Bitcoin-based DeFi is advancing rapidly towards becoming a fully fledged ecosystem. The latest evidence of this trend is manifested in the funding round secured by Velar to create a PerpDEX on Bitcoin. $3.5M has been secured in seed funding to advance the goal of bringing perpetual swaps to Bitcoin infrastructure.
A host of blockchain VCs participate in the round including Bitcoin Startup Lab, CMS Holdings, and Black Edge Capital. Like many astute venture firms, they see the upside to recreating decentralized finance infrastructure on Bitcoin and are in a race to fund the startups who can secure first mover advantage within their respective verticals.
Velar Is Bringing Perpetual Swaps Onchain
Generally speaking, the first protocol to ship its solution on an emerging ecosystem tends to fare well. Think Uniswap on Ethereum or GMX on Arbitrum. Velar is hoping to follow suit by creating the world’s first perpetual decentralized exchange (PerpDEX) on Bitcoin. This will allow futures trading of assets such as BTC and ETH.
While Bitcoin wasn’t built for DeFi since it’s not a smart contract network, enterprising developers such as Ordinals’ Casey Rodarmor have found workarounds, inspiring Bitcoin protocols such as Atomicals and BRC-20. As a result, the sort of DeFi primitives commonly found on EVM chains are now taking root on Bitcoin, either on the L1 blockchain itself or on L2 networks such as Stacks.
The Velar team is already deeply familiar with Stacks having developed Dharma, a Uniswap v2-inspired AMM built on the Bitcoin L2. Its launch will be followed by Velar Artha, the name given to the PerpDEX it’s now developing.
Why Do DeFi on Bitcoin?
There are a number of reasons why recreating decentralized finance on Bitcoin infrastructure makes sense, the most compelling being the billions of dollars of liquidity currently lying idle. BTC is not a productive asset by default, which means holders have nothing to do aside from, well, hold and wait for number to go up. The release of DeFi protocols on Bitcoin will provide opportunities for BTC whales – as well as those of humbler means – to earn a return on their holdings.
As Stacks co-creator Muneeb Ali sees it, “DeFi is the logical next step for Bitcoin. Introducing perps for Bitcoin and other assets that can be swapped in a decentralized way and earn rewards will help unlock the $500B in untapped value on Bitcoin,” adding “This fundraise helps the team at Velar build a liquidity protocol that will be a major gateway for the usability being unlocked by sBTC on Bitcoin L2.”
Velar Gets Busy With Pushing Protocols
Velar is going to be kept extremely busy in the coming months. Its full range of Bitcoin-based products will eventually include an AMM, project launchpad, and PerpDEX. The AMM is closest to completion with a testnet that debuted last year attracting more than 160,000 users. Its perpetual swaps DEX will not only strengthen the DeFi primitives available on Bitcoin, but further bolster Stacks’ position as the preeminent Bitcoin L2.
The imminent Nakamoto upgrade of Stacks network will result in block times that are five times faster and introduce a host of other improvements, from security to usability. All of which means that when Velar Artha launches, it will do so on an L2 that’s been fully optimized for DeFi.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.