Bitcoin
DeFi Technologies CEO on Industry’s First Bitcoin-Yielding ETP
Crypto.news spoke with Olivier Roussy Newton, CEO of DeFi Technologies, to explore the Valor Bitcoin Staking ETP, the first product to merge Bitcoin with yield-bearing staking mechanisms.
Bitcoin holders have traditionally missed out on staking opportunities available to other cryptocurrencies due to Bitcoin’s dependence on the Proof of Work (PoW) consensus mechanism. PoW requires miners to solve complex mathematical puzzles to validate transactions and secure the network.
Due to the size of the Bitcoin network, substantial computing power is required, which in turn consumes substantial amounts of electricity.
As an alternative, Proof of Stake (PoS) allows users to validate transactions based on the number of coins they own and stake as collateral. In a PoS system, validators are chosen based on the amount of cryptocurrency they hold and are willing to “stake” as collateral.
This approach allows participants to earn yields by simply holding and staking their tokens. The process is more energy efficient and affordable.
In contrast, Bitcoin’s PoW system rewards miners with newly minted coins and transaction fees for solving computational puzzles. However, the generation of rewards is limited to those who can afford the inherent expenses associated with the Bitcoin approach.
Consequently, Bitcoin holders rely on price appreciation for returns, missing out on the income-generating mechanisms available in PoS networks.
Recent innovations are addressing this gap by introducing ways to stake Bitcoin. For example, blockchain networks like Central Jail are enabling Bitcoin staking through mechanisms that combine PoW and PoS elements.
The Core Chain protocol, known as Satoshi Plus, allows Bitcoin holders to earn yields by staking their BTC in a non-custodial manner, maintaining control over their assets while participating in network operations to earn rewards.
This gives Bitcoin holders a means to generate passive income from their holdings without compromising the core principles of Bitcoin’s PoW-based security model.
The Valor Bitcoin Staking ETP (exchange-traded products) capitalizes on this technological advancement by providing a secure and regulated path for investors to earn staking rewards directly through Bitcoin.
Newton explains how this could transform the Bitcoin investment landscape.
Can you provide an overview of the Valor Bitcoin Staking ETP and discuss the inspiration behind its launch?
Valor is at the forefront of regulated crypto products accessible to a wide audience. They recognized that one of the problems with BTC products is that they cannot achieve yield or have to take large risks to achieve this. Upon seeing the benefits of Core Chain Non-Custodial BTC Staking, Valor realized it could offer its users yield-bearing BTC without involving any new risk assumptions.
How does the BTC staking program on Core Chain work? What guarantees its safety and efficiency?
BTC staking allows the most valuable digital asset to be used to secure the Core blockchain. Importantly, BTC staking uses native Bitcoin features, such as absolute time locks, to ensure that staked BTC never leaves the Bitcoin chain. Users simply lock their BTC on the Bitcoin blockchain, use that locked BTC to vote for validators on the Core Chain, and then earn rewards from the validators securing the Core Chain while their BTC is still locked. Thus, BTC protects the Core Chain without ever leaving the Bitcoin chain. BTC staking is part of Satoshi Plus, which is the Core Chain’s consensus mechanism. When Valor stakes BTC with Core Chain, they are participating in electing trusted validators who then create blocks on Core Chain.
Given the challenges faced by other yield-generating platforms such as Celsius and BlockFi, what distinguishes the Valor Bitcoin Staking ETP from these offerings?
First, skepticism is always necessary in cryptography and everyone should do their own research. It is important to highlight that Valor has a very different profile when compared to entities such as Celsius and BlockFi. Valor is a regulated, publicly traded company with many existing ETPs. Furthermore, the source of income from this specific product is very clear. Valor’s Bitcoin staking ETP yield is found in Core Chain’s non-custodial BTC staking. “Non-custodial” BTC staking means that BTC held by Valor never needs to change hands. There is no additional counterparty risk. The only counterparty risk comes from Valor, which is the same as a Valor BTC ETP with no yield.
How do Bitcoin miners contribute to the Core Chain network and what impact does their participation have on the security and rewards structure?
Just as BTC stakers delegate their BTC to elect validators on the Core Chain, Bitcoin miners and mining pools can delegate their hash power to the Core Chain to elect validators. In exchange for their participation in Satoshi Plus, Bitcoin miners and mining pools earn CORE rewards. With Bitcoin miners being the decentralized defenders of Bitcoin itself, their involvement in the Core Chain further decentralizes the validator election and aligns the Core Chain with the Bitcoin blockchain.
Lastly, can you explain how the ‘Satoshi Plus’ consensus mechanism refines Bitcoin’s traditional Proof of Work, particularly in terms of security and efficiency improvements for stakers?
Satoshi Plus offers tangible value to Bitcoin stakeholders through various means. First, Satoshi Plus rewards Bitcoin miners for delegating their hash power, further incentivizing Bitcoin miners to secure the Bitcoin network. Secondly, Satoshi Plus’s BTC staking brings native yield to Bitcoin for the first time in history. Bitcoin now offers staking rewards like Ethereum without compromising any of its design principles.