Bitcoin's $2 Trillion Conspiracy: Expanding the Boundaries of Time and Space

Original Title: “Bitcoin's $2 Trillion Conspiracy: Expanding the Boundaries of Time and Space”

Original Authors: @ BMANLead, @ Wuhuoqiu, @ Loki _ Zeng, @ Kristian _ cy, ABCDE

The major events in Crypto in 2024 are unfolding as the price of Bitcoin approaches the $100,000 mark. With the Bitcoin halving and ETF approvals, Trump is about to recognize Bitcoin as a strategic reserve. As Bitcoin delves deeper into traditional finance, it prompts us to rethink a question:

What is finance?

The essence of finance is the allocation of assets across space and time.

Typical cross-space allocation: lending, payment, trading

Typical cross-time allocation: staking, interest, options

In the past, Bitcoin was merely stored in wallets, remaining static in both time and space. Over 65% of Bitcoin has not moved for over a year, “BTC should only be stored in wallets” has become a stamped ideology.

Thus, BTCFi has not been favored for a long time.

Although Bitcoin was originally created to hedge against the traditional financial system, and Satoshi Nakamoto pointed out various potential scenarios for Bitcoin in a forum back in 2010, including multiple DeFi scenarios, the exploration of Bitcoin DeFi or financial scenarios gradually ceased as Bitcoin's positioning moved closer to that of digital gold.

On another timeline, Rune Christensen announced the vision of MakerDAO in March 2013, followed by the official launch of the first DEX on ETH—Oasis DEX—in 2016. In 2017, Stani Kulechov, still a student, founded AAVE in Switzerland. By August 2018, the familiar Bancor and Uniswap were launched, marking the beginning of a grand DeFi Summer. This also signaled that the future possibilities of DeFi were temporarily handed over to ETH at that time.

But as Bitcoin's timeline progresses to 2024, Bitcoin returns to the center of the crypto world, with its price reaching $99,759, infinitely close to the $100,000 mark, and a market cap exceeding $2 trillion. BTCFi has become a $2 trillion conspiracy, and discussions and innovations around BTCFi are quietly emerging…

I. Bitcoin's $2 Trillion Conspiracy: BTCFi

Although Ethereum opened the era of DeFi, for Bitcoin, BTCFi may be late, but it will never be absent. Ethereum, as a testing ground for DeFi, provides many references for Bitcoin, which today resembles 15th-century Europe, standing at the dawn of a new continent.

1.1 BTC Transitions from Passive to Active Asset

The increasing FOMO attributes and active management motivations of Bitcoin holders will drive Bitcoin's transition from a passive asset to an active asset, providing fertile ground for the development of BTCFi.

Institutional holdings are continuously increasing. According to data from feixiaohao, there are currently 47 companies holding $141.342 billion in BTC, accounting for 7.7% of the total circulating supply of BTC. This trend continues to accelerate after the approval of BTC ETFs. Since the beginning of the year, BTC spot ETH has brought in nearly 17,000 BTC in net inflows. Compared to early miners and hoarders, institutions are more sensitive to capital efficiency and return rates, not only showing a higher inclination to participate but also likely becoming active promoters of BTCFi.

The rise of inscriptions and the BTC ecosystem has made the composition of the BTC community more complex. Traditional BTC holders focus more on security, placing it at a higher priority, while new members show greater interest in new narratives and new assets.

ETH DeFi has gradually found its sustainable development path. Projects like Uniswap/Curve/AAVE/MakerDAO/Ethena have found ways to achieve economic cycles based on internal or external income without relying on token incentives.

Under the influence of multiple factors, the Bitcoin community's interest in scalability for BTCFi has significantly increased, and forum discussions have become more active. Last year, the proposal to [disable inscriptions] put forward by Bitcoin core developer Luke Dashjr did not receive support and was officially closed in January this year.

