A crypto trading startup called Velar announced on Thursday that it has secured $3.5 million in venture capital to develop a set of tools for decentralized finance (DeFi), which is a developing area of Bitcoin.CEO Mithil Thakore of Velar told CoinDesk that the company intends to open the first permanent swaps exchange using the Bitcoin network, which is the most widely used and ancient blockchain. Unlike Ethereum, however, Bitcoin cannot support the smart contracts required for DeFi.
With the rise of Bitcoin’s Layer-2s and side chains, that has started to alter.Through methods like merge mining, these networks capable of smart contracts obtain their fundamental security from Bitcoin, according to Thakore.
Thakore and Velar are specifically placing bets on Stacks’ impending Nakamoto Release, an update to its universe of Bitcoin layer that will involve the launch of a synthetic bitcoin asset called sBTC that is linked to the mother-of-all-cryptos, BTC.According to Thakore, sBTC is intended to allow bitcoin owners to access the DeFi value of their assets without requiring them to give up custody.The context of trading could be one of the use cases.With regard to Velar v3, also known as Artha, which is scheduled for release in Q2 2024, Thakore stated, “People will be able to use sBTC as collateral and trade with leverage.”According to Thakore, there have been attempts to make Bitcoin DeFi a reality, but for now, it is more of a theoretical concept.
A portion of the reason for this is that certain solutions are stalled due to Bitcoin’s 10-minute block timings, which are much too slow for trading settlement.This will be reduced to five seconds with the Nakamoto release of stacks.
“Bitcoin DeFi is just too nascent as of now,” he said. “Even the infrastructure isn’t there to cater to 100 million users right now – but it’s all progress.”
There’s also hesitancy by many bitcoin holders to participate in newfangled ways to leverage their assets. If even a sliver of holders changed their minds, the impact would be massive because of how prevalent BTC is, Thakore said.
Participants in the investment round included Bitcoin Startup Lab, CMS Holdings, Black Edge Capital, GBV, Cypher Capital, Trust Machines SPV, Transform Capital, Maple Block, and Samara Asset Group, according to a press release.