No blockchain ecosystem is seemingly protected from speculative factors farming, and the development has now come to Bitcoin.
Lower than a month in the past, Merlin was an also-ran by way of property held in Bitcoin sidechains and layer-2s. However after seeing roughly 2,000% development over the previous 30 days, Merlin has over $1 billion in whole worth locked (TVL), making it far and away the biggest Bitcoin sidechain, per DeFiLlama, and greater than 3 times as giant as the payments-focused Lightning Community.
Merlin is now technically the ninth-most capitalized blockchain, with extra TVL than established layer-1s like Avalanche and Polygon, DeFiLlama knowledge suggests.
Greater than half of Merlin’s $1 billion is held in Solv Finance, a protocol that allows customers to deposit wrapped bitcoin and obtain “Solv Points” in return. Solv and Merlin are operating a promotion encouraging customers to farm for factors and tokens.
In crypto, factors confer with worthless participation tallies that usually decide allocations in future token airdrops. Following a string of latest airdrops that netted transformed factors to giant sums of tokens associated to Solana and EigenLayer, so-called factors farming could have discovered its outlet within the Bitcoin ecosystem.
Learn extra: DeFi ‘points’ farming has reshaped the crypto investment landscape
Merlin additionally airdropped its native MERL token to customers final week. The token has slumped practically 40% since being listed on CoinGecko.
Merlin positions itself as a Bitcoin layer-2 resolution, integrating zero-knowledge proofs with Bitcoin’s blockchain via Taproot. This integration permits the system to reinforce transaction privateness and effectivity considerably.
Nevertheless, in contrast to Ethereum zk rollups the place proofs are verified on-chain, Merlin’s proofs are verified off-chain by a decentralized community of oracle nodes earlier than being batched and submitted to Bitcoin’s blockchain via Taproot. This off-chain dealing with of knowledge and proofs ensures scalability and safety with out loading the Bitcoin mainnet with extreme knowledge.
It’s value noting that many options known as Bitcoin layer-2s, together with the Lightning Community and varied sidechains, usually handle transactions by transferring property between Bitcoin and impartial but interconnected blockchains. That is completely different from including direct functionalities on prime of Bitcoin’s present infrastructure.
Merlin’s development speaks to a broader development in renewed curiosity surrounding speculative makes use of for bitcoin past simply the asset’s value. Runes, an evolution of the Ordinal inscription idea, went live at the halving and have caused a spike within the community’s transaction charges. And enterprise capital, which had lengthy been on the sidelines when it comes to Bitcoin, has began to circulate into the ecosystem, Blockworks not too long ago reported.
Learn extra: Bitcoin is suddenly cool again for VCs
There’s additionally a race alongside Merlin to attract liquidity to Bitcoin layer-2 options. A distinct Bitcoin layer-2, Stacks, simply pulled off its Nakamoto upgrade in an try and make its product quicker and extra dependable.
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