David Seroy (Bitcoin Dave) discusses how Bitcoin can evolve from digital gold to digital credit by rebuilding the repo market on-chain using layer-2 technology like BitVM and ZK rollups, enabling Bitcoin-backed fixed-income instruments. He argues that creating a Bitcoin-backed collateralized loan obligation (CLO) ecosystem could unlock the next step function in Bitcoin's value.
Summarized by Podsumo
Bitcoin Dave outlines a vision to rebuild the $12 trillion repo market on Bitcoin using layer-2 technology (BitVM/garbled circuits) and Morpho Midnight, creating Bitcoin-backed fixed-income instruments.
The key innovation is Morpho Midnight's ability to add duration to lending, allowing dollar lenders to earn higher yields without taking on riskier collateral—shifting from variable to fixed-maturity loans.
A 'Bitcoin CLO' (collateralized loan obligation) would be the ultimate pristine collateral on-chain, offering the best risk-adjusted yield and enabling a flywheel of leverage that compresses borrowing costs.
Dave contrasts his on-chain approach with Michael Saylor's Strategy (STRK), arguing Bitcoin CLOs have more resilience and less counterparty risk than corporate perpetual preferreds.
Alpen Labs aims to launch its EVM layer-2 (called Alpen EVM) with a middleware layer 'Strata' in fall 2025, targeting partners like Coinbase to distribute Bitcoin-backed borrowing products.
"I think the thesis of Bitcoin is pretty well established... What is still up for debate is what's next and beyond after that. I do think Bitcoin needs programmability, maybe not on layer one, but in these more expressive layer twos."
"You can rebuild a superior form of repo on top of Bitcoin. People will see that the economics of what you can build on chain with a Bitcoin-backed repo system is superior to what the economics are off-chain in TradFi."
"If you want to try to bring repo on chain, in my opinion, this is the only path."