1.2 Infrastructure Improvements Have Paved the Way

Technical limitations have long been a reason why Bitcoin has only been viewed as a value storage tool, but this is gradually changing. The route dispute from 2010 to 2017 ultimately ended with the fork of BTC and BCH, but the improvement of scalability has not stopped. The upgrades of SegWit and Taproot paved the way for asset issuance, and inscriptions began to appear in people's endeavors. The widespread creation of assets has brought about an objective demand for trading and financialization. With the emergence of technologies like Ordinal, Side-chain, L2, OP_CAT, and BitVM, the construction of BTCFi scenarios has become genuinely feasible.

1.3 Huge Demand Drives Development

In terms of trading volume, asset diversification has driven an increase in trading frequency. The Block's data shows that the daily average Bitcoin transfers have exceeded 500k/day over the past year, with RUNES and BRC-20 dominating. Subsequently, the demands for trading, lending, credit derivation, and earning interest have become smoothly integrated, allowing BTCFi to turn Bitcoin into a productive asset, enabling BTC to earn returns from its held assets.

Source: The Block

In terms of TVL, BTC, as the cryptocurrency with absolute market value dominance, has immense potential. Currently, the total locked value (TVL) of the BTC network is approximately $1.6 billion (including L2 and sidechains), accounting for only 0.14% of Bitcoin's total market cap. In contrast, other mainstream public chains have much higher TVL to market cap ratios, with ETH at 15.7%, Solana at 5.6%, and BNBChain at 6.8%. Based on the average of these three, BTCFi still has 65 times the growth potential.

Mainstream public chains with smart contract functionality have much higher TVL to market cap ratios: Ethereum at 14%, Solana at 6%, and Ton at about 3%. Even at a 1% ratio, BTCFi has the potential for tenfold growth.

Source: Defillama, Coinmarketcap

II. The Year of BTCFi

So by 2024, as BTC soars to $2 trillion, it also welcomes the inaugural year of BTCFi.

The combination of Bitcoin and "finance" instantly opens up the possibility of $2 trillion, expanding the boundaries of Bitcoin's time and space.

As we mentioned earlier: the essence of finance is the allocation of assets across space and time.

Thus, Bitcoin finance BTCFi represents the allocation of Bitcoin across space and time.

Cross-time allocation: enhancing Bitcoin's earning attributes, such as staking, time locks, interest, options, etc., for example:

• Opening the time dimension for Bitcoin @ babylonlabs_io
• Bitcoin earning entry @ SolvProtocol
• "Semi-centralization may be the optimal solution" @ Lombard_Finance
• "Self-contained Pendle" @ LorenzoProtocol
• A chain born for BTCFi @ use_corn

Cross-space allocation: enhancing Bitcoin's liquidity, such as lending, custody, synthetic assets, etc., for example:

• Custody platforms @ Antalpha Global, @ Cobo_Global, @ SinohopeGroup
• Lending newcomer @ avalonfinance_
• CeDeFi pioneer @ bounce_bit
• A flourishing Wrapped BTC
• Stablecoin newcomer @ yalaorg

Financial applications have not only returned to the endeavors of BTC ecosystem participants but have also birthed entirely new possibilities. Innovative BTCFi projects have begun to emerge in droves, forming a financial landscape for Bitcoin:

Source: ABCDE Capital

Whether making "digital gold" earn interest or enhancing its liquidity, these two core functions of BTCFi align perfectly with Bitcoin's current main narrative. Regardless of whether the market is bullish or bearish, as long as BTC remains unchanged, as long as BTC continues to be recognized as the most acknowledged digital gold in the circle, the BTCFi track is unlikely to be disproven, or rather, "does not need" to be disproven.

Taking gold as a corresponding example, the value of gold is typically supported by three main pillars:

1. Jewelry and industrial uses
2. Investment
3. Strategic reserve demand from central banks

From the perspective of investment demand, the launch of gold ETFs 20 years ago propelled gold prices to soar sevenfold. The reason is that before ETFs, the only channel for gold investment was physical gold, which involved high barriers for many due to insurance, transportation, and storage requirements. The gold ETF, which does not require storage and can be traded like stocks, is undoubtedly a revolutionary existence that greatly enhances the liquidity and investment convenience of gold.

