Over the past two years, the crypto industry has undergone tremendous changes, especially the Bitcoin ecosystem, which has shown new ecological characteristics. This is not only reflected in the emergence of the BTC Layer 2 network that carries TVL, but also in the BTC chain players who hope to obtain passive income, and the traditional compliant institutional groups that bought Bitcoin in large quantities after the Bitcoin spot ETF was approved, and gradually formed an ecosystem and infrastructure around these players and groups.
The popularity of the Bitcoin ecosystem has also driven the rapid development of the BTCFi ecosystem. By the end of 2024, the total market size of BTCFi will be close to US$50 billion, and the TVL of the Bitcoin network will be approximately US$2 billion (including Layer2 and side chains), accounting for only 0.1% of the total market value of Bitcoin, while Ethereum is 15.7% and Solana is 5.6%. Many institutions believe that BTCFi still has room for tenfold growth.
In the BTCFi space, typical projects include Babylon, BounceBit, Solv Protocol, Bedrock, Bitlayer, Lorenzo Protocol, Liquidium, and Shell Finance, among others. In the ICP ecosystem, BTCFi projects include Bitfinity Network, Omnity Network, Bitomni, Tap Protocol, Loka, and BitSmiley.
Today, let's get to know another heavyweight player in the BTCFi space - Side Protocol.
Side Protocol is built by crypto mafia godfather Dave Hrycyszyn in collaboration with early members from Binance Labs and several crypto geeks. It combines Bitcoin's native script and signature technology with the underlying technology architecture of Cosmos, creating a new type of financial infrastructure. The core products of this protocol include a Bitcoin sidechain with performance comparable to public chains and a native lending protocol.
On February 5, the Side Chain mainnet alpha officially went live!
What is Side Chain
Side Chain is the first product of Side Protocol, and it is the first dPoS sidechain compatible with Bitcoin, built on the Cosmos stack, including Cosmos SDK and CometBFT.
Unlike other Bitcoin sidechains based on EVM, Side Chain natively supports Bitcoin Taproot and Native Segwit address types, allowing users to sign transactions directly from on-chain Bitcoin wallets. Additionally, Side Chain has its own Bitcoin representation, sBTC, built on a threshold signature network operated by leading validators. Through integration with the IBC protocol, sBTC can also be used in other ecosystems.
With the official launch of the Side Chain mainnet alpha, various products and integrations will be gradually introduced, the most exciting being the Bitcoin-native lending solution - a liquidity protocol utilizing DLC, allowing users to borrow against BTC collateral without relying on third-party custody or bridges. This protocol will be released later this year.
Side Chain is supported by leading Bitcoin mining pools, including Antpool, F2Pool, ViaBTC Capital, and SpiderPool, which have confirmed their commitment to running validator nodes on the Side Chain. These mining pools collectively account for over 49% of the Bitcoin network's hash rate.
Core team
The team background of Side Protocol is impressive, with core members coming from well-known Web2 and Web3 companies such as Meta, Binance, and Google, possessing rich industry experience and exceptional technical capabilities.
Among them, founder and CTO Dave Hrycyszyn is a veteran expert in the crypto industry and one of the co-founders of Chainspace. He co-created Chainspace with George Danezis (co-founder of Sui) and Mustafa Al-Bassam (co-founder of Celestia). The company was acquired by Facebook due to its leading position in high-performance chain research.
Before joining to establish Side Protocol, Dave served as the CTO of the privacy protocol project Nym, successfully leading the team to secure over $50 million in investment support from top institutions including a16z, Polychain, and Binance, while facilitating the successful mainnet launch.
Side Protocol has completed three rounds of private fundraising, with the last round valuing the company at $100 million. Investors include Hashkey Capital, KR1, Continue Capital, Symbolic Capital, Informal Systems, Dora Ventures, Charles Lu, Harry Halpin, Eric Chen, Mirza Uddin, Siddhartha Dutta, and Vincent Niu.
Token economics
Although BTC is the primary asset for all Side Protocol products, the SIDE token is the protocol's native utility token, playing a crucial role in the following key areas:
Value accumulation: Side is positioned as the financial layer of Bitcoin, with a clear protocol revenue model. Fees generated from products such as Side Finance, Side Chain, Side Hub, Side Bridge, native DEX, and future products will be used to repurchase and destroy SIDE, creating a deflationary mechanism to enhance its value.
Pay transaction fees: In addition to BTC, SIDE can also be used to pay network gas fees, which apply to all network operations, rewarding participants and ensuring security by preventing spam and denial-of-service attacks.
