Title: Master Protocol: Pioneering Bitcoin’s Programmability
Author: NingNing, Independent Researcher
Source: X, @0xNing0x
Master Protocol is an emerging interest rate swap market and yield farming accelerator within the Bitcoin ecosystem. To truly understand the value of Master Protocol, it is necessary to observe it from the perspective of the BTC-FI value chain.
The narrative of Bitcoin programmability is spreading from the East to the West. With Bitcoin Magazine and top crypto venture Polychain leading the way in setting standards for Bitcoin L2, programmability has become a serious new investment avenue in the Western crypto space. Top-tier VC/investment DAOs such as Pentera, Coinbase Ventures, Polychain, and Bankless have all invested in incubating projects in this field. Projects like Babylon, Botanix, BOB, and Mezo, which have deep roots in the Western Bitcoin ecosystem, have announced significant funding rounds.
However, we are still in the early stages of the new era of Bitcoin programmability, and there are significant technical primitives and application scenarios that need to be addressed. These problems include how to use BitVm to run fraud proofs/validity proofs and how to align the compatibility of copying from Ethereum with the market demands of Bitcoin ecosystem players.
The core of the technical primitives problem lies in finding a simple and elegant solution that inherits the security of Bitcoin L1. The application scenario problem is how to explore a blue ocean market where Bitcoin programmability has an advantage over EVM-compatible smart contract solutions.
Bitcoin programmability has two major application scenarios, and the problems of technical primitives and application scenarios are interconnected.
Given that the programmability of Bitcoin scripts and OPCode is constrained by community consensus, achieving Turing completeness in the short term is difficult. The development direction of Bitcoin programmability can only be Rollup and state channels (Lightning Network) as off-chain scaling solutions.
However, Ethereum has already gained a monopoly position in the traditional market of general Rollup+smart contract Dapps and has established broad moats in terms of developers, users, and market awareness.
Therefore, for Bitcoin programmability projects, the breakthrough lies in the emerging Dapp Rollup/AppChain paradigm, providing block space security/economic security for these Dapp Rollup/AppChains.
Currently, almost all well-known DeFi, NFT, Web3 social, and Web3 gaming projects, including Uniswap and AAVE, are being rebuilt using the Dapp Rollup/AppChain paradigm. In comparison to Ethereum, the Bitcoin mainnet, with a trillion-dollar market cap, the highest decentralization, and the strongest block space security, has significant advantages.
Moreover, Bitcoin Restaking empowers BTC with interest-earning capabilities. Compared to financial interest (DeFi/CeFi lending) models, BTC’s native interest-earning capabilities have stronger positive externalities, providing a stronger security infrastructure for the prosperity of Dapp Rollup/AppChains.
Compared to Ethereum’s Restaking protocols Eigenlayer, Karak, and Symbiotic, Bitcoin’s Restaking protocol Babylon needs to address the issues of self-custody and Staking-Slash on the Bitcoin mainnet. In fact, these two issues are also the core problems that Bitcoin programmability PoS chain extension solutions such as Botanix and Mezo aim to solve.
To share the Slash risk and obtain instant liquidity for Wrap interest-earning assets, there is a market demand for Liquidity Staking (LST). Therefore, the infrastructure development of the Restaking protocol is essential for Dapp Rollup/AppChains to utilize Bitcoin’s block security space/economic security.
When the LST and Restaking protocols of the Bitcoin ecosystem grow rapidly, an interest rate swap market that prices Wrap interest-earning assets for the Bitcoin ecosystem becomes crucial, and Master Protocol occupies this ecological niche.
Master Protocol is currently in the testnet phase and supports Botanix’s mpBTC and Bouncebit’s stBBTC (in grayscale testing). Future plans include support for Babylon and BitLayer’s interest-earning assets. Users can apply for testnet mpBTC through a faucet. Similar to Pendle, Master Protocol has three types of tokens: the standardized packaged token MSY for interest-earning assets, the principal token MPT, and the interest token MYT.
After packaging interest-earning assets into MSY tokens, users can obtain MPT tokens with a lock-up period and MYT tokens that can be immediately sold on AMM DEX, thus gaining interest in advance. Of course, users can also directly buy MYT tokens on AMM DEX to participate in the value discovery process of the underlying interest-earning asset protocol, thereby gaining higher potential returns.
At the market strategy level, Master Protocol stimulates community referrals and trading activity in the interest rate swap market through equity pass NFTs and transaction point rewards, thereby increasing the adoption of the protocol within the Bitcoin ecosystem.
In conclusion, for the current Bitcoin ecosystem, new asset issuance markets like Ordinals and Runes have limited scale (~$10B) and face strong network effects competition from the Ethereum ecosystem, leaving little room for imagination. On the other hand, the BTC yield market, with a potential scale of $1 trillion, is a vast blue ocean. Restaking protocols have stronger positive externalities in the BTC yield market, providing a stronger security infrastructure for Dapp Rollup/AppChains to thrive. Master Protocol plays a crucial role in pricing these Wrap interest-earning assets for Restaking protocols, occupying a key ecological niche. However, Master Protocol has a limited window of time and needs to establish its moat before Pendle expands into the Bitcoin ecosystem. Therefore, the Master Protocol team is actively negotiating partnerships with Babylon and Bouncebit and plans to launch the mainnet version in June.
