The M1 layer for Bitcoin

Bitcoin has spent the last decade establishing itself as digital gold, a reliable store of value often referred to as 'M0' in monetary terms. However, its adoption as a medium of exchange for daily commerce—the 'M1' layer—remains limited by volatility and a fixed supply that does not easily accommodate the credit needs of a growing economy. Bitcredit Protocol is an open-source initiative designed to solve this liquidity gap by building a native credit layer on top of Bitcoin. Founded in 2023 by Hubertus Hofkirchner, the project attempts to move Bitcoin beyond speculation and into the 'real economy' of wages, supply chains, and business-to-business transactions.

The protocol functions through two primary products: Bitcredit eBills and Bitcredit eCash. Bitcredit eBills is the wholesale component, designed to facilitate working capital and wage financing directly between businesses. It uses a digital version of the historical bill of exchange, allowing companies to issue credit to one another without requiring a traditional bank or a fiat currency intermediary. This creates an elastic money supply where credit is generated based on economic activity and productive capacity rather than being constrained by the current circulating supply of Bitcoin. When a business issues an eBill to pay a supplier or a worker, they are creating a peer-to-peer credit instrument that is fully non-custodial and censorship-resistant.

The retail side of the system is handled by Bitcredit eCash. Once workers or suppliers receive payments via the wholesale protocol, they need a way to spend those funds in the daily economy. eCash allows for instant and global payments. Unlike the Lightning Network, which focuses on the speed of transferring existing Bitcoin, Bitcredit focuses on the issuance of credit that is redeemable for Bitcoin. This distinction is important for scaling; while Lightning requires pre-funded channels, Bitcredit's credit-based approach allows for a more flexible expansion of purchasing power within a localized or global circular economy.

Based in London, the Bitcredit team consists of approximately 11 to 50 employees and recently secured a $7.5 million pre-seed funding round in late 2024 to accelerate development. Hofkirchner, who previously conceived the protocol as a way to bypass the 'fiat-on-ramp' problem, positions Bitcredit as a necessary evolution for Bitcoin to become a complete monetary system.

Competitively, Bitcredit occupies a unique niche. While projects like Stacks or Rootstock bring smart contracts to Bitcoin, and Lightning handles micro-payments, Bitcredit is focused specifically on the credit markets. The protocol is entirely open-source and peer-to-peer, avoiding the centralized risks associated with traditional fintech or custodial crypto platforms. By enabling businesses to finance their own operations using Bitcoin-native instruments, the protocol removes the reliance on the legacy banking system, which often serves as a bottleneck for Bitcoin-only enterprises. The success of the project depends on the adoption of eBills by SMEs who are looking to escape the fees and surveillance of traditional finance while maintaining the hard-money benefits of the Bitcoin standard.