How RSK Blockchain is making waves with DeFi on Bitcoin
Tags: defi, rsk, blockchain, bitcoin
Published: 2021-01-28 14:53:41

With the fast adoption of cryptocurrencies and the Blockchain by financial institutions and nations all over the world, there’s a need to build decentralized applications that showcase the true power of the Blockchain’s ability to boycott the middlemen, giving people everywhere the power to create digital identities, build reputations, establish and enforce agreements, and engage in commercial transactions - all without any intermediaries.

> “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers” - Bitcoin Whitepaper.


The [bitcoin](https://en.wikipedia.org/wiki/Bitcoin) blockchain was originally built as a decentralized [digital currency](https://en.wikipedia.org/wiki/Digital_currency), only designed for use as a means of exchange, However, companies like [RSK](https://rsk.co/) have gone ahead and built its own [blockchain](https://www.rsk.co/rsk-blockchain/) which is compatible with the bitcoin blockchain through the [RSK sidechain](https://www.rsk.co/powpeg/). This means that blockchain developers can now build [decentralized applications (dApps)](https://developers.rsk.co/guides/full-stack-dapp-on-rsk/part1-overview/) on Bitcoin while also utilizing the security of the bitcoin network.

[RSK](https://www.rsk.co/rsk-blockchain/)’s goal is to add value and functionality to the Bitcoin ecosystem by enabling smart-contracts, near-instant payments, and higher-scalability.

Read the [Full Stack dApp Guide](https://developers.rsk.co/guides/full-stack-dapp-on-rsk/part1-overview/) to learn how to build one yourself!

## What is DeFi?

The term DeFi is short for Decentralized Finance. It is a general term for describing a variety of financial applications in cryptocurrency or blockchain not only with the aim of disrupting intermediaries, but also to give more equitable access to a parallel financial system.

In order to understand DeFi, it’s necessary to understand how traditional financial systems work. Traditional banks and financial institutions are centralized in nature and often laden with a myriad of problems, such as the inability to avoid the [double-spend](https://en.wikipedia.org/wiki/Double-spending) problem. This promotes distrust in the financial system.


## Why DeFi on Bitcoin?

Building decentralized financial applications on Bitcoin promotes a trustless and transparent Financial system. The RSK Sidechain was built as a way to bring Ethereum-like smart contract capabilities to Bitcoin. DeFi on Bitcoin is fully enabled on RSK, and Bitcoin users can now lend, borrow, trade and earn interest on their Bitcoin.

## DeFi Applications on RSK Blockchain

Let’s take a brief tour of the DeFi ecosystem operating on RSK.

> “Sovryn, Money on Chain and RIF Dollar only represent the beginning of the Bitcoin DeFi ecosystem,” said Diego Gutierrez Zaldivar, IOVlabs CEO.

### Money on Chain

![moneyonchain](https://dev-to-uploads.s3.amazonaws.com/i/ou4gkvix3ozwsdiwutn8.jpg) 

[Money on Chain](https://moneyonchain.com/) is a Bitcoin-collateralized [stablecoin](https://en.wikipedia.org/wiki/Stablecoin#:~:text=Stablecoins%20are%20cryptocurrencies%20designed%20to,precious%20metals%20or%20industrial%20metals).) that would minimize the counterparty risks found in other stablecoins, such as traditional bank accounts or less established blockchains. The collateral is not held in a third-party bank account, but, instead, in a smart contract secured by the most liquid and widely used blockchain in the world.

The Money on Chain solutions include; the **Dollar on Chain (DoC)**, that is the first Bitcoin Collateralized Stablecoin; the **Bitpro (BPro)**, a token designed for Bitcoin Holders; and the **BTCX**, a leveraged Bitcoin long position. The protocol also includes the **Money On Chain Token (MoC)**, a governance token. Money on Chain platform also includes a decentralized **token exchange (TEX)** for the trading of tokens on the RSK blockchain.

Read more in [A Deep Dive Into Money on Chain](https://medium.com/moneyonchain/deep-dive-into-money-on-chain-8122e45657ba).

### Sovryn

![Sovryn](https://dev-to-uploads.s3.amazonaws.com/i/5qisqniohr0hrezgkltq.jpeg)
 
[Sovryn](https://sovryn.app/) is a decentralized Bitcoin trading and lending platform. The Sovryn platform requires no permissions and it will never take custody of your coins. Instead, it offers a few core features that can elevate decentralized finance to a whole new level. With Sovryn you can perform [Margin trading and Swaps](https://live.sovryn.app/), [Borrow and lend](https://live.sovryn.app/lend), and add [liquidity](https://live.sovryn.app/liquidity) on Bitcoin.

Read more: [What it means to be Sovryn](https://sovryn.app/blog/what-it-means-to-be-sovryn.html)

### RIF Dollar on Chain

![RIF Dollar](https://dev-to-uploads.s3.amazonaws.com/i/kblc1l7qkqu9xo20kl84.png) 

The [RIF Dollar on Chain (RDOC)](https://www.rifos.org/blog/rif-on-chain-launch) is a stablecoin pegged 1:1 to the US Dollar and guaranteed by a smart contract. Users will be able to redeem their full RDOC position at contract expiration or partially during the lifespan of the contract depending on the availability of redeemable RDOC stablecoins.

Another important feature about RDOC is that it is fully collateralized by RIF tokens, and users can acquire them directly in the platform without needing to provide any collateral or [CDP](https://coinmarketcap.com/alexandria/glossary/collateralized-debt-position-cdp) like other DeFi platforms.

The RDOC token can be transferred among users and can be used for purchasing services and products, specifically dApps blockchain products that will be released on the Rif Marketplace. Another characteristic of the token is that it can be stored in any compatible hardware wallet.

Read more: [RIF On Chain Launch](https://www.rifos.org/blog/rif-on-chain-launch)

### RSK Swap

![RSKSwap](https://dev-to-uploads.s3.amazonaws.com/i/pm2k4wjdq9l9n9l6esyn.jpg)

[RSKSwap](https://rskswap.com/) is an Automated Liquidity Protocol on RSK. It enables you to instantly swap assets on RSK.

RSK Swap also enables anyone to create new markets, provide liquidity, and build financial applications.

It also empowers developers, liquidity providers and traders to participate in a financial marketplace that is open and accessible to all.

Read more: [RSK Swap Documentation](https://rskswap.com/docs/v2)

There are many more DeFi apps built on RSK. Visit [RSK Open Finance](https://www.rsk.co/openfinance/) to learn more.

Want to start building on Bitcoin? Visit the [RSK Developers Portal](https://developers.rsk.co/) or join the [RSK Community on Slack](https://open-rsk-dev.slack.com/join/shared_invite/zt-kk3yfuc6-qn~DrpMLvADkAUu1pbAcZA#/).

## Resources

- [RSK Website](https://www.rsk.co/)
- [Developer Documentation](https://developers.rsk.co/)
- [RSK Community on Slack](https://open-rsk-dev.slack.com/join/shared_invite/zt-kk3yfuc6-qn~DrpMLvADkAUu1pbAcZA#/)
- [The Complete Full Stack dApp Guide on RSK](https://developers.rsk.co/guides/full-stack-dapp-on-rsk/part1-overview/)

Thanks for reading!

Credits: Thanks to [Brendan Graetz](https://blog.bguiz.com/) for editing this article!