You are about to dive into BTCfi – Bitcoin DeFi – where Bitcoin’s unmatched security meets the rapidly changing world of decentralized finance. Imagine leveraging a market that, as of March 2025, boasts a total market cap of $1.7 billion and includes 14 innovative projects according to CoinGecko.
As of March 2025, Bitcoin’s DeFi TVL (total value locked) stands at over $5.7 billion, experiencing a sharp spike since late 2024. While this figure dwarfs in comparison to Ethereum’s DeFi TVL of over $46 billion, Bitcoin is the third largest blockchain network in terms of DeFi activity after Ethereum and Solana.
BTCfi TVL | Source: DefiLlama
In this guide, you’ll uncover how BTCfi transforms Bitcoin into a yield-generating powerhouse, explore its real-world applications, and discover the top projects to watch. Get ready to see how Bitcoin isn’t just a store of value—it’s a dynamic engine powering the future of finance.
What Is Bitcoin DeFi (BTCfi)?
BTCfi stands for Bitcoin DeFi. It expands Bitcoin’s role beyond a simple store of value. You can now use Bitcoin for lending, borrowing, staking, and trading in a decentralized way. BTCfi combines Bitcoin’s unmatched security with the flexibility of DeFi.
Bitcoin’s network is strong and secure. BTCfi builds on that strength by adding financial tools typically seen on other smart contract platforms. This combination makes BTCfi a bridge between the reliable Bitcoin blockchain and the innovative DeFi sector.
BTCfi also unlocks liquidity. You can use your idle Bitcoin to earn interest or participate in yield farming. This makes BTCfi more than just digital gold—it transforms Bitcoin into a productive asset.
How Does BTCfi Work?
Bitcoin accounts for over 6% of the global DeFi market | Source: DefiLlama
BTCfi makes Bitcoin a versatile asset. You can participate in various financial activities while holding on to the security of the Bitcoin network.
BTCfi leverages Bitcoin’s strong security and applying it to decentralized finance protocols. Here are the key steps:
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Tokenization: Your Bitcoin is tokenized into digital tokens. This process allows Bitcoin to work on blockchains that support smart contracts. Wrapped Bitcoin (WBTC) is a common example. These tokens represent your Bitcoin on DeFi platforms.
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Smart Contracts and Yield Generation: Smart contracts manage financial services like lending and staking. They work automatically and with transparency. You can earn yield by locking your tokenized Bitcoin in a contract.
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Interoperability and Cross-Chain Solutions: BTCfi platforms often use cross-chain technologies. This allows Bitcoin to move across different blockchains without losing its security. The process lets you swap, lend, or borrow assets seamlessly.
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Native DeFi Applications: BTCfi is not just about wrapped Bitcoin. Some platforms are now using methods like Threshold Signature Schemes (TSS) to handle native BTC in DeFi. This method avoids risks tied to custodial solutions and enhances security.
Use Cases and Applications for BTCfi
BTCfi opens many doors for you as a Bitcoin holder or crypto investor. Instead of just holding Bitcoin, you can make your asset work for you in a decentralized financial ecosystem. Here are some key use cases for BTCfi’s technology:
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Lending and Borrowing: You can use Bitcoin as collateral to borrow other assets. Alternatively, lend your Bitcoin to earn interest. This method lets you earn yield on your holdings without selling them.
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Staking and Yield Farming: You can stake your Bitcoin or tokenized Bitcoin. By locking up your funds, you earn rewards and sometimes even governance rights. Yield farming protocols also let you supply liquidity and earn additional rewards.
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Swapping and Trading: BTCfi enables decentralized exchanges (DEXs). You can trade Bitcoin-based tokens without a central authority. This means you maintain control over your funds during swaps.
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Cross-Border Payments and Remittances: BTCfi makes international transactions faster and cheaper. You can send Bitcoin across borders without high fees or slow processing times.
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Issuing Native Assets: Some protocols allow you to create both fungible and non-fungible tokens directly on the Bitcoin network. This innovation helps expand Bitcoin’s utility and unlocks new investment opportunities.
Top BTCfi Projects in the Crypto Market
The BTCfi space is rapidly growing, and several projects are pushing the boundaries by offering innovative yield strategies and decentralized finance solutions on Bitcoin. Below are five standout projects that combine robust protocols with attractive statistics to help you unlock Bitcoin’s full potential.
Pendle
Pendle is a permissionless yield-trading protocol that empowers you to optimize your yield exposure. It introduces yield tokenization, where yield-bearing assets are split into principal tokens (PT) and yield tokens (YT). This separation lets you hedge against market downturns while capitalizing on fixed or leveraged yield opportunities. Pendle’s automated market maker (AMM) facilitates seamless trading of these tokens, giving you control over your yield strategies without needing to navigate complex financial products. Pendle’s strong market presence underlines Pendle’s potential to tap into the vast, untapped yield opportunities within the BTCfi ecosystem.
