Liquid Bitcoin Accounts without Derivatives

Introduction

In the world of decentralized finance (DeFi), collateralization plays a pivotal role in enabling secure and transparent borrowing, lending, and other financial activities. Traditionally, Liquid Staking Tokens (LSTs) have been leveraged as collateral, representing staked assets while maintaining liquidity. However, by directly utilizing BTC staking accounts as collateral, we aim to provide institutions with a streamlined, non-tokenized alternative, preserving the essence of BTC staking while unlocking the utility of their staked assets and saving them from tax issues.

Challenge

While staking BTC enables users to earn rewards, its locked nature traditionally limits its usability in other financial activities. Existing solutions often rely on minting LSTs as a representation of staked BTC, introducing complexities such as token price volatility, liquidity dependency, and tax problems when the LST is unstaked. For institutions who prioritize simplicity, efficieny and security, there is a pressing need to directly collateralize their staking accounts without introducing an intermediary tokenization layer.

Nativerse Solution

To address this challenge, Nativerse introduces a mechanism where LBA (Liquid Bitcoin Accounts), secured via 2PC-MPC technology, can directly serve as collateral in DeFi ecosystems. This approach eliminates the need for minting Liquid Staking Tokens while ensuring decentralized security, transparency, and composability with DeFi protocols.

How It Works

1. BTC Staking Account as Collateral

  • When users stake BTC using Nativerse's 2PC-MPC technology, their LBA details are securely stored and verified on the Bitcoin network.

  • The staking account serves as a verifiable record of staked BTC, which can be used as collateral in supported DeFi applications.

2. Collateralization in DeFi

  • DeFi protocols accept LBA, allowing institutions to:

    • Borrow stablecoins or other crypto assets against the staked BTC.

    • Participate in yield farming, liquidity pools, or other DeFi opportunities without unstaking their BTC.

    • And Saving them to pay tax when they sell or unstake their LSTs

  • The LBA account remains active, continuously generating BTC rewards.

3. Risk Mitigation

  • The 2PC-MPC architecture ensures that collateral cannot be liquidated or manipulated without meeting predefined conditions.

  • In the event of liquidation (e.g., when a loan is not repaid), the NSSP system can delegate control of the LBA to the DeFi protocol under mutually agreed conditions.

Key Features and Benefits

Non-Custodial Collateralization

  • Users retain full control of their BTC staking accounts through the entire staking and collateralization process.

  • Nativerse ensures that no third party, including itself, can unilaterally access or manage the staked BTC.

Decentralized Security with 2PC-MPC

  • The innovative 2PC-MPC (Two-Party Computation with Multi-Party Computation) architecture ensures trustless and secure collateralization.

  • Multi-party validation eliminates single points of failure, safeguarding against manipulation or malicious actors.

Streamlined Efficiency Without Tokenization

  • Nativerse introduces LBAs (Liquid Bitcoin Accounts) as a non-tokenized collateral solution, removing the need to mint Liquid Staking Tokens (LSTs).

  • This approach reduces complexity, avoids token price volatility, and eliminates the tax implications of unstaking or selling LSTs.

  • BTC remains staked directly, preserving its native value and ensuring continuous reward generation without liquidity fragmentation.

Unlocking the Potential of Staked BTC in DeFi

  • Institutions and users can leverage their LBA to:

    • Borrow stablecoins or crypto assets against staked BTC.

    • Participate in yield farming, liquidity pools, and other DeFi opportunities without the need to unstake.

  • This mechanism ensures seamless integration with DeFi protocols while preserving the utility and security of the staked BTC.

Risk Mitigation

  • The 2PC-MPC architecture ensures that LBAs cannot be liquidated or manipulated outside predefined, mutually agreed conditions.

  • In cases of liquidation, Nativerse's NSSP allows secure delegation of LBA control to DeFi protocols, ensuring institutional-grade risk management.

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