Citrea’s innovative bridge solution is breaking down the long-standing collateral bottleneck in DeFi, enabling secure and efficient use of Bitcoin in programmable environments.
A secure bridge between Bitcoin and a secondary layer has long been a bottleneck for using BTC in programmable environments. This limitation hampers the development of decentralized finance (DeFi) activities on the network.
The Problem: Bridging Bitcoin to Programmable Layer 2s
Decentralized finance, also known as DeFi, refers to a financial system that operates on blockchain technology and is decentralized by design.
It allows for peer-to-peer transactions without the need for intermediaries like banks.
DeFi applications include lending, borrowing, and trading cryptocurrencies.
According to a report, the DeFi market grew from $1 billion in 2020 to over $22 billion in 2022.
The growth of DeFi is driven by its transparency, security, and efficiency.
Citrea, a project aiming to expand Bitcoin’s utility, is tackling this issue by providing a trust-minimized way to bridge BTC for use in DeFi environments. The ‘Clementine Bridge’ , recently deployed on the Bitcoin testnet, uses the BitVM2 programming language to address this bottleneck.
A New Approach: Trust-Minimized Bridging
Decentralized Finance (DeFi) activities refer to financial operations conducted on blockchain networks, excluding traditional banking systems.
These activities enable peer-to-peer transactions, lending, borrowing, and yield farming without intermediaries.
Key DeFi activities include stablecoin trading, decentralized exchange (DEX) usage, and liquidity provision.
According to a report by DeFi Pulse, the total value locked in DeFi protocols reached $250 billion in 2022, indicating significant growth in this space.
Clementine is designed to solve the collateral requirements of bridging the blockchain to programmable layer 2s. By providing a trust-minimized way to bridge BTC, Citrea aims to facilitate DeFi activities on the network. The ‘BitVM family’ of computing paradigms lies at the heart of this approach, enabling Ethereum-style smart contracts on Bitcoin.
Improving the Security Mechanism
However, the traditional BitVM design requires depositing BTC as a security mechanism each time a computation is initiated. To address this limitation, ‘Ekrem Bal’ , co-creator of Citrea, explained that they reuse the operator’s collateral, allowing them to facilitate multiple peg-outs with a single collateral. Peg-outs refer to the process of moving assets from a sidechain back to Bitcoin, triggering the release of locked BTC collateral on the main chain.
Enhanced Security Features
Citrea’s latest bridge uses BitVM2, an upgrade that boasts improvements such as allowing any participant to challenge suspicious transactions, not just a fixed set of operators. This enhanced security mechanism further solidifies ‘Citrea’s solution’ for bridging Bitcoin to programmable layer 2s.
BitVM2 is a virtual machine architecture designed for efficient execution of bytecode.
It's primarily used in the context of programming languages like Java and .NET.
The architecture focuses on low overhead, high performance, and scalability.
Key features include just-in-time compilation, dynamic recompilation, and garbage collection.
BitVM2 aims to provide a seamless experience for developers by abstracting away hardware specifics, allowing code to run across various platforms.
By deploying the ‘Clementine Bridge’ on the Bitcoin testnet, Citrea takes another step towards expanding Bitcoin’s utility and enabling more efficient DeFi activities.
