Interlay introduces new protocol for Bitcoin’s reciprocal relationship with DeFi

Interoperability network Interlay has released a 21-page technical whitepaper, titled XCC: Theft-Resilient and Collateral-Optimized Cryptocurrency-Backed Assets, advocating for the imminent development of cross-blockchain interoperability solutions to unlock a plethora of potential within the decentralized finance (DeFi) ecosystem.

Interlay, a Polkadot parachain (DOT), focuses its efforts on creating communication and interaction pathways between Bitcoin’s currency native ecosystem and the larger functionalities of DeFi with networks like Ethereum (ETH), Polkadot and Polkadot.

The new XCC protocol, which serves as an additional layer to XCLAIM and was launched to the market in 2018, allows greater asset sovereignty during cross chain activities like wrapping. It also unifies Bitcoin multisigs with mechanisms that are native to Ethereum networks such as commit chains.

The XCC asset is only available in curated DeFi apps. However, users can choose to switch to the interBTC product if the XCC asset is more convenient. Both services will be available in tandem, expanding the reach of Bitcoin’s DeFi marketplace to a wider consumer audience.

Their assessment states that XCC allows for “any Bitcoin that has been staked over a long period of time and is not intended for movement to essentially “release” it’s collateral.” This can then be “reused” to secure additional, “liquid” BTC.

Alexei Zamyatin, Interlay CEO and co-founder, shared his vision of the future of XCC as it pertains to decentralized adoption and security enhancement.

“interBTC is a decentralized Bitcoin custody that aims to be the equivalent of DAI. The goal was always to have non-custodial BTC DeFi. This is a difficult problem to solve. XCC is a significant step in this direction, finally enabling easy-to use and theft-resistant Bitcoin DeFi.

Related: Interlay seeks to increase Bitcoin’s DeFi potential by introducing a new interoperable bridge

Interlay, a previous Web3 Foundation grant recipient, announced progresses to their wrapped Bitcoin digital asset (kBTC), in mid-March. They also deployed the token onto Kintsugi’s canary parachain Kintsugi.

The move supports the Polkadot parachain protocols Moonriver and Karura, and incites them to prepare for an upcoming deployment across Cosmos or Ethereum within the next calendar year.