Bitcoin Unleashed: Direct Cross-Chain Liquidity with THORChain
Bitcoin's limited role in decentralized finance (DeFi) has been attributed to its inability to interact seamlessly with other blockchains. Most DeFi applications are built on programmable networks like Ethereum, making it necessary for Bitcoin holders to convert their assets through a centralized exchange or use wrapped tokens.
The concept of wrapped tokens is useful but alters the asset held by users. Wrapped BTC is a separate token that tracks Bitcoin's price on another blockchain, but its value depends not only on Bitcoin's price but also on the system responsible for issuing and securing it.
One Layer-1 cross-chain liquidity protocol has proved that native Bitcoin can be exchanged directly with other assets without converting to a wrapped token. THORChain achieves this through liquidity pools, where each supported asset is paired with RUNE, the platform's native settlement asset.