Conversely, looking at BTC, the BTC ETF clearly does not have the transformative nature of the gold ETF because the trading threshold for users to trade this "digital gold" is already low. The ETF merely represents further compliance, regulation, and ideological advancement. Therefore, the driving effect on BTC prices is likely not as significant as that of gold ETFs. However, BTCFi, by endowing Bitcoin with time + space financial allocation attributes, makes BTC more "useful" than before, more akin to gold's jewelry and industrial uses. Thus, compared to Bitcoin ETFs, BTCFi may have a greater long-term impact on the enhancement of BTC's value and price.

2.1. Time: Enhancing Bitcoin's Earning Attributes

2.1.1. Opening the Time Dimension for Bitcoin with Babylon

The concept of BTCFi cannot overlook Babylon, as it is the foundation for the true meaning of "on-chain earning BTC."

As is well known, BTC uses POW, which does not have the concept of inflation/earning, so it cannot have a relatively certain annual issuance return of about 3-4% (adjusted according to the staking ratio curve) like ETH's POS. However, with Eigenlayer introducing the concept of Restaking into the circle, people suddenly realized that if Restaking is a bonus for ETH, it is undoubtedly a lifeline for BTC.

Of course, you cannot directly throw BTC into Eigenlayer; they are fundamentally different chains. Technically, it is also impossible to fully replicate an Eigenlayer on the BTC chain, as BTC does not even have Turing-complete smart contracts. So, is it possible to bring the core concept of Eigenlayer's Restaking for POS Security to BTC? This is what Babylon aims to achieve.

In simple terms, Babylon utilizes existing Bitcoin scripts and advanced cryptography to simulate staking and slashing functions based on Bitcoin, and the entire process does not involve bridges or third-party wraps, which are common terms that pose security and decentralization threats in the EVM ecosystem. Because Bitcoin's script allows for the concept of "time locks," which permits users to customize a lock-up period during which that Bitcoin (UTXO) cannot be transferred, its functionality is remarkably similar to staking on POS chains. Babylon employs this feature, ensuring that BTC participating in staking does not leave the BTC chain but is simply locked in a "staking address" on Bitcoin through time-lock technology.

Source: Babylon

With BTC locked via scripts, how does Babylon implement a slashing mechanism in the absence of contracts?

This brings us to the advanced cryptographic technology used by Babylon—EOTS (Extractable One-Time Signatures). When a signer uses the same private key to sign two pieces of information simultaneously, the private key will be automatically exposed. This is equivalent to the most common security breach hypothesis on POS chains—"at the same block height, a validator signs two different blocks." By exposing the private key through malicious actions, Babylon effectively implements a mechanism for "automatic slashing."

Through the "Restaking" technology, Babylon is primarily used to enhance the security of POS chains. However, to achieve a complete Eigenlayer technology stack (such as functionalities similar to EigenDA) or more complex slashing mechanisms, it requires collaboration with other projects within the Babylon ecosystem.

Babylon adopts an innovative approach: by self-custodially locking Bitcoin and combining on-chain staking and slashing functions, it provides BTC holders with a trustless way to earn returns for the first time. Previously, BTC holders could only rely on centralized exchanges (CEX) and other wealth management platforms to earn returns or convert BTC to WBTC to participate in Ethereum's DeFi ecosystem. These methods all rely on trust assumptions regarding centralized security.

Therefore, although Babylon is benchmarked against Ethereum's Eigenlayer Restaking ecosystem, due to BTC's inherent lack of a staking mechanism, we prefer to view Babylon as an important part of building the BTC staking ecosystem.

