Yala: Linking Bitcoin Liquidity with Interest-Bearing Stablecoins

TL;DR

The original design of Bitcoin prioritized security and decentralization over complex features such as smart contracts and DeFi applications. Therefore, Yala creates a modular architecture on the Ordinals protocol, while integrating a decentralized indexer network and Oracle to introduce smart contract capabilities to Bitcoin, thereby issuing a stablecoin $YU. Based on this modular design, $YU can freely participate in DeFi activities on any chain, thereby unlocking Bitcoin's huge liquidity.

Yala's goal is to build a modular DeFi yield aggregator for Bitcoin, ensuring security and decentralization through mechanisms such as a federated voting indexer (eventually a fully decentralized indexer) and a Bitcoin vault with threshold signatures, while ensuring democratic participation and decentralized governance through the community. Yala hopes to be the most preferred path and solution to achieve mass adoption of decentralized finance on the world's most resilient blockchain, Bitcoin, while maintaining its core principles of security and decentralization.

Limitations of Bitcoin in Smart Contracts and DeFi

Bitcoin is the most innovative decentralized cryptocurrency, designed with security and decentralization in mind. Its scripting language was originally designed to facilitate simple peer-to-peer value transfers rather than complex financial functions. While the DeFi ecosystem has flourished on more flexible blockchains such as Ethereum, Bitcoin has been unable to meet its needs as an infrastructure due to its architectural limitations, including block size and frequency limits.

The blockchain scalability dilemma highlights the challenges of balancing security, decentralization, and scalability, all of which are critical to DeFi applications. Bitcoin prioritizes the first two, and therefore cannot meet the high-volume, real-time requirements of DeFi. There is no doubt that Bitcoin holders need a secure and seamless mechanism to participate in the growing DeFi ecosystem, and this need has long been met by users of Ethereum and other EVM-compatible blockchains.

Ethereum has already implemented scalability solutions such as sharding, Rollups, and modularity. Bitcoin has conservatively explored the expansion of the second-layer solution without compromising its philosophy. However, if Bitcoin is to fully embrace DeFi and bring benefits to holders, it must consider the following strategies:

1. Enhance DeFi functionality: Bitcoin can also explore sharding, Rollups, and other scalability solutions to enhance its DeFi functionality while maintaining its basic principles of security and decentralization. Careful implementation and rigorous testing will ensure that the integrity and decentralization of the network are not compromised.

2. Embrace modularity: Modular design principles can introduce new features and functions tailored for DeFi without compromising the security and decentralization of the core protocol. This will enable Bitcoin to evolve and adapt to the changing DeFi environment, providing Bitcoin holders with opportunities to generate returns and participate in the DeFi ecosystem.

3. Second-layer expansion solutions: Bitcoin developers focus on second-layer solutions such as the Lightning Network and sidechains to enhance scalability outside the main chain. However, these solutions increase complexity and reliance on independent governance protocols. In order to truly embrace DeFi and provide Bitcoin holders with a smooth yield-generating experience, Bitcoin may need to explore more integrated and user-friendly solutions.

As the DeFi ecosystem develops, Bitcoin must remain flexible and innovative in order to provide its holders with the same opportunities as other ecosystem users to participate in the evolving DeFi ecosystem. This requires innovators in the ecosystem to develop strategies that understand and foresee the needs of the rapidly evolving Defi ecosystem while being consistent with Bitcoin's core principles. Typically, this requires a decentralized, accessible, and economically empowering approach.

$YU: A Cross-Chain Yield Stablecoin Based on Bitcoin

The rise of DeFi has opened up new opportunities for financial innovation, but Bitcoin’s architectural limitations prevent it from fully participating in this rapidly evolving ecosystem. Yala’s solution is to leverage Bitcoin’s unique properties and introduce DeFi functionality, with a focus on providing a Bitcoin-backed stablecoin that can earn yield natively on multiple chains.

Ordinals Protocol: Bitcoin DeFi Opportunities

Inscriptions are a groundbreaking innovation enabled by the Ordinals Protocol that allows digital assets to be issued and managed directly on the Bitcoin blockchain. By assigning a unique identifier to each satoshis (the smallest unit of Bitcoin), Inscriptions enable the creation of non-fungible tokens (NFTs) and other digital assets, including Yala’s Bitcoin-based stablecoin, on the Bitcoin network.

