Untapped Market

Limited Options for Native BTC Trading

While decentralized exchanges (DEXs) have evolved significantly in both technology and adoption, they primarily focus on smart contract-compatible blockchains. Few decentralized cross-chain protocols support native BTC trading against other highly liquid assets like ETH, SOL, and USDT.

ThorChain is currently the most notable decentralized protocol facilitating native BTC swaps, but it has several major drawbacks:

• Inefficient AMM Model: ThorChain relies on a constant product AMM (introduced in 2018), which is suboptimal for both users and liquidity providers (LPs).

  

  Streaming Swap finished of THOR

  • Liquidity is spread out, leading to inefficient capital utilization for LPs.

  • Large trades suffer from high slippage, requiring orders to be broken into multiple smaller transactions.

  • Slow execution—a 51.8 BTC trade recently took 17 hours to complete, whereas Optimex can settle similar trades in under an hour.

  • Unstable pricing—AMMs depend on arbitrage to correct prices, making it difficult to finalize rates upfront.

• Low BTC Trading Volume: ThorChain’s BTC trading volume is significantly lower than centralized exchanges (CEXs).

  • The highest daily BTC swap volume on ThorChain was $53M, whereas CEXs routinely process tens of billions in daily BTC trading.

  

  

  • DEX volume for other assets often exceeds 10% of CEX trading volume, yet native Bitcoin DEX volume is less than 0.2%—indicating an enormous growth opportunity for Bitcoin-focused decentralized trading.

  
• Single Source Liquidity: ThorChain depends solely on its AMM model for liquidity, while Optimex integrates multiple liquidity sources, including market makers and centralized exchange liquidity, to provide deeper markets and more competitive pricing.

Wrapped BTC (WBTC) in EVM DeFi: The Trade-Offs

To bring BTC liquidity into DeFi, many protocols use Wrapped BTC (WBTC)—an ERC-20 token that represents BTC on Ethereum and other EVM chains. While WBTC enables Bitcoin holders to participate in DeFi without selling their BTC, it comes with several risks:

• Centralized Custody: WBTC is backed 1:1 by Bitcoin held by regulated custodians, meaning users must trust that these entities securely store and honestly manage the BTC reserves.

• Transparency Concerns: While custodians conduct audits, WBTC lacks real-time proof of reserves, leaving users unable to independently verify backing at any moment.

• Regulatory & Legal Risks: Custodians operate under legal jurisdictions that may freeze or seize assets, and regulatory changes could impact the ability of custodians to manage BTC reserves safely.

• Censorship & Blacklisting: Centralized entities can freeze or blacklist specific WBTC addresses upon regulatory request, introducing censorship risk.