Bitcoins
A new Bitcoin-based finance protocol called Hashi has been introduced on the Sui blockchain, with early participation commitments from crypto institutions including BitGo, Bullish and FalconX ahead of its planned launch later this year.
According to an announcement shared with Cointelegraph, Hashi is designed to let Bitcoin holders earn yield on native Bitcoin (BTC) through onchain lending and borrowing, targeting a segment that currently represents a small share of Bitcoin’s overall market.
The protocol, developed primarily by Mysten Labs, the core contributor to the Sui blockchain, will initially focus on BTC-backed lending, allowing users to borrow stablecoins against their holdings while institutions are expected to supply liquidity at launch.
Adeniyi Abiodun, co-founder and CPO at Mysten Labs, told Cointelegraph that the protocol is designed to address structural limitations that have held back Bitcoin’s use in decentralized finance, particularly reliance on intermediaries and limited transparency around collateral.
The system introduces onchain verification and programmatic collateral management aimed at making BTC lending more suitable for institutional use. “We are replacing ‘trust me’ workarounds with onchain verification,” Abiodun said.
Hashi will enable native BTC to be used directly in onchain financial services without relying on wrapped or synthetic assets, bringing transparency and automated collateral management to Bitcoin finance, components that institutions require to use it at scale.
Bitcoin remains largely unused in decentralized finance, with about 0.22% of its supply, or roughly $3.07 billion, currently deployed in decentralized finance (DeFi) protocols, according to the announcement and onchain data from DefiLlama.
The rollout also includes participation commitments from custodians and infrastructure providers such as Ledger and Cubist, along with Sui-based DeFi protocols expected to support lending, custody and collateral management once the platform launches.
Hashi said it will rely on a combination of multi-party computation custody and smart contracts on Sui to manage collateral and facilitate lending, with audits and formal verification planned before launch.
Additional features outlined include insurance coverage for BTC collateral and plans for issuing Bitcoin-backed bonds. The project is currently in development, with a devnet expected soon and a mainnet launch planned for later this year.
Related: Maestro launches mining-backed Bitcoin credit market for institutions
Bitcoins Bitcoin-backed lending rebounds after post-FTX collapse
Bitcoin-backed lending markets shrank sharply following the 2022 collapse of crypto lenders BlockFi and Celsius Network, where rehypothecation and opaque risk management exposed users to significant losses.
The practice of rehypothecation, reusing customer collateral to generate additional loans, amplified systemic risk during that period and contributed to a broader loss of confidence in crypto lending platforms.
In recent years, however, interest in Bitcoin-backed lending has begun to recover as regulators and companies explore models that emphasize transparency, collateral management and reduced counterparty risk.
In June, the US Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to explore whether cryptocurrencies can be counted as borrower reserves in mortgage risk assessments, marking a shift toward recognizing digital assets like Bitcoin without requiring conversion into US dollars.
Private companies are also building Bitcoin lending products. In June, Jack Mallers said Strike had updated its Bitcoin-backed loan agreement to state that user collateral is held in segregated wallets and is not rehypothecated, “never has been, never will be,” according to a post on X.
Source: Jack Mallers
In January, Coinbase reintroduced Bitcoin-backed loans in the United States, allowing eligible users to borrow up to $100,000 in USDC against BTC held on the platform.
Other companies, including Ledn, also offer loans against Bitcoin while emphasizing stricter custody and risk controls.
Magazine: Big Questions: Can Bitcoin save you from the dreaded Cantillon Effect?
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Cointelegraph by Nate Kostar Read More