Concerns Over Misleading Bitcoin Locking in BTCFi Ecosystem

Concerns Raised by Yu Feng Regarding BTCFi Practices

According to recent reports from Foresight News, Yu Feng, the founder of Nubit, has raised significant concerns about specific practices within the BTCFi ecosystem. His observations focus on the method of using offline pre-signed transactions, which he argues creates a misleading representation of locked Bitcoin in various protocols.

Misleading Appearance of Locked Bitcoin

Yu Feng noted that many protocols are engaging in practices that do not genuinely secure Bitcoin on the mainnet. Instead of locking Bitcoin securely, these protocols utilize offline pre-signed transactions to create the illusion that funds are locked. This can lead to several implications for users, as it creates a false sense of security.

Inflated TVL Figures: This method allows users to submit multiple pre-signed transactions that reference the same Unspent Transaction Output (UTXO). Consequently, various protocols can report inflated Total Value Locked (TVL) figures, even though the Bitcoin is not securely locked anywhere.
Trust Issues: Such practices can erode trust within the BTCFi ecosystem, as users may feel deceived by the reported figures that do not reflect the actual security of their funds.

Proposed Solutions by Yu Feng

In response to these concerns, Yu Feng has proposed two solutions aimed at establishing a more trustworthy and secure BTCFi environment:

1. Genuine On-Chain Transactions

The first solution emphasizes the need for transactions to be genuinely recorded on the blockchain. By implementing Bitcoin script addresses dedicated to locking funds, protocols can ensure that transactions are verifiable and immutable. This practice would provide users with greater confidence in the security of their investments.

2. Zero-Knowledge Proof Designs

The second solution involves employing zero-knowledge proof designs that enhance both transparency and security in the locking process. This innovative approach would help mitigate the risk of double-spending, thus reinforcing the trust users have in the BTCFi protocols.

Conclusion

Yu Feng's insights into the BTCFi ecosystem shed light on crucial challenges faced by users and developers alike. By addressing these practices through genuine on-chain transactions and advanced cryptographic methods like zero-knowledge proofs, the BTCFi space can work towards a more secure and reliable framework for all participants.