Written by: David Seroy, Head of Ecosystem, Alpen Labs
For years, I have argued that Bitcoin-backed stablecoins are the missing link between Bitcoin’s decentralized ethos and the world’s demand for dollar stability (2022, 2023).
Many very credible stablecoins already exist, and even more are coming. But none have met the bar for a truly Bitcoin-native financial primitive, one that’s scalable, censorship-resistant, private, and permissionless. That vision is finally coming into focus.
With Bitcoin ZK rollups from Alpen Labs enabling the highest-security, lowest-trust BTC bridge technically possible and Liquity V2 advancing the CDP model, it’s now possible to build the Bitcoin Dollar (“BTD”): a Bitcoin-collateralized stablecoin that delivers dollar stability without compromising Bitcoin’s core principles.
The promise of Bitcoin-backed stablecoins
After BTC itself, the clearest product-market fit in crypto is stablecoins and borrowing. A collateralized debt position (“CDP”) combines both, allowing anyone to lock up BTC as collateral, mint stablecoins like BTD, and create a dollar-pegged asset from a BTC-backed loan.
This idea isn’t new. Maker’s DAI proved the model using Ethereum back in 2017, and dozens of forks followed. Some even claim to be BTC-backed. However, virtually all came with trade-offs that betray Bitcoin’s core principles: upgradability, governance tokens, centralized wrappers, or trusted oracles.
The Bitcoin Dollar is different. Built with Liquity V2 codebase and Bitcoin ZK rollups, it will be deployed as a credibly neutral, public good from day one on Alpen:
- No token
- No governance
- No centralized bridge
- Immutable code
It’s the most censorship-resistant stablecoin ever built, Bitcoin-grade, end to end.
A new era of Bitcoin programmability
Bitcoin’s limited scripting has long blocked native stablecoin development. Sidechains like Rootstock and Liquid enabled early experiments like Sovryn’s Zero and Fuji Money, but they lacked the trust minimization made possible by BitVM(2)-style bridges.
Two breakthroughs are finally changing that:
ZK rollups on Bitcoin
Networks like Alpen are bringing smart contract functionality to Bitcoin using zero-knowledge proofs. These rollups enable BTC to be locked in trust-minimized bridges without soft forks, powering decentralized apps while inheriting Bitcoin’s base-layer security.
Decentralized borrowing protocols
Liquity V1 (2020) pushed beyond DAI with 0% interest loans, efficient liquidations via a Stability Pool, and a governance-minimized, immutable design. Unfortunately, it had limitations that prevented it from scaling.
Liquity V2 (2025) builds on the foundation of V1 with user-set interest rates and better capital efficiency, proving it’s possible to build scalable, censorship-resistant, credibly neutral, non-custodial stablecoins.
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BTD will deploy Liquity V2 with BTC as the sole collateral on Alpen’s Bitcoin ZK rollup with immutable code from the moment of deployment.
Together, these unlock something new: a Bitcoin-backed stablecoin with real yield, no token, and no governance.
Navigating challenges
The primary trade-off with BTD is an oracle. Maintaining BTD’s peg requires accurate BTC/USD price feed. This feed will be sourced from battle-tested oracles. While historically robust, these oracles introduce the sole trust assumption in the Liquity V2 design.
While more trust-minimized oracle designs are being researched, none are yet proven robust enough to replace these providers. For now, redundancy and careful oracle selection mitigate this risk.
Immutability presents another trade-off. As an immutable protocol, BTD cannot adapt to new oracle designs or improvements without being redeployed entirely. This means the oracle providers will be enshrined into the protocol from day 1 and cannot be changed.
Should a superior oracle solution be developed and become sufficiently robust, BTD would have to be redeployed entirely as a new protocol. This is the cost of ensuring decentralization and preventing governance capture.
Why BTD stands apart
Many approaches to stable value on Bitcoin have been explored, but most fall short.
- Stablesats rely on custodial exchanges and lack sufficient privacy.
- Stablechannels are conceptually interesting but not easily scalable or private.
- Fiat-backed stablecoins are centralized, permissioned, and censorable.
- Undercollateralized algorithmic stablecoins have proven disastrous.
- Other “Bitcoin stablecoins” often come with governance tokens, ephemeral yields, or centralized wrappers.
From extensive research, the Liquity V2 model on a Bitcoin ZK rollup stands out as the best available option for truly censorship-resistant, dollar-stable money.
A strategic leap for Bitcoin
Bitcoin-backed stablecoins are a strategic necessity for Bitcoin’s long-term success. The global economy’s reliance on dollars cannot be ignored, but it can be redirected. By channeling dollar demand into Bitcoin-backed stablecoins, the Bitcoin economy can grow without compromising its principles. BTD, positioned as a neutral public good, aims to extend Bitcoin’s vision, not dilute it.
Compare this to the Eurodollar system, a $57 trillion market built on dollar-denominated liabilities backed by U.S. treasuries. Its growth fueled global debt, rehypothecation, and opacity. Bitcoin-backed stablecoins, built on transparent ledgers and restricted from fractional reserve practices, offer a superior alternative. As demand for censorship-resistant dollars rises, Bitcoin’s role as the ultimate collateral will solidify, accelerating the shift to a decentralized economy.
These stablecoins can integrate with Bitcoin’s emerging payment rails, including Taproot Assets, FediMints, Cashu, RGB, Ark, ShieldedCSV, and ZK rollups. While these rails are sovereign, the assets they carry often remain fragile or permissioned. BTD is a step toward assets that match the ethos of the rails, creating a circular economy where Bitcoin-backed dollars flow seamlessly.
The road ahead
The journey to hyperbitcoinization is long, and ignoring dollar demand risks slowing Bitcoin’s adoption. Bitcoin-backed stablecoins like BTD, now in development, offer a pragmatic yet principled solution. Alpen testnet will invite developers to explore Bitcoin’s programmable rails, building applications like decentralized trading and lending generally confined to centralized systems. This testnet marks a critical step toward scaling Bitcoin’s ecosystem, enabling stablecoins and other financial primitives to thrive natively.
The infrastructure is ready. ZK rollups provide trust-minimized programmability. Protocols like Liquity V2 demonstrate that immutable, censorship-resistant stablecoins are viable. The challenge now is to bring these systems to production, refine their trust assumptions, and integrate them with Bitcoin’s payment layers. If successful, Bitcoin-backed stablecoins could bridge today’s dollar-driven world with tomorrow’s Bitcoin economy, realizing a vision I’ve advocated for years.
To skeptics: Why shouldn’t Bitcoin have financial tools that embody its principles? The rails are being built, and assets like the Bitcoin Dollar are rising to meet them. This is a significant step toward a decentralized future.
