In the current crypto ecosystem, Bitcoin liquidity is facing significant wastage and fragmentation issues. Despite Bitcoin occupying half of the total market capitalization of cryptocurrencies, over 66% of Bitcoin has not moved within a year, resulting in over $900 billion in liquidity not being released. Additionally, the proliferation of Bitcoin Layer 2 networks further fragments liquidity. Current Bitcoin settlement solutions each have their own bottlenecks, severely impacting user experience and hindering the release of Bitcoin liquidity, thereby obstructing the further development of the Bitcoin ecosystem.

To address the challenges of Bitcoin settlement, Chakra has built the first modular settlement layer designed to unlock Bitcoin's liquidity across diverse blockchain ecosystems. Through high-performance PoS consensus and parallel settlement mechanisms, Chakra provides BTC Layer2 solutions and protocols with secure, efficient, and low-latency shared settlement services.

Wasted BTC Liquidity

BTC is the highest market cap cryptocurrency, accounting for about 50% of the total market capitalization of cryptocurrencies. However, according to Dune Analytics, over 66% of Bitcoin has not moved within a year, leaving over $900 billion in liquidity unutilized, equivalent to the combined market cap of the top twelve cryptocurrencies excluding Bitcoin. Bitcoin's role as a store of value is becoming more pronounced, while its role as a medium of exchange is weakening, which deviates significantly from Satoshi Nakamoto's original vision of a "peer-to-peer electronic cash system," leading to a shortage of liquidity in the market.

The issue of liquidity wastage fundamentally stems from the lack of native DeFi applications. Bitcoin Layer2 solutions have addressed application scenarios; however, the market still lacks a reliable, efficient settlement infrastructure to fully release BTC liquidity.

Fragmented Liquidity from Isolated Bitcoin Layer2s

As demand for Bitcoin scaling increases, numerous Bitcoin Layer 2 networks have emerged. Although the Bitcoin ecosystem is still in an exploratory phase, there are already over 30 BTC L2s on the market. These isolated BTC Layer2s inevitably lead to further liquidity fragmentation. In the current Ethereum ecosystem, we have witnessed the harm of liquidity fragmentation caused by Layer2s, a problem Vitalik has been trying to solve for years.

For each Bitcoin Layer 2 network, you send your BTC to it and receive a corresponding BTC-mapped asset that can only circulate on the Layer 2 network. These mapped assets cannot freely circulate across other Layer 2 networks. Under the current single Bitcoin Layer 2 architecture, liquidity migration is extremely difficult. If you want to move Bitcoin liquidity from Layer 2 network A to Layer 2 network B, you need to first destroy the Bitcoin-mapped asset on A, wait for the lock-up period to end, receive the corresponding Bitcoin on the Bitcoin mainnet, and then deposit it into B's official bridge to mint Bitcoin liquidity on B. This method of liquidity migration involves a delay that includes A's withdrawal waiting time plus the Bitcoin mainnet transaction confirmation time, requiring at least hours of waiting, severely affecting user experience and hindering Bitcoin liquidity release.

The Bitcoin ecosystem needs a secure, scalable, and interoperable framework for BTC settlement.

Bottlenecks of Existing Settlement Solutions

The current Bitcoin ecosystem relies on three primary settlement methods: state channels like lightning network, centralized custodians like Coinbase or Binance, and cross-chain bridges such as Wrapped Bitcoin (WBTC) or RenBTC. However, each of these approaches has significant limitations:

• State channels lack advanced functionality due to the limited programmability of Bitcoin's scripting language. They are suitable for frequent small transactions between two parties but struggle to handle large-scale, multi-party transactions.

• Centralized custodians introduce counterparty risk and compromise decentralization, as evidenced by events like the Mt. Gox and FTX collapse. The lack of transparency requires a high level of trust assumptions for this solution.

• Cross-chain bridges are innovative but have struggled with widely acknowledged security concerns. Historically, cross-chain bridges have been hacked for more than $2.8 billion, including Wormhole, Nomad, Multichain, Ronin, etc.

These methods all fail to enable Bitcoin to fully participate in the broader cryptocurrency ecosystem, particularly in DeFi and yield-generating activities. As a result, Bitcoin remains underutilized despite its dominant market position. The limitations of existing settlement solutions underscore the need for a more robust, secure, and decentralized approach to unlock the full potential of BTC and its derivatives in the evolving crypto landscape, where Chakra will play a crucial role.

Chakra: The First Modular Bitcoin Settlement Layer

As the first modular shared settlement layer, Chakra uses a more robust, secure, and decentralized method to unlock Bitcoin's potential, providing the market with unified Bitcoin liquidity and interoperability. Chakra brings the following benefits to the Bitcoin ecosystem:

• Unified Liquidity: The centralized settlement layer can integrate the liquidity of different Layer 2 solutions, reducing fund dispersion and improving overall efficiency.

• Enhanced Functionality: By introducing stronger programmability and smart contract support at the settlement layer, Chakra can overcome the limitations of Bitcoin's scripting language, offering more flexible and powerful settlement services.

• Modular Design: The unified settlement layer provides standardized interfaces and modular services, reducing redundant work between projects, improving development efficiency and security.

