Even nowadays, for many people, Bitcoin stills a synonym of cryptocurrency.
Despite this, when it comes to decentralized finance, Ethereum-based platforms and services have a clear edge when compared to Bitcoin, especially when you consider the number of ERC20 tokens available out there.
Atomic Loans came to build a bridge between the two worlds, unleashing the Bitcoin potential within the DeFi world, by allowing users to collateralize BTC to draw stablecoin loans.
How Does It Work?
Atomic Loans is an open-source and non-custodial protocol that allows its’ users to use Bitcoin as direct collateral for cross-chain loans on DeFi.
It provides a mechanism that allows users to borrow Ethereum-based stablecoins with Bitcoin as collateral, so they can get liquidity without necessarily having to sell their Bitcoin funds.
The process is quite easy to understand. First, users start by setting the loan terms, picking their size and length, while choosing how much Bitcoin they want to use to collateralize.
Then, the Bitcoin is locked up in a script escrow system. These loans can be drawn out in form of DAI or USDC stablecoins.
When the user manages to repay the loan, the escrow locked Bitcoin is released and returns to his funds.
Dig into It:
No one can deny that Bitcoin is one of the best collateral types available in the market nowadays, as it has less volatility when compared to other crypto-based assets, added up by great liquidity.
DeFi so far has been dominated by Ethereum-based protocols and services, but while Ethereum has a more malleable monetary policy, Bitcoin still has a stronger monetary policy (which is pretty obvious considering the 21 million of BTC coins).
Atomic Loans aims to integrate the best of both worlds, as it gives users the possibility to lock BTC as collateral to access Ethereum-based stablecoins.
It can be interesting for Bitcoin holders, as they have a direct way to spend against their BTC without necessarily having to sell the underlying BTC.
It also can be good for holders who are craving for immediate liquidity but want to still be exposed to the potential Bitcoin’s long-term upside.
The protocol is 100% open-source, meaning its’ contract code and balances are public and can be verified by anyone. Users also can monitor their Bitcoin’s location on-chain whenever they want.
Everybody Hates Fees:
Fees for borrowing are 10% for DAI and 9.75% for USDC, while lending fees are up to 9.25% for DAI and up to 9% for USDC.
We also must remember the protocol support fixed-rate/fixed-term loans. The loan’s length depends directly on how long lenders are willing to lend.
So far, it is up to 4 months for DAI and up to 7 months for USDC.
Only Time Will Tell:
Although DeFi stills somewhat centered around Ethereum, Bitcoin is already considered by many specialists as an essential factor to contribute to the decentralized finance maturity.
Atomic loans present itself as a solution for those who dream about a permissionless parallel financial system, aiming to build an important bridge between two vital components of what will be the future of decentralized finance.
Despite this, the platform stills an early stage and has a lot to prove. Users might not want to risk serious money here, but only start seeing it as a potential alternative.
Who Is Behind the Idea?
The project was founded by Matthew Black (current CTO) and Tony Cai (current CEO).
Based in Toronto, the platform was launched in January 2019. Recently they have raised $2.45 million in a seeding funding round led by Initialized Capital to go further with the company’s development.
A revolutionary idea on its’ right, Atomic Loans provides non-custodial Bitcoin-backed loans.
The protocol works enabling a two-sided marketplace for BTC-backed lending, permitting its’ users to lock their BTC within an escrow system in the Bitcoin chain to borrow Ethereum-based DAI and USDC.
It is noticeable that the project, despite all the hype involved, still under development and needs to mature and gain notoriety, especially among veteran traders and investors in the DeFi market.