Happy all-time high day to the bitcoin HODLRs!

BitVM3 is Bitcoin’s latest experiment to make bridges cheaper and more trust-minimized. By swapping SNARK verifiers for garbled circuits, it could cut onchain costs by ~1000x. But the approach is still experimental, with known vulnerabilities and huge off-chain overhead. Meanwhile, BitVM2 bridges are moving to production.

— Macauley

Helium’s path to deflation:

In about three weeks, on Aug. 1, Helium will undergo its next emission halving to reduce annualized HNT emissions from 15m to 7.5m.

HNT’s utility is directed tied to Helium Network usage, where HNT is burned for consumable Data Credits, a fixed rate token of $0.00001.

In June 2025, Helium’s core revenue (excluding all other off-chain revenues from Nova Labs) saw a Data Credit burn of $361k, or $4.3m annualized. Assuming this ARR increases 4x to $17.6m at a HNT price of $2.30, HNT may become deflationary, Blockworks’ Nick Carpinito writes in a new report on Helium.

Whether Helium can see that sustained growth depends on the company’s carrier offload business model with large telco operators. Carrier offload — not Helium’s own mobile virtual network operator (MVNO) — accounts for 85%+ of total Data Credit burn today.

— Donovan Choy

BitVM3: Cheaper BTC bridges…in theory

The race to make Bitcoin programmable without a soft fork has turned into one of the most creative arms races in crypto. At the center is BitVM, a framework for proving off-chain computation on Bitcoin via fraud proofs. Its first iteration, now known as BitVM1, used a multi-round interactive protocol. BitVM2 simplified this to a single-round fault proof using a split SNARK verifier, and is already proving practical for early adopters like Build on Bitcoin (BOB), Citrea and Bitlayer.

Now, BitVM3 proposes to go even further by cutting onchain fraud proof costs by ~1000x. But there's a catch: It’s still in the research phase, with critical security, complexity and data availability challenges to solve before becoming production-ready.

“The overall design of the BitVM bridge between BitVM2 and BitVM3 remains the same,” BOB co-founder Alexei Zamyatin told Blockworks. “The key difference is swapping the SNARK verifier (BitVM2) with a garbled circuit (BitVM3), he said, adding “we are exploring incorporating elements of the latest BitVM design in our customised hybrid BitVM bridge.”

Garbled circuits are a term for cryptographic gadgets that allow one party to pre-commit to a computation that another can verify without learning the private inputs. In theory, this reduces Bitcoin’s onchain burden to tiny commitments per logic gate. While it holds great promise, it’s far from proven at scale and research is ongoing to address shortcomings before deployment.

Meanwhile, existing bridges are moving ahead on BitVM2. BOB recently launched its latest BitVM2-based bridge testnet with major DeFi partners to enable Bitcoin-backed assets on other chains. BitVM2 is being audited and is expected to be ready for mainnet soon.

“Garbled circuits are an exciting development but they still need quite a bit more research before they could be considered practical to implement,”  Zamyatin explained. “It is important to note that the majority of the work to build a bridge using BitVM stays the same [when] using BitVM2 or BitVM3.”

BitVM2’s current costs aren’t trivial: Zamyatin estimates a worst-case onchain fraud proof at around $16,000 in transaction fees. But even that is cheaper than Ethereum’s OP Stack fault proofs, which require 14 ETH or more (over $40,000 today) for bonds, and can run into hundreds of ETH to actually prove fraud onchain. 

Meanwhile, other teams are experimenting with different flavors of garbled circuits, as Robin Linus said in the BitVM Builders Telegram group this week:

“Citrea is exploring a classic approach of Yao-style garbling combined with a cut-and-choose method for verifying the circuits' correctness. That comes at the expense of higher communication and storage cost, but it is nicely simple and relies on very conservative assumptions. In contrast, Alpen [Labs] is exploring a designated-verifier SNARK, which reduces the communication overhead, but comes at the expense of more exotic cryptography, which isn't battle-hardened yet and doesn't work as well with off-the-shelf tooling.”

In simpler terms, Citrea’s method is like making lots of sealed envelopes (“garbled circuits”) that hide each step, then letting the checker randomly open some of them (“cut and choose”) to confirm you didn’t cheat. It’s straightforward and built on time-tested ideas, but you need to send and store piles of envelopes, which is bulky and slow.

Alpen’s method shrinks everything into a single, tiny postcard (“designated-verifier SNARK”) that the checker can read quickly, saving bandwidth and space. The catch is that this postcard relies on newer, more experimental “cryptographic ink” that hasn’t faced as many real-world stress tests and isn’t yet compatible with the standard stationery most developers keep on their desks.

Ultimately, the entire effort gets dramatically easier if Bitcoin Core can agree on new opcodes in a soft fork — like CTV or TXHASH — that would let these protocols enforce covenant-like spending conditions without relying on elaborate multisig setups. But a periodic glance at the Wiki-style page tracking stakeholder views on new opcodes shows that consensus building is a painfully slow process.

“One thing that’s looking more and more likely is CTV — but it also depends on the flavor,” Zamyatin told me. For instance, a new proposal just two days ago is not as favorable for BitVM, he said, and therefore unlikely to win support from most L2 builders.

So, BitVM3 remains a highly promising but deeply experimental approach. Meanwhile, BitVM2 bridges and other approaches look set to be Bitcoin’s next major step toward trust-minimized layer-2 scaling.

— Macauley Peterson

Why are onchain borrow interest rates so much lower today (4%) than in Q4 2024 (15%)?

Noah: Similar to 2022, investors are less focused on reaching for upsides. People are interested in collecting yield, so demand to lend has exceeded demand to borrow. There are still a lot of stablecoins in search of yield, which is leading to compressed yields.

Is there demand for fixed-interest rate lending?

Felipe: This demand has been proven out by Maple, which has been growing quite aggressively. A lot of funds need fixed rates to execute their strategies. The reason why there hasn’t been more fixed-rate onchain is a demand issue. Whenever yield curves are inverted because rates are high in the near term, people want to borrow fixed rates if they're planning out a longer-term strategy. But it becomes difficult to eke out levered 15% strategies with a variable rate because your strategy that works today might not tomorrow.

Noah: It’s mostly funds borrowing from Maple today — a mixture of directional funds looking for leverage and yield funds optimizing for various costs of capital. To a lesser extent, there are probably bitcoin miners/companies looking for loans on their crypto collateral.

What are the impacts of emerging markets’ access to onchain equities?

Felipe: Big money already has access to equities. But the TAM is big — there’s 5+ billion people in emerging markets. But it’s not going to be that exciting for volumes compared to assets like memecoins, with high turnover. It could be meaningful for TVL. Today’s onchain TVL is still tiny, in the single-digit basis points of the world’s assets. So if emerging markets are buying the Nasdaq or S&P 500, that could be a big amount of TVL relative to what we have onchain now, just because we're starting with such a small base. But it won't trade. And if it trades, it won't pay 1%.