Title: Master Protocol: Revolutionizing Bitcoin’s Programmability
Author: NingNing, Independent Researcher
Source: X, @0xNing0x
Master Protocol is an emerging interest rate swap market and yield farming accelerator within the Bitcoin ecosystem. It can be considered as the Pendle of the Bitcoin ecosystem, but it is not simply a fork of Pendle. To truly understand the value of Master Protocol, it is necessary to examine it from the perspective of the BTC-FI value chain.
The narrative of Bitcoin programmability is spreading from the East to the West. With Bitcoin Magazine and top crypto venture firm Polychain advocating for Bitcoin L2 standards, Bitcoin programmability has become a serious new investment track in the Western world. Leading VC/investment DAOs such as Pentera, Coinbase Ventures, Polychain, and Bankless have all invested in projects within this track. Projects like Babylon, Botanix, BOB, and Mezo, which have strong ties to the Western Bitcoin ecosystem, have announced significant funding.
However, we are still in the early stages of the new era of Bitcoin programmability, and there are significant technical primitives and application scenarios that need to be addressed. These problems include how to use BitVm to run fraud proofs/validity proofs and how to address the compatibility between copying from Ethereum and the market demand of Bitcoin ecosystem players.
The core issue of technical primitives is finding a solution that can elegantly inherit the security solutions of Bitcoin L1. The problem with application scenarios is how to explore a blue ocean market that has a competitive advantage over EVM-compatible + smart contract solutions.
There are two major application scenarios for Bitcoin programmability.
The issues of technical primitives and application scenarios are not isolated but interconnected.
Due to the constraints of community consensus, the programmability of Bitcoin scripts and OPCode is currently limited, making it difficult to achieve Turing completeness in the short term. The development direction of Bitcoin programmability can only be rollups and state channels (Lightning Network) as off-chain scaling solutions.
However, Ethereum has already gained a monopoly position in the traditional market of general rollups + smart contract-based DApps and has established a wide moat in terms of developers, users, and market awareness.
Therefore, for Bitcoin programmability projects, the breakthrough lies in the emerging DApp rollup/AppChain paradigm, which provides block space security/economic security for these DApp rollups/AppChains.
Currently, almost all well-known DeFi, NFT, Web3 social, and Web3 gaming projects, including Uniswap and AAVE, are being rebuilt using the DApp rollup/AppChain paradigm. Compared to Ethereum, the Bitcoin mainnet, with its $1 trillion market capitalization, highest decentralization, and strongest block space security, has a significant advantage.
Furthermore, Bitcoin Restaking gives BTC the ability to earn interest. Compared to financial interest (DeFi/CeFi lending) models, BTC’s native interest-earning ability has stronger positive externalities and can provide a more robust security infrastructure for DApp rollups/AppChains to thrive.
Compared to Ethereum’s Restaking protocols Eigenlayer, Karak, and Symbiotic, the Bitcoin Restaking protocol Babylon needs to address the additional issues of self-custody and staking-slash on the Bitcoin mainnet. In fact, these two issues are also the core problems that Bitcoin programmability PoS chain extension solutions like Botanix and Mezo aim to solve.
To mitigate slash risk and achieve instant liquidity for Wrap interest-earning assets, there is a market demand for Liquidity Staking (LST). Therefore, it is imperative to establish the infrastructure of the Restaking protocol to allow DApp rollups/AppChains to utilize Bitcoin’s block space security/economic security.
When the LST and Restaking protocols within the Bitcoin ecosystem grow explosively, an interest rate swap market that prices Wrap interest-earning assets for the Bitcoin ecosystem becomes crucial, and Master Protocol occupies this ecological niche.
Master Protocol is currently in the testnet phase, supporting Botanix’s mpBTC and Bouncebit’s stBBTC (in grayscale testing), with plans to support Babylon and BitLayer’s interest-earning assets in the future. Users can apply for testnet mpBTC through the faucet. Similar to Pendle’s implementation mechanism, Master Protocol has three types of tokens: MSY (a standardized packaging token for interest-earning assets), MPT (principal token), and MYT (interest token).
After packaging interest-earning assets into MSY tokens, users can obtain MPT tokens with a lock-up period and MYT tokens that can be immediately sold on AMM DEX, allowing them to receive interest on their assets in advance. Of course, users can also directly purchase MYT tokens on AMM DEX to participate in the value discovery process of native tokens in interest-earning asset protocols and potentially earn higher returns.
Screenshot of Master Protocol’s testnet product
At the market strategy level, Master Protocol stimulates community advocates and interest rate swap market traders through equity pass NFTs and transactional point rewards, thereby increasing the adoption of the protocol within the Bitcoin ecosystem.
In summary, for the current Bitcoin ecosystem, new asset issuance markets like Ordinals and Runes have limited scale (~$10B) and face strong competition from Ethereum’s network effects, leaving little room for imagination. In contrast, the $1 trillion BTC yield market represents a vast blue ocean. Restaking protocols have stronger positive externalities within the BTC yield market, providing a more robust security infrastructure for DApp rollups/AppChains to thrive. Master Protocol plays a crucial role in pricing the Wrap interest-earning assets of Restaking protocols, occupying a key ecological position. However, Master Protocol has a limited time window and needs to establish its own moat before Pendle expands into the Bitcoin ecosystem. Therefore, the Master Protocol team is actively negotiating collaborations with Babylon and Bouncebit, with plans to launch the mainnet version in June.
