Why Cosmos DeFi Hub Osmosis is launching Bitcoin L2

Osmosis is currently secured by OSMO stakers, but the developers plan to add staked BTC to the mix in June.

Osmosis, a Cosmos-based blockchain known for its decentralized exchange, is entering the Bitcoin Layer 2 race. This is the latest indicator of the rapid growth in Bitcoin developer activity.

Next month, Osmosis plans to unveil Aroid Bitcoin, the latest in a number of in-house products aimed at simplifying trading tickers and injecting additional liquidity. Alloy Bitcoin is a tradable asset that acts as a derivative representation of the Bitcoin liquidity pool.

Sunny Aggarwal, co-founder of Osmosis Labs, told Unchained that Alloy Bitcoin is a new product that consists of “baskets of BTC variants from basically across the ecosystem.” In the case of Osmosis, we lump together his nBTC issued by Nomic, his wBTC issued on Ethereum, and Osmosis’ native wBTC in terms of liquidity.

This solution takes a slice of a centralized exchange book, such as Coinbase, which classifies all Ether (ETH) on the platform as Ether, regardless of its origin or bridges between other chains. For Osmosis, alloyed Bitcoin is latest Found in many similar products containing alloyed ethers.

read more: Bitcoin Layer 2 aims to attract Dapps like Ethereum. Will they succeed?

Alloy Bitcoin could secure penetration

Once smart contracts are introduced, Alloy Bitcoin could become an important element of Osmosis' security model. However, the governance members, made up of OSMO token holders, will first need to vote on including Alloy Bitcoin in the security model. OSMO is the native token of Comsos DeFi hub.

Osmosis security now comes from validators leveraging staked OSMO. However, Alloy Bitcoin will add assets in addition to OSMO as a staking possibility. According to Agarwal, BTC could become the primary asset for Cosmos DeFi if the community approves its addition.

“I think how this is received by Osmosis governance will depend on the terms of each individual proposal,” Robomakgobo, head of the Osmosis grants program, wrote on Unchained on Telegram. “Osmosis needs to allocate a portion of its security budget (currently allocated only to OSMO stakers) to staking BTC. The amount of staking rewards that will be allocated may be a point of contention.”

If the governance allows BTC staking, “BTC staked will earn a portion of the OSMO staking reward, but depending on the number of BTC staked, the staking reward for OSMO stakers will be It will decrease slightly,” RoboMcGobo added.

With a total value locked (TVL) of $177.45 million, Osmosis is the fifth largest blockchain network within the Cosmos ecosystem with a 7-day trading volume of $175.57 million. Defilama.

Staking BTC on Osmosis provides increased security and brings more liquidity to Osmosis and Cosmos overall. [annual percentage return] It encourages people to bridge that BTC,” Agarwal said.

Osmosis' plan comes amid a surge in Bitcoin experimentation. From the launch of Ordinals in January 2023, which brought non-fungible tokens to Bitcoin, to the recent rise of the Runes protocol, the original blockchain's use cases have been steadily building.

read more: What is Rune? A guide to Bitcoin's new alternative token protocol

Innovation is evident in projects such as Citrea and Merlin Chain, which aim to build a layer 2 network for Bitcoin. Built on top of Bitcoin, a Layer 2 focused on decentralized finance, Mainnet released On Wednesday, developers returned to the oldest blockchain, highlighting a resurgence in Bitcoin activity.

According to data from CoinGecko, the price of BTC has increased by 4.4% in the past 24 hours and is trading at around $61,800. is shown.