BounceBit
BounceBit pioneers the CeDeFi (Centralized Decentralized Finance) model, blending the efficiency of centralized finance with the transparency and security of decentralized protocols. By leveraging Bitcoin’s security and full EVM compatibility, BounceBit introduces Liquidity Custody Tokens (LCTs) to offer institutional-grade yield products. This approach not only democratizes high-yield opportunities traditionally reserved for top asset managers but also supports innovative use cases like restaking and integration of real-world assets (RWAs).
Learn more about how BounceBit works in our comprehensive guide.
Solv Protocol
Solv Protocol stands out with its comprehensive Bitcoin staking abstraction layer. It aims to unlock the latent potential of Bitcoin by transforming it into a versatile reserve token. Through Solv’s innovative platform, you can engage in various yield-generating activities including restaking, liquidity provision, and even low-risk trading strategies. SolvBTC, the platform’s universal Bitcoin reserve token, is fully backed 1:1 by BTC, thereby providing a seamless bridge to the DeFi ecosystem. Solv Protocol aims to unlock over $1 trillion of idle Bitcoin by connecting it with diverse DeFi yield streams and enhancing cross-chain liquidity.
Here’s more information on how to get started with Bitcoin staking on Solv Protocol.
ALEX Lab
ALEX Lab is carving a niche as a one-stop DeFi platform tailored for Bitcoin. It supports fixed-rate and fixed-term Bitcoin lending and borrowing, alongside decentralized exchanges and token launch capabilities. The protocol is built on the Bitcoin-linked Stacks blockchain, ensuring that you benefit from both Bitcoin’s robust security and the flexible functionality of modern DeFi applications. ALEX Lab aims to provide accessible financial services for both the unbanked and mainstream users, bridging the gap between traditional finance and crypto.
pSTAKE Finance
pSTAKE Finance revolutionizes Bitcoin staking by offering a liquid staking solution that allows you to earn yield on your Bitcoin without sacrificing custody. It operates on a non-custodial model that securely transforms your BTC into liquid staking tokens. These tokens enable participation in a range of DeFi opportunities, all while preserving the inherent security of Bitcoin. pSTAKE Finance partners with major networks like BNB Chain, ensuring robust liquidity and broad access to yield-generating protocols. pSTAKE Finance’s strategic partnerships underscore its role as a leader in the BTCfi space, paving the way for more active and yield-generating Bitcoin utilization.
Core Chain
Core Chain harnesses Bitcoin’s robust security and pairs it with an EVM-compatible smart contract environment. This combination lets you use non-custodial staking and rewards miners with CORE tokens, adding extra layers of security and utility. Core Chain’s unique Satoshi Plus consensus mechanism expands Bitcoin’s protective shield and has attracted significant attention from both retail users and institutional investors. With its seamless integration of Bitcoin’s reliability and modern DeFi functionalities, Core Chain stands as a prime example of how legacy networks can be reinvented for new financial paradigms.
Stacks
Stacks is designed specifically to bring smart contract capabilities to Bitcoin. By building on Bitcoin’s secure foundation, Stacks creates a vital bridge between Bitcoin and decentralized applications (dApps). This project enables you to deploy and interact with smart contracts while using Bitcoin as collateral, thereby unlocking new financial opportunities.
Stacks has carved out a niche in the BTCfi space, with its blockchain supporting a growing number of decentralized apps that serve various purposes—from yield farming to decentralized lending. The network’s emphasis on security and composability has seen it secure significant liquidity and user adoption, with many dApps now processing transactions worth millions of dollars each month.
Sovryn
Sovryn is a comprehensive platform offering lending, borrowing, and trading services that operate entirely on Bitcoin. It employs over-collateralized loans and decentralized liquidity pools to ensure that transactions are secure and transparent. As a favorite among Bitcoin purists, Sovryn’s non-custodial design lets you retain control of your assets while accessing a wide array of financial services. Sovryn's TVL skyrocketed from around $30 million in early 2022 to over $1 billion by 2024—an increase of more than 3200%. The platform has processed over $150 million in loans and now serves a global user base spanning more than 50 countries, with daily active users exceeding 10,000. This explosive growth shows that decentralized financial services can efficiently operate on Bitcoin without compromising on security or decentralization.