2.1.2 Bitcoin Earning Entry Solv Protocol

When discussing the staking ecosystem, another project—Solv Protocol—must be mentioned. Solv is not a direct competitor to Babylon but can create various LST (liquid staking tokens) products by introducing a staking abstraction layer. The sources of yield for these LSTs can be quite diverse, such as:

• Staking returns from staking protocols (like Babylon);
• Returns from POS network nodes (like CoreDAO, Stacks);
• Or returns from trading strategies (like Ethena).

Currently, Solv has launched several successful LST products, including Solv BTC.BBN (Babylon LST), Solv BTC.ENA (Ethena LST), and Solv BTC.CORE (CoreDAO LST), all performing excellently. According to DeFiLlama data, the current TVL (total locked value) of Solv BTC on the Bitcoin mainnet has surpassed the Lightning Network, ranking first.

Source: Solv

Its earning methods include but are not limited to the following:

• SolvBTC - Can be minted on 6 chains, fully circulated on 10 chains, and connected to over 20 DeFi protocols to earn returns.
• Solv BTC.BBN - BTC can enter Babylon through Solv to earn returns.
• Solv BTC.ENA - BTC can enter Ethena through Solv to earn returns.
• Solv BTC.CORE - BTC can enter Core through Solv to earn returns.
• SolvBTC.JUPITER and other subsequent net value growth-type yield-bearing assets.

Source: Solv

Therefore, rather than viewing Solv as a BTC staking protocol, we prefer to describe it as a "BTC Yu'ebao." Solv provides diverse sources of returns, whether from staking returns, node returns, or trading strategy returns, allowing BTC holders to have a more flexible way to earn.

Moreover, it is worth noting that Solv currently exhibits the most impressive data performance among all BTCFi protocols:

1. Wide Coverage: Solv is currently circulating on 10 blockchains and connected to over 20 DeFi protocols.

2. Innovative Collaboration: For example, Solv's collaboration with Pendle provides Bitcoin users with nearly 10% fixed yield APY, with LP market-making returns reaching 40%.

3. Broad Acceptance: The number of SolvBTC holders has exceeded 200,000, with a total market cap exceeding $1 billion.

4. Strong Reserves: SolvBTC's Bitcoin reserves have surpassed 20,000 BTC.

Based on these achievements, Solv Protocol has gained a leading position in the BTCFi space and continues to iterate on its products. The next focus will be on launching more types of LST products. It is reported that Solv plans to collaborate with Jupiter to launch a new product called Solv BTC.JUP, which will bring the market-making returns of Perp DEX into BTC LST products, further expanding the boundaries of BTC staking.

At the same time, Babylon provides a trustless mechanism that allows BTC holders to earn returns similar to staking. This also paves the way for projects to compete for a position similar to Lido, aiming to create liquidity assets like stETH. Although Babylon has achieved secure locking of Bitcoin and provided basic returns, to further release BTC's liquidity and enhance returns, BTC locked on Babylon can participate in EVM and non-EVM DeFi applications in the form of warrant tokens. Fully leveraging the unique composability of blockchain will be key to building the LST ecosystem, and Solv BTC.BBN is a successful case.

In addition to Solv, there are other heavyweight projects in the market competing for the LST ecosystem, such as Lombard and Lorenzo. These LST projects generally align in technical directions for releasing BTC liquidity and participating in DeFi yields.

Solv's core advantage lies in its ability to provide Bitcoin users with a richer variety of yield types, including re-staking yields, validator node yields, and trading strategy yields. With this diversified yield model, Solv offers Bitcoin users more flexible and diverse choices.

2.1.3 Move Ecosystem's BTCHub: Echo Protocol

Echo is the BTC Fi center of the Move ecosystem, providing a one-stop financial solution for Bitcoin within the Move ecosystem, enabling BTC to seamlessly interoperate with the Move ecosystem.

Echo is the first to introduce BTC liquid staking, re-staking, and yield infrastructure into the Move ecosystem, bringing a new category of liquid assets to the Move ecosystem. By collaborating with the Bitcoin ecosystem, Echo seamlessly integrates all native BTC layer 2 solutions, including Babylon, and supports various BTC liquid staking tokens, making Echo a key entry point for attracting new capital into the Move DeFi ecosystem.

