Ethereum
Bitcoin (BTC) Fees Could Be Covered With ETH-Based Protocol
Blockchain Protocol Alkimiya launched, introducing a tool that allows users to protect themselves against Bitcoin volatility (BTC) transaction fee rate.
The hardest part might be convincing bitcoin hardliners — sometimes called “maximalists” or “maxis” — to use the new protocol, since it’s built on the foundation of The Ethereum blockchainTarget users of the platform, described as a “blockchain protocol,” could include traders, mining pools and foundations.
“While we recognize that Bitcoin maxis may initially be hesitant to use an Ethereum-based solution, our primary goal is to create the most robust and efficient marketplace for exchanging Bitcoin transaction fees,” Alkimiya founder and CEO Leo Zhang said in an email interview with CoinDesk.
There’s little doubt that a solution like Alkimiya’s is useful: In April, when Casey Rodarmor’s Runes protocol for creating fungible tokens on Bitcoin went live, the Bitcoin network’s fee rate jumped from $4.80 to $125 per transaction.
“Bitcoin mining companies, faced with high operating costs, are increasingly looking for hedging instruments to protect themselves against fee volatility,” Alkimiya said in his press release.
The company was founded in 2021 and is backed by investors including Dragonfly, Castle Island Ventures, 1KX, GMR, Coinbase Ventures, Circle Ventures, Tribe Capital and Robot Ventures, according to the release. raised $7.2 million funding in January 2023 and posted online on a test network in April.
Designed as a peer-to-peer payment network, Bitcoin has been around since 2009, and many of its users are notoriously loyal and skeptical of solutions that aren’t built “natively” or use a secure device directly on top of the older, original blockchain.
It is worth noting, however, that Bitcoin does not have the programmability of Ethereum, which appeared in 2015, founded mainly by developers, including Vitalik Buterin, who had previously worked on Bitcoin.
And like many decentralized applications and protocols on Ethereum, Alkimiya’s design requires some programming.
Here’s how Alkimiya works, according to the project’s documentation: “Alkimiya users can enter buy and sell positions for any pool. These buy and sell positions are represented by NFTs (ERC-1155) called Long and Short shares. Long shares in the same pool have the same tokenId and are fungible, while Long shares in different pools have different tokenIds and are non-fungible. The same rule applies to Short shares.”
A ERC-1155 is a standard for a “smart contract interface that can represent and control any number of fungible and non-fungible token types,” according to the definition on the Ethereum Foundation website.
Zhang, the founder, told CoinDesk that the project is “actively monitoring” the development of Ethereum-compatible layer-2 solutions on top of the Bitcoin blockchain, as well as “UTXO-based approaches.”
A UTXO – short for “unspent transaction output” – represents a key element of Bitcoin’s architecture, radically different from Ethereum’s accounting approach.
The reality is that many Layer 2 Bitcoin solutions are still under development, especially those compatible with Ethereum.
“Given that we cannot currently develop on Bitcoin, developing on Ethereum is the most decentralized approach available, which aligns with our commitment to decentralization and avoiding a centralized approach,” according to Zhang.
The goal is to eventually create “seamless integration paths that allow Bitcoin users to easily access and use our platform without having to manage multiple wallets or interfaces,” Zhang said.