HOT Protocol is poised to revolutionize the decentralized finance (DeFi). At least one future change is going to greatly reduce the costs of verifying cryptographic proofs for light clients. This sharding innovation allows for much cheaper scaling of light clients - an important breakthrough for inclusivity. The protocol employs NEAR Chain Abstraction to enhance the security of its nodes. This development opens the hosting environment for private, secure and inexpensive validations of Bitcoin and Zcash transactions. HOT Protocol addresses the security risks associated with wrapped Bitcoin (wBTC). In the process, it hopes to free trillions of Bitcoin-based liquidity to be deployed within DeFi’s nascent ecosystem — significantly increasing BTC’s long term value.

Scaling Light Clients Affordably

HOT Protocol uses a sharding design which makes costs predictable and affordable regardless of massive user growth. This design is important for light clients, which need to verify cryptographic proofs in order to confirm the legitimacy of transactions. Though traditional approaches to verification are possible, they are cost prohibitive at scale once the user base grows and transaction volume expands.

The protocol’s architecture is designed to significantly reduce the computational requirements on light clients. AIR approach HOT Protocol allows to decentralized the verification process to multiple nodes. This method helps them keep costs down, giving them a real-world solution to scaling high-cost DeFi applications. This design allows light clients to scale cheaply, serving more users as demand grows without cutting corners on security or performance.

Enhancing Security with NEAR Chain Abstraction

HOT Protocol is advancing the state of the art from traditional Multi-Party Computation (MPC). It takes advantage of NEAR Chain Abstraction, which massively increases the resilience of each node holding a piece of the private key. This new layer of security is very important in safeguarding the verification process from any possible attacks and vulnerabilities.

NEAR Chain Abstraction does more than enhance security. NEAR Chain Abstraction enhances reliability. This improvement maintains the connectedness of the system, even if many individual nodes are removed. It further hardens the verification process against attempts by bad actors to game the system and obtain verification.

Transforming Bitcoin in DeFi

Bitcoin is brought into the DeFi world through a process called “wrapping” BTC. During this procedure, Bitcoin becomes temporarily locked up as a token backed by its value is created on a smart contract blockchain such as Ethereum or Solana. Assets like wrapped Bitcoin, such as wBTC, allow Bitcoin holders to maximize the utility of their assets. Though seemingly small, this change makes BTC a much more productive resource in the DeFi ecosystem.

Despite the benefits presented by wBTC, its implementation brings security vulnerabilities. BitGo is responsible for controlling the BTC used as collateral to mint wBTC. This establishes an intermediary point of concentrated power within the process. HOT Protocol addresses these risks directly. It allows for secure and decentralized verification of Bitcoin transactions and therefore reduces reliance on centralized custodians. It increases the overall security of Bitcoin in the DeFi space.

Hundreds of millions — perhaps billions — of dollars in Bitcoin-based liquidity could so easily be poured into the DeFi ecosystem. This highly secure, low-cost verification method would dramatically increase the value of BTC. HOT Protocol improves how Bitcoin can be used in DeFi, making it easier and safer. Aside from presenting new financial opportunities to Bitcoin holders, this advancement will help accelerate the implementation of decentralized finance.