Echo's flagship product, aBTC, is a cross-chain liquid Bitcoin token backed 1:1 by BTC. This innovation promotes the DeFi interoperability of Bitcoin, allowing users to earn actual returns within ecosystems like Aptos, and aBTC will receive comprehensive support across the entire Aptos DeFi network.

Echo introduces re-staking into the Move ecosystem for the first time through its innovative product eAPT. This will enable re-staking to protect Move VM chains or any projects developing their own blockchains, allowing them to rely on Aptos for security and validation.

Thus, Echo will become the BTChub of the Move ecosystem, providing four products centered around Bitcoin:

• Bridge: Allows assets from BTC L2 to be bridged to Echo, enabling interoperability between the Move ecosystem and BTC L2.
• Liquid Staking: Stake BTC on Echo to earn Echo points.
• Re-staking: Synthesize Move ecosystem's LRT token aBTC, allowing Bitcoin to interoperate within the Move ecosystem and earn multi-layered returns.
• Lending: Deposit APT, uBTC, and aBTC to provide staking lending services, sharing the profits of lending operations with users to earn nearly 10% APT returns.

2.1.4 "Semi-centralization may be the optimal solution" Lombard

Lombard's core feature lies in its balance between security and flexibility for its L BTC assets. Generally, absolute decentralization can provide higher security but often sacrifices flexibility. For instance, the significant market cap gap between Ren BTC and T BTC compared to W BTC is a typical case of this trade-off. While completely centralized management can offer maximum flexibility, its development ceiling is relatively limited due to trust assumptions and potential security risks. This is also one reason why W BTC's market cap proportion has always been low in BTC's total market cap.

Lombard cleverly finds a balanced solution between security and flexibility. While maintaining relative security, it maximizes the flexibility of its L BTC, thereby opening up new development space for BTC liquid assets.

Source: Lombard

Compared to traditional multi-signature Mint/Burn models, Lombard introduces the more secure "Consortium Security Alliance" concept. This concept first appeared in early consortium chains and differs from the multi-signature nodes controlled by project parties in many current DeFi projects, especially cross-chain bridge projects. Lombard's security alliance consists of highly reputable nodes, including project parties, well-known institutions, market makers, investors, and exchanges, with consensus achieved through the Raft algorithm.

Although this mechanism cannot be fully termed "100% decentralized," its security is far superior to traditional multi-signature models while retaining the characteristics of multi-signature 2/3 data notarization, full-chain circulation, flexible minting, and redemption. Moreover, complete decentralization does not necessarily equate to absolute security. For example, whether POW or POS, the attack costs and security models can be calculated based on mechanism design and market cap. Aside from high-market-cap public chains like BTC, ETH, and Solana, most decentralized projects may not be as secure as Lombard's "security alliance" model. Through this design, Lombard achieves a balance between security and flexibility, providing users with a trustworthy and efficient BTC liquidity solution.

In addition to the security alliance design, Lombard also utilizes CubeSigner, a hardware-supported non-custodial key management platform. It has strict policy restrictions to prevent key theft, mitigate violations, hacks, and internal threats, and prevent key misuse, adding another layer of security for LBTC.

The $16 million seed round financing led by Polychain undoubtedly signals Lombard's resource richness in the circle, which greatly aids the credibility of its Consortium nodes and future integrations with DeFi and other public chain projects. LBTC is bound to be one of the strongest competitors to WBTC.

Source: Lombard

2.1.5 "Self-contained Pendle" Lorenzo

In contrast to Lombard's unique advantages in asset security, Lorenzo, as the Babylon LST entry backed by Binance, also exhibits highly attractive features.

