YALA Protocol: Building Native DeFi Infrastructure for Bitcoin

What Is the YALA Protocol?

Image: https://yala.org/

YALA is a decentralized finance (DeFi) protocol purpose-built for the Bitcoin network. Its mission is to boost Bitcoin’s asset programmability and liquidity while preserving the network’s core security. Leveraging overcollateralized native BTC assets (such as $YU), atomic swaps, and a modular architecture, YALA acts as a bridge between Bitcoin and other blockchains—transforming BTC from “digital gold” into a vital foundational asset for DeFi applications.

Why Does Bitcoin Need DeFi?

Despite Bitcoin’s market capitalization exceeding $2 trillion and comprising more than 50% of the total crypto market, its share of total value locked (TVL) in DeFi is below 3%. This disparity is largely due to BTC’s lack of Turing-complete smart contract functionality, making it difficult to directly implement sophisticated financial protocols.

YALA aims to overcome this challenge by introducing a BTC-native liquidity protocol, enabling Bitcoin to participate in a wide range of DeFi applications—including lending, restaking, insurance, and more—much like ETH currently does.

A Closer Look at YALA’s Modular Architecture

The YALA protocol features five core layers:

1. Application Layer: Delivers lending, liquidity issuance, restaking, yield farming, and related services.
2. Execution Layer: Distributed across the Bitcoin mainnet and target chains. It enables complex logic through UTXO state changes and multi-signature mechanisms.
3. Consensus & Data Availability (DA) Layer: Synchronizes states using Prover nodes and external data availability networks, such as Nubit.
4. Settlement Layer: Ensures all final states are securely settled via Bitcoin mainnet UTXOs.
5. Interoperability Layer: Facilitates cross-chain data and asset exchange with other networks using atomic swaps, DLC protocols, and secure multisig solutions.

Core Features and Highlights

• BTC-overcollateralized asset $YU: YALA introduces $YU as a liquidity asset, minted exclusively via BTC overcollateralization and managed by the YALA Vault module.
• Automated Stability Mechanism: Similar to MakerDAO’s stabilization system. YALA employs dual auctions and automated controls to maintain $YU’s peg to BTC.
• Insurance Mechanism (Takaful): Provides risk-sharing based on Islamic insurance principles, with participant protection managed via the Qard Hasan module.
• Cross-Chain Mapping & Atomic Swaps: This feature allows for secure asset mapping and seamless flow between BTC and other chains, such as Ethereum and Solana.
• Data Availability & State Synchronization: The protocol maintains system performance and security through SegWit scripts, UTXO states, and external data availability networks.

Summary

The introduction of the YALA protocol unlocks unprecedented financial extensibility for BTC. YALA not only solves Bitcoin’s long-standing programmability challenges. It also builds a native, efficient, and secure DeFi ecosystem for BTC. As more assets and applications integrate with the protocol, YALA is positioned to become critical infrastructure within the broader Bitcoin ecosystem.

Image: https://www.gate.com/trade/YALA_USDT

YALA has launched on the Gate spot market. As of July 29, 2025, YALA is priced at approximately $0.181. Traders should be aware of recent high volatility and manage risk accordingly.