Hashi, a new Bitcoin-based finance protocol, is set to launch on the Sui blockchain with backing from major crypto institutions like BitGo, Bullish, and FalconX. The protocol aims to revolutionize Bitcoin lending by offering native BTC holders a way to earn yield through onchain lending and borrowing, a segment that currently represents only a tiny fraction of Bitcoin’s market.
The development of Hashi is primarily led by Mysten Labs, the core contributor to the Sui blockchain. Initially, the protocol will focus on BTC-backed lending, allowing users to borrow stablecoins against their Bitcoin holdings. Institutions are expected to provide liquidity at launch, marking a significant step towards integrating Bitcoin into the decentralized finance (DeFi) ecosystem.
Addressing Bitcoin’s DeFi Limitations
A spokesperson for the Sui Foundation highlighted that Hashi is designed to address structural limitations that have hindered Bitcoin’s adoption in DeFi. These limitations include reliance on intermediaries and a lack of transparency around collateral. The protocol introduces onchain verification and programmatic collateral management, which are crucial for institutional participation.
We are replacing ‘trust me’ workarounds with onchain verification, ensuring that all transactions are transparent and verifiable.
By enabling native BTC to be used directly in onchain financial services, Hashi brings transparency and automated collateral management to Bitcoin finance. This is a significant advancement, as Bitcoin remains largely unused in DeFi, with only about 0.22% of its supply, or roughly $3.07 billion, currently deployed in DeFi protocols, according to onchain data from DefiLlama.
Partnerships and Security Measures
The rollout of Hashi includes participation commitments from custodians and infrastructure providers such as Ledger and Cubist, along with Sui-based DeFi protocols that will support lending, custody, and collateral management. The protocol will use a combination of multi-party computation custody and smart contracts on Sui to manage collateral and facilitate lending. Audits and formal verification are planned before the mainnet launch.
Additional features of Hashi include insurance coverage for BTC collateral and plans for issuing Bitcoin-backed bonds. These features are designed to enhance the security and reliability of the platform, making it more attractive to both retail and institutional users.
Recovery of Bitcoin-Backed Lending
Bitcoin-backed lending markets suffered a significant blow following the collapse of crypto lenders BlockFi and Celsius Network in 2022. The practice of rehypothecation, or reusing customer collateral to generate additional loans, amplified systemic risk and led to substantial losses. However, interest in Bitcoin-backed lending has begun to recover as regulators and companies explore models that emphasize transparency, collateral management, and reduced counterparty risk.
For example, in June, the US Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to explore whether cryptocurrencies can be counted as borrower reserves in mortgage risk assessments. This marks a shift toward recognizing digital assets like Bitcoin without requiring conversion into US dollars. Private companies are also building Bitcoin lending products, such as Strike’s updated Bitcoin-backed loan agreement, which emphasizes that user collateral is held in segregated wallets and is not rehypothecated.
Looking Forward
Hashi’s launch on the Sui blockchain represents a significant milestone in the integration of Bitcoin into the DeFi ecosystem. By addressing the structural limitations of Bitcoin in DeFi and introducing innovative features like onchain verification and programmatic collateral management, Hashi is poised to attract a broader range of users and institutions. As the protocol develops and gains traction, it has the potential to unlock new opportunities for Bitcoin holders and contribute to the growth of the DeFi space.
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