In the current wave of DeFi innovation, traditional DEX and lending protocols mostly continue the inertia of DeFi Summer or "live off past glories." After the collapse of Terra, aside from Ethena, which can barely be considered relatively innovative, other innovations appear lackluster. The only noteworthy tracks are LST (liquid staking tokens) and LRT (liquid re-staking tokens), thanks to the LST effect brought about by Ethereum's transition to POS and the leverage effect sparked by Eigenlayer Restaking.

In this track, the biggest winner is undoubtedly Pendle. It is no exaggeration to say that the vast majority of yield-bearing assets in the Ethereum ecosystem ultimately flow to Pendle. The design of separating principal and interest brings a new gameplay to DeFi: users looking to control risks can obtain a comprehensive hedging mechanism through Pendle, while aggressive players seeking higher yields can leverage their returns.

Lorenzo clearly aims to integrate all these aspects in this track. After Babylon enabled staking functionality, its LST products possess operational capabilities similar to stETH, Renzo, and EtherFI's LRT assets. Lorenzo's LST products can be split into two types of tokens: liquidity principal token LPT (st BTC) and yield accumulation token YAT. Both types of tokens can be freely transferred and traded, allowing holders to earn returns or withdraw staked BTC separately. This design not only enhances asset flexibility but also provides users with more investment choices.

Source: Lorenzo

Through this design, Lorenzo unlocks more possibilities for participating in DeFi by staking BTC based on Babylon. For example, LPT and YAT can establish trading pairs with ETH, BNB, and USD stablecoins, providing arbitrage and investment opportunities for different types of investors. Additionally, Lorenzo can support lending protocols around LPT and YAT, as well as structured Bitcoin yield products (such as fixed-income wealth management products for BTC). In other words, the vast majority of innovative gameplay currently on Pendle can be referenced and realized by Lorenzo.

As one of the few Bitcoin ecosystem projects personally backed by Binance and the only LST project in the current BTC FI track with "Pendle" attributes, Lorenzo undoubtedly deserves significant market attention. This project not only expands the boundaries of BTC liquidity but also introduces more flexible yield management and investment methods into the DeFi ecosystem, providing investors with more diversified choices.

2.1.6 A Chain Born for BTCFi: Corn

Corn is the first Ethereum L2 project that uses Bitcoin as Gas, aiming to provide users with various financial services, including lending, liquidity mining, and asset management. This chain is entirely built around the financial needs of Bitcoin, and its uniqueness lies in mapping Bitcoin (BTC) as the native Gas token BTCN for the network, allowing Bitcoin to be used more widely within the Ethereum ecosystem.

Core Features:

BTCN Token:

Corn introduces the BTCN token as the Gas fee for transactions on the Corn network. BTCN can be seen as a Bitcoin mapping in ERC-20 format, similar to WBTC, but with differences in technical implementation. The benefits of using BTCN as Gas include reducing transaction costs, improving the efficiency of Bitcoin usage, and creating new value capture opportunities for Bitcoin.

Ecosystem "Crop Circle":

Corn proposes an ecosystem concept called "Crop Circle," aiming to recycle the value of Bitcoin in various ways to generate additional returns. Users can stake BTCN to earn network returns, participate in liquidity mining, lending, and develop derivative markets based on BTCN, among other comprehensive services.

Token Economic Model:

Introducing $CORN and $popCORN. $CORN serves as the base token, which users can obtain by staking BTCN or participating in liquidity provision; $popCORN is the governance token obtained by locking $CORN, granting users the right to participate in governance and receive additional rewards. This model encourages users to hold tokens long-term and enhances community engagement through dynamic weighting and locking mechanisms.

Corn provides an innovative L2 solution by bringing Bitcoin into the Ethereum ecosystem, aiming to create more earning opportunities for Bitcoin holders.

