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The cheapest way to borrow against your Bitcoin

· 3 min read
Usamaro
Usamaro
Marketing Bunny

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This week marks a major milestone as we officially unveil Uncap. We are building the liquidity layer for BTCFi on Starknet, as we believe it to be the place where the BTC economy will flourish.

Uncap is composed of two core components: USDU, a BTC-backed stablecoin, and a powerful liquidity engine that creates a flywheel for the entire ecosystem.

USDU: The Bitcoin backed stablecoin​

Uncap's first product is USDU. It is the decentralized stablecoin built by rewriting the entire Liquity v2 protocol from scratch in Cairo, optimized for Starknet. While the underlying protocol is battle-tested, what makes USDU unique is its collateral: instead of ETH, it uses Bitcoin.

USDU is designed with a clear progression toward the most native Bitcoin collateral possible. We'll launch with existing BTC wrappers to establish the protocol, then rapidly transition to BitVM-powered BTC as this trust-minimized infrastructure becomes available. Our ultimate goal is backing USDU with fully native Bitcoin through covenant-based solutions like OP_CAT, creating the most trustless foundation for BTCFi.

This evolution reflects our commitment to Bitcoin's core principles: as the ecosystem develops more native solutions, USDU will always adopt the most trust-minimized form of Bitcoin collateral available.

This is the only Liquity-like protocol that focuses on Bitcoin, the hardest asset on Earth, and the only one on Starknet. Thanks to user-set interest rates, a core feature of the Liquity v2 model, users can borrow at very low, competitive rates, enabling the cheapest way to borrow against Bitcoin.

The flywheel for BTCFi​

While we are proud of the achievement, USDU is the foundation stone, not the finished building. To ensure deep, sustainable liquidity, we are building a powerful liquidity engine on top of Ekubo, the leading DEX on Starknet.

This engine creates a virtuous cycle, a flywheel, at the center of BTCFi:

  1. Borrowing fuels liquidity: A portion of the interest paid by USDU borrowers is automatically directed to incentivize liquidity pools on Ekubo for USDU pairs (e.g., WBTC/USDU).

  2. Deep liquidity enables utility: This creates a robust and reliable market, making USDU highly usable for trading and earning yield across the ecosystem.

  3. Trading fees strengthen the protocol: Fees generated from this trading activity are then used to grow the protocol's treasury, which in turn can mint more USDU to further deepen on-chain liquidity.

This flywheel is designed to make USDU the most liquid and useful BTC-backed stablecoin in DeFi. We are working on our initial integrations with top protocols to unlock these new yield opportunities.

Our immediate next step is to go through thorough audits and prepare for launch. The groundwork is laid, but the journey to unleash Bitcoin's full DeFi potential begins now.

We invite you to join us.