Bitcoin New Era: Unveiling the Wealth Code of BTCFi
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Bitcoin New Era: Unveiling the Wealth Code of BTCFi
BTCFi is more than just a simple one plus one equals two.
Navigating Web3 tides with focused insightsWhat is BTCFi?
BTCFi (BTC DeFi) refers to a decentralized financial system built on bitcoin assets and the Bitcoin network. By combining the security and stability of bitcoin with the innovation of DeFi, BTCFi has stood out in this bull market.
The Origins in Bitcoin
Since its launch in 2009, Bitcoin—being a digital asset with a fixed total supply—has continuously attracted global investors and gradually earned widespread consensus as "digital gold." During this process, Bitcoin’s price has repeatedly reached new highs, hitting a record market capitalization of $1.4 trillion in early 2024. Additionally, the U.S. Securities and Exchange Commission (SEC) officially approved Bitcoin exchange-traded funds (BTC ETFs) in January 2024. This move not only marks traditional finance’s recognition of cryptocurrencies but also signifies that mainstream capital markets have begun legally allocating Bitcoin, propelling the entire crypto ecosystem into a phase of rapid growth.
Bitcoin is more than just a digital asset—it is a revolutionary electronic payment network. Using the Proof-of-Work (PoW) consensus algorithm, Bitcoin has become the most decentralized payment network in human history. Unlike traditional financial systems, users on the Bitcoin network do not need to trust any centralized institution; instead, they rely solely on underlying code to ensure the security of their assets and transactions.
Integration of BTC and DeFi
With advancements in blockchain technology, decentralized finance (DeFi) has gradually emerged as a key branch of fintech. DeFi refers to a series of automated financial products built on blockchain technology. Compared to traditional financial systems, DeFi offers greater inclusivity and interoperability. As long as users have internet access, they can easily buy and trade digital assets through DeFi products. Moreover, DeFi seamlessly integrates various traditional financial services such as lending, borrowing, financing, and equity trading. These functions act like Lego blocks—flexibly combinable to create new financial products that meet diverse user needs and enhance user experience.
In the past, due to Ethereum's mature smart contract programming language and developer ecosystem, most DeFi products were built on the Ethereum platform. However, following the successful Taproot upgrade of the Bitcoin mainnet in November 2021, along with the introduction of the Ordinals protocol and BRC-20 standard leveraging Segwit technology, the Bitcoin mainnet can now support more use cases beyond simple value transfer and storage—including issuance, trading, and lending of native assets.
Technological progress has driven exploration of various DeFi applications on the Bitcoin network. Developers have started replicating Ethereum-based DeFi applications onto Bitcoin, gradually building a thriving Bitcoin ecosystem—including asset issuance protocols like Runes and Layer 2 scaling solutions such as BitLayer.
Synergy Between Technology and Demand
Advancements in the Bitcoin ecosystem have coincided with growing user demand for Bitcoin yield generation. In the current market cycle, many investors prefer holding Bitcoin over other altcoins while seeking additional returns during their holding period. The rise of DeFi on the Bitcoin network provides Bitcoin holders with safer, more native opportunities for wealth growth—such as PoS staking and arbitrage—meeting the demand for asset appreciation.
This synergy between technological advancement and user demand has led developers to explore a more native path for DeFi on Bitcoin. As a result, BTCFi has flourished in this bull market, becoming an increasingly important force in the crypto space.
How Does BTCFi Differ From DeFi?
Compared to DeFi on other blockchains, BTCFi has four key characteristics that are particularly important for Bitcoin holders:
- Security: For Bitcoin maximalists and holders, ensuring asset security is the prerequisite for all DeFi activities—not only in participating in mainnet DeFi, but also regarding the security of cross-chain bridges and connected chains. To address this, Uniquid Layer leverages ADV technology to maximize the safety of liquidity aggregation.
- Native Design: Bitcoin core developers and the community uphold a simple and robust technical stack (small block size, fixed supply, PoW consensus), favoring application development without modifying the mainnet code—this is the essence of Bitcoin’s native design. BTCFi products must be built using mature, time-tested native technologies to gain acceptance from the mainstream Bitcoin community. Furthermore, BTC and native fungible token protocols on the mainnet such as BRC20 and Runes possess their own form of asset natively—distinct in community culture, asset type, and holder demands from assets on other chains.
