Why is Onchain Bitcoin Yield so Important?

Yield is one of the most powerful and important financial primitives - you should be able to earn it on your own terms in a secure, trustless manner. What happens when you trust your crypto assets to centralized corporations to earn yield? Grab your popcorn, it’s story time.

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In 2022, Celsius and BlockFi, two of the most prominent centralized lending platforms in the crypto world, collapsed spectacularly.

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Both enticed users to deposit their hard-earned funds with yields up to 18% on various cryptocurrencies, including Bitcoin. Little did users know, they were putting their funds into a textbook ponzi scheme.

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Textbook ponzi scheme

The yield earned on these platforms was paid out by new depositors - creating a house of cards held up by a constant flow of new money. When this flow was cut off (marked by the devastating Terra collapse), the yields were no longer sustainable and withdrawals were shut off to protect the companies’ interests.

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Imagine: you’re a Bitcoin maxi and hold a majority of your BTC on Celsius to earn yield on top of your stack. 

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You’ve been told by countless influencers and VCs that your funds are completely safe - even FDIC insured! All of the sudden, Celsius pauses withdrawals - and you’re unable to touch the BTC you’ve deposited. They declare bankruptcy and your BTC is officially in limbo for the next few years.

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This is the horror of using centralized intermediaries to earn yield on your crypto. The moment you deposit your funds into a CEX, bank, or institution, is the moment your funds are no longer in your control.

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Why centralized platforms?

Why did users end up depositing with centralized lending platforms or even CEX’s to earn yield? I believe it was for 3 reasons:

• Easy
• Convenient
• Trustworthy (at the time)

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DeFi has a bad rep for being easily exploitable/ruggable. This narrative has been perpetuated by the countless scams and hacks that have stolen billions of dollars of retail funds over the years. On top of this, it’s not easy or convenient (compared to depositing on a CEX) to start earning yield on your crypto assets. Ask any crypto native and they’ll say the same thing, even 2 years after the Celsius implosion.

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Why decentralized platforms?

However, the tides are changing. Focus on crypto UX has never been more relevant and Stacks continues to build to become the most secure blockchain next to Bitcoin. The demand for yield on crypto assets isn’t going anywhere, and users are seeing the true value of on-chain, immutable DeFi apps that can provide this yield.

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Just to give an idea of the demand for trustless yield: Aave, the largest on-chain lending market, has over $10b in crypto assets deposited.

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Launching on-chain BTC yield!

With Zest Protocol’s BTC Earn product - we’re bringing the easiest, the most convenient, and trustless APY to your Bitcoin.

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The way our smart contracts will be structured, it will be impossible for us to disable withdrawals in any way. We will offer the highest on-chain rates, competitive even with top CEXes with similar, centralized products.

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Security is our top priority here at Zest, not only have we been audited by 4 different firms (pending 5), we have also formed the most elite blockchain security team in the entire Stacks ecosystem: The Clarity Alliance.

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Rest assured your BTC will be safe in Zest Protocol while earning the highest possible on-chain yields once our Earn product launches very soon. Bookmark our docs to ensure you have all of the latest details as they’re released!

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And as usual, stay zesty🍊

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