Babylon
Babylon leverages native Bitcoin staking to transform your Bitcoin into a yield-bearing asset. The platform allows you to stake BTC directly, earning rewards while maintaining self-custody. Babylon’s innovative approach includes cross-chain interoperability, giving you access to various DeFi opportunities without leaving the Bitcoin ecosystem. During Babylon’s initial Phase 1 launch, the staking cap was set at 1,000 BTC, with individual stakes capped at 0.05 BTC to manage risk. With partnerships like Cobo’s BTC Staking API, Babylon has already facilitated staking for over 742 BTC, representing a substantial portion of its total staked value. This success underscores Babylon’s potential to lead the charge in making Bitcoin a productive asset in the DeFi space.
Elastos
Elastos and similar projects use advanced methods such as merged mining and sidechain technology to enhance Bitcoin’s security for DeFi applications. Elastos, in particular, benefits from the fact that approximately 50% of Bitcoin’s total hashrate—part of the global 800 EH/s—helps secure its network. This gives Elastos a robust security profile while allowing for innovative features like restaking and cross-chain transfers.
These projects expand Bitcoin’s capabilities by enabling trustless, native BTC transactions across multiple networks. They have attracted institutional interest and have become vital in the BTCfi ecosystem, helping to drive market growth and improve interoperability. As these solutions mature, they will likely play a key role in unlocking more scalable and secure financial applications on Bitcoin.
Benefits of BTCfi
BTCfi gives you several benefits that traditional finance and even other DeFi platforms may not offer:
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Enhanced Security: Bitcoin is known for its robust proof-of-work (PoW) consensus. BTCfi uses this security as its foundation. Your assets are protected by one of the most secure networks in the world.
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Increased Utility for Bitcoin: Instead of sitting idle, your Bitcoin can generate yield. You can participate in lending, staking, and trading without moving away from Bitcoin’s ecosystem.
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Decentralized and Transparent: BTCfi runs on smart contracts and decentralized protocols. This structure reduces the need for middlemen and increases transparency. You can track transactions on the blockchain, which builds trust.
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Lower Transaction Costs: BTCfi can reduce fees compared to traditional financial services. Whether you are making cross-border payments or lending, you typically pay lower fees in BTCfi.
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Access to Global Markets: BTCfi gives you permissionless access to financial services. You can participate in global lending, staking, and trading platforms. This can be especially useful if you do not have access to traditional banking.
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Interoperability and Flexibility: BTCfi projects often work across multiple blockchains. You can easily swap assets and use Bitcoin in various DeFi applications. This flexibility expands your financial options.
These benefits make BTCfi a compelling choice for anyone looking to use Bitcoin beyond just a store of value. You can earn returns, participate in decentralized applications, and enjoy the best of both Bitcoin and DeFi.
What’s Next for Bitcoin’s DeFi Ecosystem and BTCfi?
BTCfi is still evolving, and its future is bright. Here’s what you can expect:
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Growing Adoption: More users and institutions are likely to adopt BTCfi. As Bitcoin continues to gain value, its integration into DeFi will attract more capital and innovation.
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Improved Cross-Chain Solutions: The development of better cross-chain protocols will enhance BTCfi’s usability. You can expect smoother interoperability between Bitcoin and other blockchains, making transactions easier and more secure.
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Expansion of DeFi Applications: Developers will build new applications on BTCfi. You may see more lending platforms, DEXs, and yield farming opportunities. These new apps will expand your choices and help you diversify your crypto portfolio.
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Enhanced Security Measures: As BTCfi grows, protocols will adopt advanced security measures. Innovations like Threshold Signature Schemes (TSS) will reduce custodial risks. This ensures your assets remain safe while you enjoy higher returns.
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Increased Institutional Interest: Institutional investors are eyeing BTCfi as a way to unlock Bitcoin’s potential. Their participation can drive further innovation and stability in the market.
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Regulatory Clarity: Governments around the world are slowly developing clearer regulations for crypto. As these frameworks emerge, BTCfi may benefit from increased legitimacy and mainstream acceptance.
With these trends, BTCfi is set to play a major role in the future of decentralized finance. You may soon find that BTCfi is a key part of a more secure, accessible, and innovative financial ecosystem.
Conclusion
BTCfi is reshaping how you use Bitcoin by merging its robust security with the dynamic capabilities of decentralized finance. It opens up opportunities to lend, borrow, stake, and trade Bitcoin while maintaining a high level of asset security. The BTCfi ecosystem is growing rapidly, with leading projects Babylon providing diverse tools and opportunities to make your Bitcoin work harder for you. As you explore BTCfi, keep an eye on emerging trends like improved cross-chain solutions, innovative DeFi applications, and increasing institutional interest.
However, always remember that investing in DeFi carries inherent risks, including market volatility, regulatory uncertainties, and potential smart contract vulnerabilities. Do your own research and consider your risk tolerance before diving in. This guide has provided a beginner-friendly overview of BTCfi—its workings, applications, and benefits—so you can make more informed decisions on your crypto journey.