- Decentralization: Decentralization remains a core principle of the Bitcoin community and the foundation of the crypto industry. It is precisely because the Bitcoin network is sufficiently decentralized that it has achieved its status as digital gold. When participating in BTCFi protocols, holders prioritize factors such as how securely locked BTC is managed at the protocol level, whether sufficiently decentralized multi-signature wallets or ZKPs are used, and whether single points of failure are eliminated.
- Interoperability: To attract broader support from Bitcoin holders, BTCFi protocols must seamlessly integrate with the Bitcoin mainnet, enabling smoother connectivity between BTC and BTCFi to unlock Bitcoin’s liquidity potential. Currently, many BTCFi protocols compete for BTC liquidity by offering high APYs and issuing their own LST assets, which somewhat hinders cross-chain interoperability and raises user entry barriers. With Uniquid Layer, users no longer need to learn complex Restaking protocols—simply stake assets on Uniquid Layer to earn optimized yields across multiple Restaking projects, receive liquidity tokens, and participate in a broader DeFi ecosystem.
BTCFi is not merely an extension of DeFi. Rather, it must be built upon these four characteristics to provide Bitcoin holders with a more secure, native, decentralized, and liquid financial solution—enabling them to benefit from DeFi innovation while preserving confidence in Bitcoin’s core strengths.
What Are the Revenue Sources in BTCFi?
To meet the demand for asset appreciation among Bitcoin holders and awaken idle Bitcoin liquidity, BTCFi must continuously generate real and sustainable returns to achieve long-term growth. Currently, BTCFi’s underlying revenue sources can be categorized as follows:
- PoS Validation Rewards: Users stake BTC into staking protocols like Babylon to participate in node validation and governance on PoS blockchains, earning rewards from AVS while enhancing chain security.
- CeFi Funding Rate Arbitrage: Since crypto futures do not involve physical delivery, exchanges use funding rate mechanisms to balance price differences between perpetual contracts and spot markets, adjusting traders’ holding costs. Users can entrust their BTC to professional quant firms to perform funding rate arbitrage across centralized exchanges.
- Lending Yields: Users can lend Bitcoin to borrowers for interest, borrow other assets against Bitcoin collateral, or over-collateralize to mint stablecoins and engage in DeFi ecosystems.
- Liquidity Mining: Users deposit Bitcoin into liquidity pools on DEXs to earn transaction fees.
- Token Incentives: To encourage Bitcoin holders to join and contribute TVL and trading volume, BTCFi protocols often distribute a portion of project tokens to early participants. This source typically constitutes the largest share of calculated APY and carries the highest volatility and uncertainty.
The diversity of BTCFi revenue streams, fragmentation across protocols, and discrepancies between actual and expected APY make it difficult for users to accurately assess yield structures and identify the safest, highest-return platforms. Recognizing this critical pain point, Uniquid Layer integrates multiple Restaking projects and employs professional analysts and quantitative strategies to calculate the true underlying returns of various BTCFi protocols, maximizing liquidity yield for Bitcoin holders.
Conclusion
As Bitcoin mainnet technology advances and demand for Bitcoin yield grows, BTCFi is flourishing in this cycle, showing strong momentum. Unlike DeFi ecosystems on other chains, BTCFi is more than just the sum of its parts—it possesses intrinsic characteristics. Only by building upon these foundational traits and maximizing asset returns through various DeFi mechanisms can BTCFi protocols gain the trust of Bitcoin holders and develop sustainably.
With ongoing improvements in Bitcoin mainnet technology and rising demand for Bitcoin yield, BTCFi is thriving in this market cycle. Distinct from DeFi on other chains, BTCFi has unique inherent qualities. To succeed, BTCFi protocols must build on these fundamentals and maximize returns via diverse DeFi methods, earning the trust of Bitcoin holders and fostering healthy, organic growth.
About Uniquid Layer
Uniquid Layer is a liquidity platform designed for the broader community, aiming to serve as an accessible gateway for newcomers to Bitcoin, maximizing Bitcoin yield with the highest security standards.
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