Hashi, a new protocol built atop the Sui blockchain, has introduced a technical model enabling native Bitcoin to function as collateral in decentralized finance without the need for asset wrapping or third-party custody. Sui is a layer-1 blockchain designed for fast, low-cost transactions and aims to facilitate broad Web3 adoption. The protocol launched its Devnet alongside the announcement, drawing attention from several leading institutional partners.
Minimizing Trust in DeFi Collateralization
Historically, utilizing Bitcoin in DeFi has required users to rely on centralized custodians or wrapped tokens. These systems introduce risks due to third-party management, regulatory scrutiny, and the potential for taxable events. Hashi proposes an alternative where original Bitcoin never leaves its native chain. Instead, the protocol verifies BTC collateral in tandem between the Sui and Bitcoin networks.
This structure cuts out intermediaries by using smart contracts for all logic and execution, establishing a trust model that depends solely on Sui’s validator set and the protocol’s on-chain governance mechanism. As a result, collateral and loans are transparent and can be monitored live on-chain. Liquidations and risk management are handled automatically by smart contract code, without human intervention.
Institutional Backing in the Run-Up to Public Launch
Ahead of its broader rollout, Sui has aligned with several recognized institutional partners specializing in digital asset custody and infrastructure. These groups—Ledger, BitGo, FalconX, Bullish, and Erebor Bank—have committed to roles spanning infrastructure development, custody services, and capital market support. Their involvement reflects growing institutional interest in DeFi approaches with minimized trust assumptions.
Bitcoin’s potential in DeFi remains largely untapped. The asset’s market capitalization currently exceeds $1.4 trillion, yet less than 0.37% reportedly participates in DeFi activity. Much of Bitcoin’s circulating supply remains idle in ETFs or long-term holding wallets. Through Hashi, holders may soon be able to borrow against their positions on-chain, without needing to sell or commit assets to centralized third parties.
By removing the need to wrap tokens or create new liabilities, Hashi also sidesteps many tax and compliance uncertainties historically associated with synthetic Bitcoin products. Loans can be taken out against on-chain collateral, with all parameters—such as terms, liquidation mechanisms, and risk metrics—visible on both Sui and Bitcoin blockchains at all times.
The protocol has also drawn attention from market analysts and crypto observers. One such analyst, Eye Zen Hour, emphasized recurring risks in earlier models involving wrapped Bitcoin and centralized custody, noting in a post:
A huge inflection point for DeFi just arrived. Bitcoin is a $1.4T+ asset, but less than 0.37% of it is used in DeFi. The constraint has never been demand. It has been trust. Unlocking Bitcoin liquidity has historically required intermediaries.
This focus on trust-minimization is central to Hashi’s approach. It aims to create a structure where DeFi participation is available to Bitcoin holders without introducing new trusted parties at the protocol level.
As other protocols consider leveraging Hashi as a foundational layer, the scope could expand beyond lending toward more advanced DeFi applications. With the Devnet phase now active, further developments in institutional and retail adoption are likely to emerge as the protocol advances toward full mainnet deployment.