• Increased Security: From an economic security perspective, the unified shared settlement layer can gather more funds to provide higher economic security. As a shared infrastructure, it will also undergo multiple rounds of security audits to ensure code reliability.

• Faster Settlement: The unified settlement layer allows for settlements without waiting for Layer 1 network confirmations, enabling faster settlements between Bitcoin Layer 2 networks.

With Chakra, Bitcoin's cross-chain settlement can be achieved with less than 5 seconds of system latency, giving Bitcoin assets almost frictionless cross-chain liquidity for the first time. Unlike ordinary cross-chain asset transfers, Chakra ensures that the mapped assets for settlement are backed 1:1 by BTC on the underlying Bitcoin network, while the underlying BTC assets are staked in Babylon, ensuring the security of the PoS system and providing staking yields for holders of mapped assets. The modular design makes Chakra highly composable, allowing for arbitrary combinations with Bitcoin execution layers and Data Availability (DA) layers to build a modular Bitcoin stack. Standardized interfaces make it easy to construct cross-chain applications for BTC assets, reducing development difficulty and providing users with a unified experience.

Key Benefits of Integrating with Chakra

The Chakra network offers a modular settlement network that provides shared settlement services for all blockchain networks and protocols. Among the hottest use cases currently are BTC Liquid Staking/Restaking protocols and BTC L2 solutions.

For Liquid Staking/Restaking Protocols

The shared settlement service by Chakra provides essential improvements in utilization, functionality, and user adoption for Liquid Staking/Restaking Protocols.

Efficient Liquidity Utilization and User Adoption

Chakra's robust cross-chain mechanisms reduce the friction associated with moving assets between chains. This efficiency minimizes latency and costs, making it more attractive for users and protocols to participate in staking and restaking activities.

With the omni chain interoperability provided by Chakra, staking/restaking protocols can integrate with any DeFi protocol on any blockchain network, enabling the free market allocation of liquidity. Users can also choose from a variety of downstream DeFi protocols to maximize their personal returns.

Composable Strategy with advanced function

Liquid Staking/Restaking Protocols can interact with Chakra's Settlement Layer through turing-complete smart contracts, enabling sophisticated settlement strategy that involve multiple steps, artifacts and interactions across multiple blockchain networks. Leveraging the settlement artifact provided by Chakra, Liquid Staking/Restaking Protocols could easily customize their own complex staking logic.

This capability greatly enhances the flexibility and functionality of staking protocols.

Enhanced Utilities and Stability of LST/LRT

Liquid Staking Tokens (LST) and Liquid Restaking Tokens (LRT) goin increased liquidity and tradability when integrated with Chakra. The ability to use LST/LRT across different chains increases their appeal to a wider range of users and investors. This broader market participation drives demand and liquidity, further enhancing the value and utility of these tokens.

As the adoption rate of LST/LRT gradually increases, the liquidity depth of LST/LRT in DeFi protocols also grows, greatly enhancing stability. Additionally, frictionless interoperability significantly reduces the cost and difficulty of arbitrage. A large amount of arbitrage activity will ensure that the peg between LST/LRT and BTC remains very stable.

For Layer 2's

Integrating Layer 2 solutions with the Chakra Settlement Layer provides significant advantages that enhance the performance, utility, and user experience of L2 networks.

Efficient TVL Onboarding

The TVL on Layer 2 is a critical indicator of a chain's prosperity. Thanks to Chakra, Layer 2 no longer needs to design complex settlement strategies to achieve the transfer of BTC assets from the Bitcoin network to Layer 2. With Chakra's shared settlement service, onboarding BTC liquidity becomes effortless.

Moreover, by facilitating efficient cross-chain transactions, Chakra helps minimize the transaction costs associated with moving assets between L2s and other networks. This enables Layer 2 to efficiently aggregate TVL from other blockchain networks, fostering its own ecosystem's prosperity.

Enhanced Utility of the Chain Token and Increased Composability of Assets

Integrating with Chakra enhances the liquidity and tradability of tokens of and on L2 networks. It enables L2 tokens to access yield opportunities on various blockchain networks through Chakra.

Meanwhile, Chakra supports the development of composable smart contracts that interact with multiple blockchain networks. Developers can create complex financial products that leverage the composability of Chakra's Settlement Layer. These products can include multi-chain yield farming, cross-chain lending, and synthetic asset creation, providing more sophisticated investment opportunities for users.

Enhanced Security and Support

Chakra employs a comprehensive security framework, including random rotation of validator sets, PoS with slashing, and asynchronous execution, etc. These measures ensure that all cross-chain transactions are secure and reliable. We also provide an active community of blockchain enthusiasts and experts. This community offers valuable insights, support, and collaboration opportunities, enhancing the development experience.

By overcoming the bottlenecks of existing settlement solutions and providing a scalable, secure, and interoperable framework, Chakra stands to play a crucial role in the evolution of the Bitcoin ecosystem, ensuring that Bitcoin can realize its potential as both a store of value and a medium of exchange. As the crypto landscape continues to evolve, Chakra's modular settlement layer will be instrumental in paving the way for a more efficient, integrated, and dynamic Bitcoin ecosystem.

Learn more about Chakra: https://linktr.ee/ChakraChain