Mysten Labs, the core contributor to the Sui blockchain, announced a new Bitcoin (BTC) lending and yield protocol called Hashi on Wednesday, with early participation commitments from BitGo, Bullish, FalconX, Ledger, Fordefi, Cubist, and Erebor Bank.
The protocol is designed to let Bitcoin holders borrow stablecoins and earn yield against native BTC on-chain - without relying on wrapped tokens or centralized intermediaries.
Less than 0.5% of Bitcoin's total supply is currently deployed in decentralized finance, according to Sui's announcement, reflecting longstanding structural barriers including opaque collateral management, rehypothecation risk, and reliance on wrapped assets.
Hashi is Mysten Labs' attempt to address those barriers through on-chain verification and programmatic collateral management built on Sui.
How Hashi Works
The protocol will initially focus on BTC-backed lending, allowing users to borrow stablecoins against Bitcoin holdings while institutional partners supply liquidity.
Hashi will use multi-party computation custody and Sui smart contracts to manage collateral, replacing external trust assumptions with on-chain settlement. A devnet is expected in the near term, with a mainnet launch planned later in 2026. Audits and formal verification are scheduled before any public launch.
Institutional partners are expected to handle custody, infrastructure, and capital markets functions. The system also includes plans for insurance coverage on BTC collateral and Bitcoin-backed bond issuance, though both remain pre-launch.
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Why Bitcoin DeFi Has Struggled
Bitcoin lending markets contracted sharply after the 2022 collapse of BlockFi and Celsius Network, where rehypothecation - the practice of reusing customer collateral to generate additional loans - amplified losses and destroyed user confidence.
Recovery has been gradual. In January, Coinbase relaunched Bitcoin-backed loans in the U.S., letting eligible users borrow up to $100,000 in USDC against held BTC. Strike has emphasized segregated, non-rehypothecated collateral in its loan agreements, and Ledn operates BTC-backed loans with similar risk controls.
Hashi enters a recovering but still cautious market. Institutional participants appear to be the intended first users, with retail access expected as liquidity and audit infrastructure matures.
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