Meta protocols based on Ordinals (BRC-20, BRC-100, BRC-420, etc.) enable the Bitcoin network to integrate indexers, paving the way for the development of a true DeFi ecosystem on Bitcoin.

Yala Bitcoin-based stablecoin: earning income across chains

Yala's modular design introduces programmable smart contracts and DeFi applications to Bitcoin, including, of course, the Bitcoin native stablecoin $YU that can earn income on multiple chains. For detailed technical design, please read Yala's white paper. By leveraging a strong EVM-free security framework like Ethereum or Solana, Yala's stablecoin products, including loan/borrowing protocols, liquidity pools, and governance contracts are all backed by formal verification to ensure mathematical correctness.

Through the Bitcoin native stablecoin $YU, users can participate in DeFi opportunities on various blockchain networks and earn yields without sacrificing the security and decentralization principles of the Bitcoin network.

Strong Security and Decentralization

Yala's solution prioritizes security and decentralization, consistent with the fundamental principles of Bitcoin. The indexer network implemented by the federated voting indexer mitigates the risks of centralized BRC-20 indexing, and strict data verification and consensus protocols ensure the reliability and integrity of the token balance information maintained. It is worth noting that the federated voting indexer is a transitional solution, and Yala will be committed to promoting the construction of decentralized indexers.

The cooperation with Nubit provides additional data availability verification for indexer behavior, and the separation of the BRC-20 black and white modules guarantees security for deposit and withdrawal transactions.

Execution Layer and Oracle Network

At the execution layer, Bitcoin asset management leverages Bitcoin Vaults that use threshold signatures to ensure strong security without a single point of failure. Yala’s decentralized Oracle network also provides tamper-proof, real-time price data, which is critical for managing liquidations and maintaining stablecoin pegs.

By introducing a Bitcoin-based stablecoin that can earn yield on multiple chains, Yala is unlocking Bitcoin’s potential in the high-growth DeFi ecosystem. This approach combines Bitcoin’s strong security and decentralization with DeFi’s innovation and flexibility to create a strong, user-centric blockchain ecosystem for a diverse digital economy.

Building a True DeFi Ecosystem for Bitcoin

At Yala, our vision is to create a thriving, open ecosystem that unlocks the full potential of Bitcoin DeFi.

1. Unleash the untapped potential of Bitcoin assets: Yala is committed to unlocking the full potential of DeFi on Bitcoin. With the Bitcoin-backed $YU stablecoin, we will provide Bitcoin holders with native returns on all other chains.

2. Promote the democratization of DeFi participation: Our vision is to promote the democratization of DeFi, allowing any individual and organization to participate in a transparent, autonomous, and decentralized financial system. Our goal is to build an open ecosystem in which various DeFi applications can interact and combine seamlessly, driving innovation, collaboration, and shared value creation.

3. Support decentralized governance of loan protocols: We will continue to work for decentralization and community governance, transforming the governance structure of our loan protocol into a decentralized autonomous organization (DAO) to enable the broader community to actively participate in the evolution of the Yala ecosystem. We are eager to create a self-sustaining, resilient, and evolving DeFi ecosystem on Bitcoin through openness and collaboration.

4. Pioneering Bitcoin's DeFi field: Yala's ultimate goal is to establish itself as Bitcoin's preeminent DeFi infrastructure. We envision a future where individuals and organizations can access a wide range of secure, transparent, and decentralized financial services, products, and opportunities in the Bitcoin ecosystem.

Together, we will build a true DeFi ecosystem on Bitcoin, the world's most secure and resilient blockchain, to promote the mass adoption of decentralized finance and open up a world of opportunities.

About Yala

Yala is a decentralized financial protocol based on Bitcoin's native stablecoin YU, which opens up Bitcoin liquidity. As a powerful asset and liquidity enhancement tool, the stablecoin $YU operates across multiple ecosystems, improving efficiency without bridging or reconfiguring the underlying Bitcoin. Yala empowers Bitcoin holders and ecosystem participants to unlock their liquidity while maintaining the security of Bitcoin infrastructure.

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