BitVM and Peg-BTC unlock Bitcoin’s DeFi potential on Sui

Bitcoin is now accessible on Sui via BitVM. Developers can now build using Bitcoin smart contracts.

Bitlayer announces partnership with Sui to launch a new bridge that brings Bitcoin to the Sui network using BitVM and Peg-BTC. This is designed to bridge the gap between the DeFi world and Bitcoin, which is not compatible with most blockchain protocols.

BitVM is a crypto infrastructure that enables programmability on Bitcoin without altering its protocol. Introduced by Robin Linus in 2023, BitVM uses Bitcoin’s protocol to initiate off-chain transactions while enforcing results on-chain through fraud proofs and other cryptographic techniques. This expands Bitcoin’s functionality without impacting its consensus rules.

Peg-BTC is a synthetic asset designed to mimic the price of Bitcoin (BTC) while operating on a different blockchain. It facilitates faster transactions, lower fees, and integration with decentralized finance (DeFi) ecosystems.

Built on BitVM, Peg-BTC is supported by collateralization, where assets like stablecoins and other cryptocurrencies are locked in smart contracts to back the pegged token. It is utilized in non-Bitcoin native chains such as Sui.

This combination allows Bitcoin holders to mint a version of BTC that operates natively on the Sui network while preserving Bitcoin’s value. Although existing bridges in the industry recreate crypto assets on non-native blockchains, they typically rely on third-party custody.

BitVM, however, enables Bitcoin transfer on Sui without central intermediaries. Sui’s high throughput makes it an excellent choice for this application. Additionally, Peg-BTC holders will soon be able to stake, lend, borrow, and provide liquidity across the Sui ecosystem.

The partnership is significant for BTCFi, according to Charlie Hu, cofounder of Bitlayer.  “By bringing Bitcoin’s liquidity into Sui’s DeFi ecosystem, we’re giving BTC holders new tools to earn yield without giving up exposure to Bitcoin itself,” he added.

Adeniyi Abiodun, a founder of Mysten Labs, the company behind Sui, stated that this development is just the beginning. He noted that the Bitlayer team is aiding Sui in becoming the primary network for Bitcoin use in DeFi.

Looking ahead, Bitlayer plans to introduce the BuitVM bridge to Base, Starknet, Arbitrum, Sonic, Cardano, and Plume. This move will enhance activities within the Bitcoin DeFi ecosystem, which is experiencing the emergence of new infrastructures.

The Bitcoin DeFi space, also known as BTCFi, is rapidly expanding, transforming the Bitcoin blockchain from merely a store of value into a platform for lending, borrowing, trading, and yield generation.

Developers are leveraging technologies such as the Lightning Network, Rootstock (RSK), Stacks, and Bitlayer to enable smart contract functionality and scalability for the asset with a market cap exceeding $1 trillion.