2.2. Space: Enhancing Bitcoin's Liquidity

2.2.1 Custody Platforms Antalpha, Cobo, Sinohope

While decentralization is the absolute "politically correct" stance in the circle, if we exclude the black swan event of FTX's collapse, the leading centralized trading/custody/financial service platforms in the circle actually perform much better in terms of fund security than most decentralized platforms. The losses caused by hacks on non-custodial wallets/DeFi protocols exceed those of centralized custody platforms by an order of magnitude each year.

Thus, leading Bitcoin custody and financial service platforms play an undeniable role in releasing Bitcoin liquidity and endowing Bitcoin with cross-time or space allocation functions.

Here are three examples:

Antalpha - With the largest Bitcoin community in the circle, a strategic partner of Bitmain, Antalpha Prime's ecological products develop around the BTC ecosystem, providing institutions with hardware energy financing services in BTC production, such as mining machine financing, electricity financing, and BTC custody storage MPC solutions.

Cobo - The name of Cobo is known throughout the circle; the Cobo custody wallet was co-founded by Shen Yu and Dr. Jiang Changhao. To date, it has over 100 million addresses and $200 billion in transaction volume. Cobo now offers various solutions, including MPC and smart contract wallets, and is a trusted one-stop wallet provider for many institutions and users.

Sinohope - A licensed listed company in Hong Kong, in addition to wallet solutions, it also provides a one-stop full-stack blockchain solution, including L1/L2 browsers, faucets, basic DEX, lending, NFT marketplaces, and other comprehensive services.

These platforms have a large number of real B-end users and consistently maintain high security levels. Therefore, many DeFi protocols have collaborated with the above platforms, where the concepts of centralization and decentralization are not so clearly defined, finding a relatively stable balance in technology and commercialization from the perspective of security and trust.

2.2.2 Lending New Star Avalon

Avalon is a decentralized lending platform focused on providing liquidity for Bitcoin holders. Users can use Bitcoin as collateral for loans, and Avalon automates the lending process using smart contracts. The fixed lending rates offered by Avalon are as low as 8%, making it attractive in the competitive DeFi market.

Focus on Bitcoin: Avalon has launched BTC layer 2 services within Bitlayer, Merlin, Core, and BoB, focusing on providing lending services for Bitcoin holders, meeting the liquidity needs of Bitcoin users.

Collateral Management: Avalon employs an over-collateralization mechanism, requiring users to provide Bitcoin exceeding the loan amount as collateral to reduce platform risk.

Data Performance: The platform currently exceeds $300 million in TVL and is actively collaborating with several BTCFi projects such as SolvBTC, Lorenzo, and SwellBTC to expand its user base.

2.2.3 CeDeFi Pioneer Bouncebit

BounceBit is an innovative blockchain platform focused on empowering Bitcoin assets, transforming Bitcoin from a passive asset into an active participant in the crypto ecosystem through the integration of centralized finance (CeFi) and decentralized finance (DeFi), along with re-staking strategies.

Features of BounceBit:

BTC Re-staking: BounceBit allows users to deposit Bitcoin into the protocol and earn additional returns through re-staking. This increases the liquidity and earning opportunities of the assets. Users can deposit various types of on-chain Bitcoin assets into BounceBit, including native BTC, WBTC, renBTC, etc.

Dual Token PoS Consensus Mechanism: BounceBit employs a hybrid PoS mechanism of BTC + BB (BounceBit's native token) for validation. Validators accept both BBTC (the Bitcoin token issued by BounceBit) and BB tokens as staking, enhancing the network's resilience and security while expanding the participant base.

BounceClub: BounceBit provides the BounceClub tool, enabling users without programming backgrounds to create their own DeFi products.

Liquidity Custody: BounceBit introduces the concept of liquidity custody, allowing collateralized assets to remain liquid while providing more earning opportunities.

This differs from traditional locking models, offering users greater flexibility.

BounceBit provides more earning opportunities for Bitcoin holders through its innovative re-staking model and dual-token PoS consensus, promoting Bitcoin's application in the DeFi ecosystem. Its liquidity custody and BounceClub tools also make DeFi development simpler and more user-friendly.

