Adeniyi Abiodun: Bitcoin will become a key collateral instrument in DeFi by 2026, challenges of Bitcoin ETFs, and innovations in native Bitcoin lending | Unchained

Key takeaways

• Bitcoin is expected to become a significant collateral instrument in DeFi by 2026.
• The introduction of Bitcoin ETFs in 2024 did not generate yield due to custodial lock-in.
• Bitcoin serves as a strong store of value but is less effective for payment systems.
• Hashi protocol enables native Bitcoin lending without the need for wrappers or triggering tax events.
• Direct borrowing using Bitcoin can be achieved without creating derivative assets.
• A trust-minimized approach to decentralized lending avoids tax implications.
• The Sway network enhances security with multisig accounts requiring majority approval for transactions.
• Institutional clients face challenges with DeFi due to complex trust assumptions.
• Hashi was developed to address the specific needs of institutional clients in DeFi.
• DeFi offers a platform for traditional financial institutions to leverage Bitcoin effectively.
• The integration of Bitcoin into DeFi could unlock significant liquidity potential.
• Institutional adoption of DeFi requires simplified trust frameworks to overcome barriers.

Guest intro

Adeniyi Abiodun is co-founder and Chief Product Officer at Mysten Labs, the company behind the Sui blockchain. He previously served as a Product Lead at Meta, where he contributed to the Diem project and crypto infrastructure initiatives including the Move programming language. Under his product leadership, Sui has evolved into a major platform focused on scalability and developer experience, recently launching Hashi to unlock Bitcoin liquidity through trust-minimized protocols.

Bitcoin’s evolving role in DeFi

• Twenty twenty twenty twenty six is gonna be a year where bitcoin truly becomes collateral instrument especially in defi.

  — Adeniyi Abiodun

• Bitcoin is anticipated to play a pivotal role as collateral in decentralized finance by 2026.
• The use of Bitcoin as collateral allows for liquidity creation without selling the asset.

• Bitcoin proved there’s a strong store value it had not been great for payments but bitcoin as collateral instrument creates liquidity without selling.

  — Adeniyi Abiodun

• The shift towards Bitcoin as a collateral instrument marks a significant change in its utility.
• Understanding Bitcoin’s current state in DeFi is crucial for anticipating future developments.
• The implications of Bitcoin’s use as collateral could reshape decentralized finance.
• Bitcoin’s evolving role in DeFi highlights its potential beyond being a store of value.

Challenges with Bitcoin ETFs

• In 2024 what we really had was a year where we had a bunch of bitcoin etfs launched none of that could actually earn any yield all of it was pretty much locked into custodians.

  — Adeniyi Abiodun

• Bitcoin ETFs introduced in 2024 were unable to provide yield due to custodial restrictions.
• The disconnect between institutional products and yield generation is a critical issue.
• Understanding the Bitcoin ETF landscape is essential for grasping its market impact.
• The lack of yield from Bitcoin ETFs highlights limitations in current financial products.
• Institutional adoption of Bitcoin ETFs requires addressing custodial and yield challenges.
• The introduction of Bitcoin ETFs did not meet expectations for yield generation.
• Institutional products must align with market needs to enhance Bitcoin’s financial utility.

Innovations in Bitcoin lending

• Hashi is a means of enabling native bitcoin without any form of wrappers or any form of you know second or third order trust assumptions enable you to actually formally lend bitcoin without having a tax event.

  — Adeniyi Abiodun

• Hashi protocol allows for native Bitcoin lending without wrappers or tax events.
• The mechanism enables direct borrowing using the Bitcoin network without derivatives.

• actually taking bitcoin on the existing bitcoin network you lock it into an mpc wallet on chain in an existing network never leaving the bitcoin network itself you don’t create any derivative that derivative assets of any form and then that allows you effectively to originate loans directly on a suite blockchain instantaneously…

  — Adeniyi Abiodun

• A trust-minimized approach to decentralized lending avoids triggering tax events.
• The new system leverages Bitcoin’s security for decentralized lending.
• Understanding traditional Bitcoin lending and tax implications is crucial for grasping Hashi’s impact.
• Hashi differentiates itself by eliminating wrappers and trust assumptions in lending.

Security enhancements in the Sway network

• the same protocol that governs billions of dollars in the sway network ensuring the safety of the sway network that can process 100 of thousands of transactions per second is effectually using the same cryptographic primitives that secures a bit bit the sway network to secure that mpc network on a bitcoin network directly…

  — Adeniyi Abiodun

• The Sway network uses a multisig account to enhance security through majority approval.
• Cryptographic methods ensure the safety of the Sway network’s transactions.
• The network can process hundreds of thousands of transactions per second securely.
• Understanding the technical structure of the Sway network is essential for grasping its security mechanisms.
• The use of multisig accounts in the Sway network highlights its commitment to security.
• The Sway network’s security measures are critical for its operation and trustworthiness.
• The integration of cryptographic methods secures the Sway network’s transactions effectively.

Institutional challenges in DeFi

• They always got stuck when it came to not understanding fully the end to end trust assumptions that need to be made.

  — Adeniyi Abiodun

• Institutional clients struggle with DeFi due to complex trust assumptions.
• The need for simplified trust frameworks is crucial for institutional adoption.
• Understanding the challenges faced by institutions in DeFi is essential for addressing barriers.
• Hashi was built specifically to address the needs of institutional clients in DeFi.

• We built hashi specifically for institutions so it took a lot of institutional input for us to come up with the ideology to solve that problem.

  — Adeniyi Abiodun

• Institutional input was crucial in developing solutions tailored to their needs.
• Overcoming trust challenges is key to unlocking institutional participation in DeFi.

DeFi’s potential for traditional finance

• This is giving you that same platform where traditional centralized issue and entities like bitgo can leverage the decentralized nature of what sui offers to originate loans for their clients.

  — Adeniyi Abiodun

• DeFi provides a reliable platform for traditional financial institutions to leverage Bitcoin.
• The integration of decentralized systems into established finance enhances operations.
• Understanding the relationship between DeFi and traditional finance is crucial for leveraging Bitcoin.
• DeFi’s potential to enhance traditional finance operations highlights its transformative impact.
• The platform allows traditional entities to originate loans using decentralized systems.
• DeFi’s integration into traditional finance could unlock new opportunities and efficiencies.
• The collaboration between DeFi and traditional finance showcases the evolving financial landscape.