Staking: The Side Chain is an important part of the Side Protocol architecture, operating as a permissionless network through a proof-of-stake mechanism, and supporting delegation within the protocol. Similar to other dPoS networks, users can delegate their SIDE tokens to sidechain validators, earning a share of staking rewards while actively contributing to network security.
On-chain governance: SIDE allows the community to participate in decentralized governance by voting on key network decisions, including protocol parameter adjustments, upgrades, community fund allocation, and other important initiatives.
The total supply of SIDE is 1 billion tokens, distributed as follows:
Ecosystem reserve: 20%
Team: 18%
Community treasury: 17%
Public offering: 15%
Private offering: 13%
Genesis airdrop: 10%
Liquidity: 7%
The initial circulating supply is 229,000,000 tokens (22.90% of the total supply), with all tokens expected to be fully unlocked four years after the TGE. The release schedule is as follows:
After the mainnet launch, Side Protocol will distribute 10% of the total supply, which is 100 million SIDE tokens as a genesis airdrop, with potential airdrop recipients:
Active Bitcoin users
NFT community (including Bitcoin NFT holders)
Cosmos community
Testnet users
Public goods
The SIDE token airdrop distribution will begin after the mainnet launch and will last for 3 months. You can now check if you are eligible for the airdrop (genesis.side.one). Since the launch of checks and registrations on November 26, 2024, the airdrop activity has been exceptionally popular, with over 200,000 user addresses qualifying.
sBTC incentive program
To celebrate the launch of sBTC on the Side Chain mainnet and encourage early adoption, we are pleased to introduce the sBTC incentive program!
sBTC incentive program round one
Rewards:
Each bridge transaction can earn 100 SIDE, and in future rounds, the rewards per transaction will decrease.
The initial total reward pool is 1 million SIDE, which will be adjusted based on participation.
How to bridge
Both inbound and outbound transactions are eligible for rewards. Please follow the instructions in the video below:
Use Side Station (station.side.one) to transfer BTC or sBTC between Bitcoin and Side Chain;
After completing the bridge transaction, your eligible token rewards will be automatically sent to your wallet without needing to claim them; just connect your wallet to see your updated SIDE balance;
Note: For outbound transactions, if you do not have SIDE tokens to pay the gas fees on the Side Chain, you can switch your gas tokens to sBTC.
How to track your bridging progress?
Please note that each bridge transaction may take up to one hour because, for security reasons, each transaction needs to be confirmed six times on the Bitcoin network.
To check your bridging progress:
Visit Bridge -> Side Station Explorer to check your transaction status;
Enter your Bitcoin address into the 'User' filter to display all your bridging activities.
How to handle SIDE tokens
For those who have registered for the Genesis Drop, you can now check your balance on Side Station by connecting your Bitcoin wallet with your registered address. You can now send or stake your SIDE tokens.
We recommend staking SIDE tokens with a validator of your choice. As a delegated proof-of-stake (dPoS) chain, staking not only earns you additional rewards but also helps secure the network.
As of the publication of this article, the staking annual yield for SIDE has exceeded 25%.
Looking ahead
The blockchain went live on January 24, but it will only be fully operational once the Side Bridge (sBTC) is launched and running. Coordinating the DKG ceremony and completing bridge and incentive plan testing took several days.
As mentioned earlier, we prioritize launching products to drive usage and adoption, which is why the current mainnet is still in alpha. Before adding more partners and completing further integrations, we want to ensure that the sidechain is reliable and resilient in a production environment. In this process, we will collect product feedback and mitigate potential risks. Once these steps are completed, the community can expect the arrival of token liquidity events.
Conclusion
Looking ahead, as technology develops, Layer 2 technologies will continue to evolve and improve, and solutions like Rollups will mature, significantly enhancing Bitcoin's transaction processing capability.
With the emergence of more solutions that do not require cross-chain bridges, Bitcoin will enable safer and more efficient asset transfers and interactions with other blockchain networks, thus allowing Bitcoin to participate more broadly in DeFi applications across different chains.
With solutions like rsk, avm, bitvm, etc., Bitcoin's smart contract capabilities will be enhanced, enabling the support of more complex financial business logic and applications.
All these technological advancements will provide stronger technical support for decentralized financial services in the Bitcoin ecosystem, enabling more flexible staking, lending, derivatives trading, and other financial products.
As DeFi experiences a resurgence, we may witness a closer connection between BTCFi and real finance, with the application of stablecoins within the BTCFi ecosystem continuously expanding, providing more efficient and lower-cost solutions for cross-border payments and international trade.
Related links
Official website:
side.one
Medium:
medium.com/@SideProtocol
Docs:
docs.side.one
Github:
github.com/sideprotocol
#SideProtocol #SideChain #SIDE #BTCFi
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