London blockchain venture builder Coinsilium (AQSE:COIN) is pivoting into a surging growth industry.
And the market is responding, with shares advancing by more than 10% in the last two weeks alone on rising volume.
The company has in its hands the world of decentralised finance, or DeFi for short.
The numbers involved are scarcely believable as retail and institutional capital floods in.
In just the last 30 days, the total value in these new financial products has more than doubled to more than $9 billion.
Coinsilium is moving to profit here by investing in the infrastructure that underpins not just DeFi, but an entire emerging industry.
Bitcoin booms again
As central banks switch from cautious inflation targets to unfettered trillion-dollar money-printing programmes, ‘safe haven’ stores of value like gold and cryptocurrencies have been the biggest beneficiaries.
And cryptocurrency is deep in the throes of a new bull market. That’s been shown as the price of Ethereum just hit a 19-month high.
Meanwhile, the Bitcoin price has stabilised above $11,500 per coin, surging 110% since March.
That makes it one of the world’s best-performing assets. Far beyond the 38% added to the gold price.
Analysts have put a near-term $16,000 price target on the world’s largest cryptocurrency.
Smart contracts, smarter business
The first breakout star of DeFi is cryptocurrency lending.
All loans are carried out automatically by what are called smart contracts — pieces of code that stipulate the terms of loans and how and when they must be paid back.
Smart contracts are already part of English law. A panel of top UK judges and regulators confirmed that they constitute binding legal contracts back in May 2019.
So there is growing faith in what has often been something of a regulatory Wild West for investors.
And this is where Coinsilium comes in.
The firm began a JV with Singapore tech firm IOV Labs in January 2020 to promote the adoption of the RSK blockchain.
RSK is building projects that use Bitcoin smart contracts.
Most smart contracts are currently based on Ethereum. But there is a huge gap in the market for smart contracts based on Bitcoin.
And there are a near-infinite number of potential uses for Bitcoin smart contracts.
For example, California’s prime energy agency is now trialing RSK’s Bitcoin smart contracts as a way to bring more transparency and liquidity to carbon credit trading.
As with other smart contract projects, auto-executing code sets out the terms and conditions of each carbon credit trade.
Digital tokens represent a company’s share in the process.
“Today carbon credit trading is not digitized,” explains Eduardo Javier Munoz, CEO of one of the businesses taking part in the pilot. “It is a very unconventional market. Now it will be easier to hold [credits] and trade them.”
Digitizing carbon credit reporting creates new opportunities for businesses to redeem these credits but also makes participation much cheaper.
The bridge between old and new
RSK builds products using Bitcoin smart contracts.
What is crucial to the growth of this business is a key feature called an interoperability bridge.
RSK’s developers have managed to link the Bitcoin and Ethereum blockchains together so that smart contracts work well on both platforms.
When a user transfers any token, the bridge’s smart contract locks the original and creates a corresponding amount of new tokens on the other blockchain. Ethereum-based tokens can be transformed into RSK’s RRC20 tokens, and back the other way.
“Interoperability has been a cornerstone of the RSK vision from the start. We believe being able to offer Bitcoin’s benefits to Ethereum users and to connect these respective developer communities is a crucial step for the blockchain ecosystem as a whole.” — Adrian Eidelman, RSK Strategist, IOV Labs
Bitcoin and Ethereum are the two largest and most-used blockchains in existence, but processes tend to remain isolated and segregated to each network.
As industry website Coindesk notes, interoperability makes it much easier for projects to operate on different blockchains and take advantage of things like faster transactions speeds and lower costs.
Projects can cater to a broader base of users who would otherwise remain siloed in closed networks. So it is a huge usability upgrade.
Fast growth, more uses
Those utilising RSK’s model include Bitcoin stablecoin protocol Money on Chain. The project says it will use the RSK Bitcoin-Ethereum bridge to cross its stablecoins into the Ethereum ecosystem.
“Today, the advantages of building Decentralized Finance [DeFi] applications for Bitcoin on top of the RSK Network are far superior in terms of security and other features compared to putting it on top of Ethereum.” – Max Carjuzaa, Money on Chain co-founder
Making the system blockchain agnostic opens up a vast potential new market and user base for smart contracts as a whole.
Effectively, people who own Bitcoin can use their holdings in RSK to interact with Ethereum-based smart contracts.
And there are far more retail and institutional investors who own Bitcoin than Ethereum.
Bitcoin dominates the cryptocurrency market. There’s a reason why it is used as shorthand for the entire industry and the most easily recognisable digital asset.
Fidelity’s 2020 Asset Management survey found 36% of large US and European institutions, including hedge funds, investment advisors and pension funds, own digital assets. 25% hold BTC, while 11% hold ETH.
That means there is a huge amount of untapped power in opening up smart contract projects to Bitcoin owners.
AndCoinsilium’s link with RSK gives it direct access to the largest growth area of this fast-moving trend.