM) per day. Supersonic leverages Bitcoin itself as the DA layer, making Bitcoin responsible for storing the state commitments, zk proofs, and batches of transactions. This allows for full data transparency and security on the Bitcoin blockchain. Transactions are processed by the Supersonic Sequencer, verified through cryptographic proofs by the Supersonic Prover, and inscribed onto Bitcoin through the OP_BVM metaprotocol. Hybridsonic provides a ZK rollup that combines Bitcoin and alternative DA layers, such as Celestia, Avail, and Filecoin, to reduce storage costs. Hybridsonic offers a cost-effective solution for developers who don't require full Bitcoin DA but still want to benefit from a Bitcoin-secured rollup. The Hybridsonic Sequencer submits transactions to both Bitcoin and alternative DA layers, optimizing cost while maintaining security and flexibility.

Both products integrate into BVM Studio, allowing developers to deploy their own ZK rollups with a drag-and-drop tool. They offer 1-second block times, faster bridging (30 seconds to bridge in, 4 hours to bridge out), and flexible architecture that can adapt to future upgrades such as BitVM2 and SNARK verifiers in Bitcoin Script. For more, check out this post.

zkTLS & Bitcoin (soon™️)

The downfall of major crypto lenders like Celsius and BlockFi in 2022 resulted in the loss of $24 billion and, more importantly, trust. As the space enters what many call an "Era of Reconstruction," zkTLS has emerged as a potential game-changer. zkTLS (Zero-Knowledge Transport Layer Security) is a protocol that bridges the gap between Web2 and crypto systems by enabling secure and private data verification. By using zkTLS, crypto lending platforms may be able to redefine trust and transparency.

Traditionally, oracles have been used to pull data from Web2 into crypto, but they aren’t scalable for sensitive personal information and often come with high costs. zkTLS, on the other hand, uses ZKPs and TLS encryption to prove the authenticity of Web2 data while limiting how much information is revealed. It operates by establishing a standard TLS connection between a user and a Web2 server, allowing users to select specific data they want to prove based on a predefined JSON schema. The protocol then generates a zero-knowledge proof of the selected data, ensuring that only necessary information is shared without revealing sensitive details. This proof is verified on-chain or by a designated verifier, confirming the data's authenticity while maintaining privacy. To enhance security, the proof generation often involves secure multi-party computation, preventing users from forging false proofs.

This opens the door to new possibilities in crypto lending. For example, zkTLS could enable real-time verification of user data on Bitcoin, making it possible to create programmable financial products, such as under-collateralized Bitcoin loans or fiat-backed lending.  For institutional adoption, zkTLS could provide a way to meet regulatory requirements without compromising Bitcoin's core principles of decentralization. These developments could pave the way for greater interoperability between traditional finance and Bitcoin, further expanding BitcoinFi and lending markets.

Closing Thoughts

In the crucible of BitcoinFi, change is the only constant. As the dust settles and decisions are made, Bitcoin’s path forward feels like a balancing act between what it is and what it can be. Liquidity and decentralization are no longer opposing forces but partners in building a stronger ecosystem. The four-year cycle, once our North Star, now flickers with doubt. But in that uncertainty, we find our strength. It is in uncertainty that we grow, adapt, and innovate. It's a circus out here, but you know what? That's the beauty of it. BitcoinFi is not a destination but a journey. And in that pursuit, we find our purpose, passion, and reason to build.

Thank you for tuning in to this week’s BitcoinFi Weekly. See you next week.

If there's a topic you’d like us to cover or have questions, reach out at [email protected].

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