21 Apr 2023
Alex DeFi Protocol: Bridging the Gap Between Bitcoin and DeFi
You may have heard a bit about ALEX, and for good reason. Let's take a look how ALEX protocol brings DeFi to Bitcoin and what we can expect going forward.
Staying ahead of the next big thing in crypto is how you make the most of the opportunities provided by this tech. When I learned what Stacks is, a blockchain that brings smart contract functionality to Bitcoin, I knew that this was the place to be. As we have discussed in previous articles, DeFi is one of the major innovations that smart contracts have made possible. Today we will be talking about the protocol that is bringing DeFi to Bitcoin:
You may have recently heard a bit about ALEX, as it was just listed on GateIO and MEXC, two highly respected centralized crypto exchanges. However ALEX is bigger than this news, by orders of magnitude. So let's start with what ALEX is:
- A DEX, otherwise known as a decentralized exchange, is a means by which users can trade cryptocurrencies directly without needing a middle man. Everything is managed by the protocol. The ALEX protocol allows users to trade, stake coins for yield, farm, and lend/borrow digital assets.
- A launchpad, which in crypto terms is a means by which new protocols can obtain funding/attract investors. Launchpads are important because they help these new projects gain visibility and credibility within the crypto community. They also provide an opportunity for regular people to invest in projects they believe in
- A bridge. On 4/18 ALEX took its STX-ETH bridge live. A bridge is the means by which trade can be accomplished between different blockchains. This is huge for several reasons, that I will further discuss towards the end of this article. For now its sufficient to say that this is not only a major technological accomplishment, but this is very bullish for Stacks and ALEX.
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Understand that ALEX is a very complex protocol, and this is no surprise when you understand that ALEX has been built by the financial/blockchain cream of the crop. To begin the co-founder of Alex Chiente Hsu, PhD (@RuleBasedInvest) has previously been the managing director in such firms as Morgan Stanely and Credit Suisse. The COO of ALEX, Rachel (@rachel_alexgo) is a Goldman Sachs alum as well as an web3 entrepreneur. These are people who understand finance, and are first movers into bringing financial products to Bitcoin.
While speaking to Chiente for this piece it became apparent that despite what has been built thus far is only the beginning. Their vision is nothing less than bringing “permissionless and universally inclusive finance to the most decentralized and secure blockchain”. Read that again, let it sink in, and understand the magnitude of the situation.
In addition to the STX-ETH bridge, ALEX is also building a BTC to sBTC bridge. Seeing as though sBTC will be a cornerstone of DeFi on Bitcoin, “as it will be the most trust minimized representation of Bitcoin on a smart contract layer” (Chiente has a way with words, I probably should have mentioned earlier that she is also an author), it makes sense to see ALEX proactively working on incorporating sBTC based products into the protocol. We can also expect to see an sBTC based stable coin as well as other Bitcoin based financial products for Bitcoin hodlers/users.
By building the ALEX protocol, and then constructing the bridge to Ethereum ALEX has uniquely positioned itself to be the first stop that people coming from ETH make on their Bitcoin DeFi journey. The first mover advantage alone is huge for a new protocol, but when you factor in the high degree of expertise, care, and polish that ALEX has been constructed with…it's hard not to be giga bullish.
At the time of this writing, Ethereum has a total market cap of $232,163,425,926. Stacks has a total market cap of $994,683,743, and Bitcoin has a total market cap of $548,157,505,879. Thanks to ALEX, an ETH investor looking to put Bitcoin liquidity to work can easily do so in a decentralized manner. After seeing the mad rush of ETH natives into Bitcoin ordinals, it isn’t hard to imagine what the DeFi rush to Bitcoin could look like.
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There are several concepts floating around crypto that I think are likely to be reality:
- The future of crypto is multi/cross chain. When I think of all the tech that I use in my daily life (that I am not obsessed with) I don’t know a ton about how it works or the evolutionary path it took to exist in its current state. If this can be true for something as common as a vehicle’s backup camera, how would this not be true for crypto? Much like Flagship strives to inform its community of the latest in crypto developments, and makes adoption that much easier; it is apparent that the crypto users in the recent future will use applications that make it unnecessary to know if they are using ETH/SOL/STX etc.
- The future of crypto trading is decentralized. This makes sense, especially for Bitcoin, because decentralization is the cornerstone of what cryptocurrency is about. Today we see some governments of the world trying to halt crypto development, and they do so by attacking the centralized weak points. DeFi eliminates the threat of government intervention. Decentralized exchanges such as ALEX are destined to become the exchange method of choice for crypto market participants.
With this in mind it is clear to see the significance of the ALEX protocol. By embracing the ability to move assets between blockchains, and operating a decentralized protocol it is evident that the ALEX team has its eyes on the future.
Keep your eyes open on some more DeFi content headed your way. Keeping you ahead of the curve is what we do here at Flagship, and it is my honor and pleasure to be your Stacks Outpost Captain. That’s all I have to say for now, Captain Jack signing off.
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Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.