Has BTCFi died? Three perspectives on redefining its infrastructure-era value
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Has BTCFi died? Three perspectives on redefining its infrastructure-era value
As for whether BTCFi is dead, I think it's too early to make that judgment, and there's a misunderstanding about the evolutionary logic of the BTCFi space.
Navigating Web3 tides with focused insightsLittle did we expect the topic "BTCFi is dead" to emerge so quickly. Indeed, since @babylonlabs_io launched, the market had anticipated that Babylon would boost the BTCFi sector with its ecosystem, but clearly things didn't go as planned. As for whether BTCFi is truly dead, I believe it's too early to make such a judgment, and doing so reflects a misunderstanding of BTCFi's evolutionary logic. Following this line of thought, here are a few observations I'd like to share:
1) Directly linking Babylon's post-launch market performance to the overall prospects of the BTCFi sector is clearly misguided.
Babylon enables users' BTC assets to be locked on the Bitcoin mainnet via script-based agreements while simultaneously offering "security consensus services" across multiple BTC Layer2 networks, thereby accessing rich yields provided by these extended chains. From the supply side, Babylon's technological innovation is indeed valuable. But from the demand side— who will purchase these security consensus services, and who will provide sustainable yields?
Clearly, judging from B2B demand among various large, mid-sized, and emerging chains for "security consensus," BTCFi’s outlook may fall short of expectations. However, from the C2C user demand perspective, every BTC holder has a continuous need to generate yield on their BTC holdings. The ultimate goal of BTCFi technical solutions is to tap into trillions of dollars in traditional financial capital. The real endgame of the BTCFi narrative is integrating Bitcoin's unique decentralized consensus with global financial liquidity.
Viewed through this lens, in the post-ETF era, the BTCFi story has only just begun—where is the talk of it being dead coming from?
2) In fact, technical solutions around BTCFi have been steadily maturing—from early EVM-Compatible designs, to UTXO Stack architectures, then zkVM protocol frameworks, RGB client verification frameworks, Optimistic Challenge Protocol (OCP) architectures, and beyond. At one point, BTC-related technical solutions appeared chaotic and fragmented, yet beneath the surface, they've naturally evolved and converged through market forces.
The following discussion focuses on a comparison between OP_CAT and BitVM2 technical approaches, arguing that BitVM2 holds greater potential because it doesn't require changes to Bitcoin's existing scripting language:
1. OP_CAT Path – Logically sound, but requires modification of Bitcoin opcodes, making it difficult to gain acceptance from core developers.
2. BitVM2 + OCP Mechanism – Leverages an OCP challenger mechanism to enable off-chain computation and interaction, triggering on-chain protocol execution on the Bitcoin mainnet when a "challenge" arises, with Bitcoin Layer1 acting as the arbiter to ensure security.
Immature solutions will be eliminated or corrected under market pressure. For instance, early Bitcoin cross-chain solutions mostly relied on centralized custodial models, whereas today, the combination of BitVM2 and OCP can already provide trustless, natively secure cross-chain mechanisms.
Once mature, non-invasive technical solutions like BitVM2—those not requiring changes to Bitcoin's core code—will usher Bitcoin into its own "OP moment," much like how Ethereum experienced an explosive ecosystem boom once Optimistic Rollups gained recognition.
3) Let technical solutions continue to compete and evolve internally, because there's another deeper layer: the biggest challenge facing BTCFi isn't technical feasibility, but rather sustainable tokenomics.
Many current solutions rely heavily on token issuance and incentives, which is clearly unsustainable. A truly sustainable BTCFi economic model should be built upon actual network usage value. When Layer2 networks process transactions and collect fees, redistributing part of those earnings back to BTC stakers creates a value cycle grounded in real demand.
This model does not depend on purchasing demand from external chains, but instead generates revenue by serving its own ecosystem—making it significantly more sustainable in economic design.
That's all.
In summary, shifting perspectives reveals a far brighter future for BTCFi. The sector is still in the early phase of infrastructure building, technical solutions are converging, tokenomics are improving, and the gateway to global financial liquidity through ETFs has only just opened.
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Haotian | CryptoInsight
