Hashi Bitcoin DeFi Protocol Debuts on Sui Blockchain With Support From BitGo and FalconX
The new protocol aims to unlock lending, borrowing, and yield generation opportunities for native Bitcoin via decentralized onchain financial infrastructure.
Hashi, a Bitcoin-focused decentralized finance protocol, has made its debut on the Sui blockchain, securing early participation pledges from prominent cryptocurrency institutions like BitGo, Bullish, and FalconX in advance of its anticipated launch later in the year.
As stated in an announcement provided to Cointelegraph, Hashi aims to enable Bitcoin (BTC) holders to generate yield on their native Bitcoin assets via onchain borrowing and lending mechanisms, focusing on a market segment that presently accounts for only a minor portion of Bitcoin's total capitalization.
Mysten Labs, the primary development team behind the Sui blockchain, built the protocol, which will concentrate initially on lending backed by BTC collateral. This will allow participants to secure stablecoin loans against their Bitcoin positions, while institutional players are anticipated to provide the necessary liquidity at the time of launch.
A representative from the Sui Foundation informed Cointelegraph that the protocol seeks to overcome structural constraints that have previously hindered Bitcoin's adoption in the decentralized finance ecosystem, especially dependencies on third-party intermediaries and insufficient transparency regarding collateralization.
The platform introduces onchain verification mechanisms and automated collateral management systems intended to enhance the suitability of BTC lending for institutional participants. "We are replacing 'trust me' workarounds with onchain verification," the spokesperson said.
Hashi will enable native BTC to be used directly in onchain financial services without relying on wrapped or synthetic assets, bringing transparency and automated collateral management to Bitcoin finance, components that institutions require to use it at scale.
Bitcoin continues to see minimal utilization in the decentralized finance space, with approximately 0.22% of its total supply, equivalent to roughly $3.07 billion, presently allocated to decentralized finance (DeFi) protocols, based on the announcement and onchain data sourced from DefiLlama.
The launch initiative also features participation commitments from custody providers and infrastructure companies including Ledger and Cubist, alongside Sui-native DeFi protocols that are anticipated to facilitate lending operations, custody solutions, and collateral management functions when the platform goes live.
Hashi indicated it will utilize a hybrid approach combining multi-party computation custody technology and smart contracts deployed on Sui to oversee collateral and enable lending activities, with comprehensive audits and formal verification processes scheduled to occur prior to the official launch.
Further features described in the roadmap include insurance protection for BTC collateral deposits and intentions to issue Bitcoin-backed bond instruments. The project remains under active development, with a developer network (devnet) anticipated in the near future and a mainnet deployment scheduled for later in the current year.
Bitcoin-backed lending rebounds after post-FTX collapse
Markets for Bitcoin-backed lending contracted dramatically in the aftermath of the 2022 failures of cryptocurrency lending platforms BlockFi and Celsius Network, where the practices of rehypothecation and non-transparent risk management frameworks resulted in substantial losses for users.
Rehypothecation, the practice of leveraging customer collateral to create additional lending positions, magnified systemic vulnerabilities during that timeframe and played a role in eroding trust across the broader crypto lending industry.
Over the past few years, nonetheless, appetite for Bitcoin-backed lending services has started to rebound as both regulatory authorities and private enterprises investigate frameworks that prioritize transparency, robust collateral oversight, and minimized counterparty exposure.
In June, the US Federal Housing Finance Agency issued guidance to Fannie Mae and Freddie Mac to investigate whether cryptocurrency holdings can qualify as borrower reserves when conducting mortgage risk evaluations, representing a notable shift toward acknowledging digital assets such as Bitcoin without mandating their conversion into US dollars.
Private sector firms are simultaneously developing Bitcoin lending solutions. In June, Jack Mallers said Strike had updated its Bitcoin-backed loan agreement to state that user collateral is held in segregated wallets and is not rehypothecated, "never has been, never will be," according to a post on X.
In January, Coinbase reintroduced Bitcoin-backed loans in the United States, allowing eligible users to borrow up to $100,000 in USDC against BTC held on the platform.
Additional firms, including Ledn, similarly provide lending services secured by Bitcoin collateral while highlighting more stringent custody protocols and risk management controls.