The hardest part might be getting hardline bitcoiners – sometimes known as “maximalists” or “maxis” – to use the new protocol since it’s built atop the Ethereum blockchain. Target users for the platform, described as a “blockspace markets protocol,” could include traders, mining pools and foundations.
“While we recognize that Bitcoin maxis may initially hesitate to use an Ethereum-based solution, our primary focus is on creating the most robust and efficient marketplace for trading Bitcoin transaction fees,” Alkimiya founder and CEO Leo Zhang said in an email interview with CoinDesk.
There may be little doubt about the usefulness of a solution like Alkimiya’s: In April, when Casey Rodarmor’s Runes protocol for minting fungible tokens atop Bitcoin went live, the Bitcoin network fee rate shot up to $125 per transaction from $4.80.
Bitcoin “mining companies, facing high operating costs, are increasingly seeking hedging instruments to protect against fee volatility,” said Alkimiya in its press release.
The company was founded in 2021 and is backed by investors including Dragonfly, Castle Island Ventures, 1KX, GMR, Coinbase Ventures, Circle Ventures, Tribe Capital and Robot Ventures, according to the statement. The project raised $7.2 million of funding in January 2023, and went live on a test network in April.
Designed as a peer-to-peer payments network, Bitcoin has been around since 2009 and many of its users are notoriously loyal, and skeptical of solutions not built “natively,” or using a secure apparatus directly atop the oldest and original blockchain.
Notably, however, Bitcoin lacks the programmability of Ethereum, which came along in 2015, founded mostly by developers, including Vitalik Buterin, who had previously worked on Bitcoin.
And like many of the decentralized applications and protocols atop Ethereum, Alkimiya’s design requires some programming.
Here’s how Alkimiya works, according to the project’s documentation: “Alkimiya users can enter Buy and Sell positions for any pool. These Buy and Sell positions are represented by NFTs (ERC-1155) called Long and Short shares. Long shares from the same pool have the same tokenId and are fungible, while Long shares from different pools have different tokenIds and are non-fungible. The same rule applies to Short shares.”
An ERC-1155 is a standard for a “smart-contract interface that can represent and control any number of fungible and non-fungible token types,” according to the definition on the Ethereum Foundation’s website.
Zhang, the founder, told CoinDesk that the project is “actively monitoring” the development of Ethereum-compatible layer-2 solutions atop the Bitcoin blockchain, as well as “UTXO-based approaches.”
A UTXO – short for “unspent transaction output” – represents a key element of Bitcoin’s architecture, radically different from Ethereum’s account approach.
The reality is that many Bitcoin layer-2 solutions are still in a work in progress, especially those with Ethereum compatibility.
“Given that we cannot currently develop on Bitcoin, developing on Ethereum is the most decentralized approach available, which aligns with our commitment to decentralization and avoiding a centralized approach,” according to Zhang.
The goal is to eventually create “seamless integration pathways that make it easy for Bitcoin users to access and use our platform without having to manage multiple wallets or interfaces,” Zhang said.