Interlay is raising $3 million to connect Bitcoin (BTC) to other blockchains. This funding contributes to the development of decentralized finance (DeFi), supporting interoperability between its protocols.
Interlay: back to basics to understand the issues
The Interlay project, which aims to promote the interoperability of DeFi, has just raised $3 million, a fund that will allow it to continue its development.
Interlay was co-founded by Alexei Zamyatin and Dominik Harz, 2 researchers from Imperial College London, in the field of blockchain. The project defends the idea that the scalability of DeFi relies in part on the interoperability of its protocols. However, most blockchains have not been designed with this in mind, making some cross-chain communication difficult or simply impossible.
Even atomic swaps, which consist in exchanging assets from 2 different blockchains in peer-to-peer mode on the basis of a smart contract, require in practice an intermediary – traditionally an exchange – to guarantee their success.
Interlay then imagined a reward-based system, like Bitcoin, to solve this problem. The project developed Xclaim to enable truly decentralized interoperability without financial risk. Xclaim was first introduced in 2018. Its users use it to create 1:1 backed assets to existing cryptocurrencies, similar to Wrapped Bitcoins (wBTC) on Ethereum (ETH).
Interlay justifies this use of Xclaim, describing it as a framework:
- Dynamic and permissionless: any user of the system can, easily and without needing permission, become their own intermediary;
- Financially sound: intermediaries give guarantees and cryptographically prove their good behavior. Theft attempts are automatically sanctioned and users are refunded;
- Fast and efficient: Xclaim is, according to its developers, “95% faster and 65% cheaper” than atomic swaps based on time-locked hash contracts (HTLC).
A first marriage between Bitcoin and Polkadot
This recent round of funding will allow for the development of Interlay’s interBTC platform, which gives its users the ability to invest, earn and pay with Bitcoin on any blockchain.
This interoperability will initially be implemented on Polkadot (DOT), but will be extended to other blockchains, including Ethereum (ETH) and Cosmos (ATOM). Xinshu Dong, a partner at IOSG Ventures, who led this round, noted that:
“Connecting Polkadot and Bitcoin in a secure and efficient way is the first strategic step for Interlay.”
Interlay received financial support from Blockchain.com, Launchub Ventures, CMS Holdings, KR1, Hypersphere and Zeeprime, as well as business angels, such as Bitmain co-founder Jihan Wu and Blockchain.com CEO Peter Smith.
Will Interlay help make Bitcoin the future of decentralized finance, just like Jack Dorsey? In reality, DeFi is too heavy for the shoulders of a single blockchain. Only a meta-blockchain is powerful enough to adequately support the growth of the industry.