2.2.4 Stablecoin New Star Yala

Yala is a stablecoin and liquidity protocol on BTC. Yala enables its stablecoin $YU to flow freely and securely across various ecosystems through its self-built modular infrastructure, releasing BTC liquidity and bringing significant capital vitality to the entire crypto ecosystem.

Core products include:

• Over-collateralized stablecoin $YU: This stablecoin is generated through over-collateralizing Bitcoin, and the infrastructure is based not only on the native Bitcoin protocol but can also be deployed freely and securely in EVM and other ecosystems.

• MetaMint: A core component of $YU, allowing users to conveniently mint $YU using native Bitcoin across various ecosystems, injecting Bitcoin's liquidity into these ecosystems.

• Insurance Derivatives: Providing comprehensive insurance solutions within the DeFi ecosystem, creating arbitrage opportunities for users.

Yala's series of infrastructures and products serve its vision—bringing Bitcoin's liquidity into various crypto ecosystems. Through $YU, Bitcoin holders can earn additional returns in various cross-chain DeFi protocols while maintaining the security and stability of the Bitcoin mainnet; through the governance token $YALA, Yala achieves decentralized governance across its products and ecosystems.

2.2.5 Flourishing Wrapped BTC

WBTC

Wrapped Bitcoin (WBTC) is an ERC-20 token that connects Bitcoin (BTC) with the Ethereum (ETH) blockchain. Each WBTC is backed by 1 Bitcoin, ensuring its value is tied to the BTC price. The launch of WBTC allows Bitcoin holders to use their assets within the Ethereum ecosystem and participate in decentralized finance (DeFi) applications. This greatly enhances Bitcoin's liquidity and use cases in the DeFi space.

WBTC has always been the leader in Wrapped BTC, but on August 9, the WBTC custodian BitGo announced a joint venture plan with BiT Global to migrate the BTC management address of WBTC to the joint venture's multi-signature. While this seemed like a routine corporate collaboration, it sparked a huge uproar due to BiT Global's ties to Sun Yuchen. MakerDAO quickly initiated a proposal to "reduce the collateral scale of WBTC," demanding that the collateral amount related to WBC in the core treasury be reduced to zero. The market's concerns about WBTC also provided new opportunities for new types of Wrapped BTC.

BTCB

BTCB is a Bitcoin token on Binance Smart Chain that allows users to trade and use it on BSC. BTCB is designed to enhance Bitcoin's liquidity while leveraging BSC's low transaction fees and fast confirmation times.

Binance is actively expanding the functionality of BTCB, planning to launch more DeFi products related to BTCB on BSC. These new products will include lending, derivatives trading, etc., aimed at enhancing the utility and liquidity of BTCB. BTCB's application on BSC has already received support from multiple DeFi protocols, including Venus, Radiant, Kinza, Solv, Karak, pStake, and Avalon. These protocols allow users to use BTCB as collateral for lending, liquidity mining, and stablecoin minting.

Binance aims to strengthen BTCB's market position through these measures and promote broader applications of Bitcoin within the BSC ecosystem. The introduction of BTCB not only provides Bitcoin holders with new use cases but also injects more liquidity into the DeFi ecosystem of BSC.

dlcBTC (now iBTC) @ibtcnetwork

iBTC is a Bitcoin asset based on Discrete Log Contracts (DLC) technology, designed to provide users with a secure and privacy-preserving way to create and execute complex financial contracts. Its core feature is complete decentralization, allowing users to use dlcBTC without relying on third-party custody or multi-signature mechanisms, ensuring users have full control over their assets, thereby reducing the risks associated with centralization. Additionally, iBTC's security benefits from its unique self-wrapping mechanism, ensuring that users' Bitcoins remain under their control, with only the original depositors able to withdraw funds, effectively preventing assets from being stolen or seized by governments.

iBTC also utilizes zero-knowledge proof technology to enhance the privacy and security of transactions. Users can execute complex financial transactions within contracts without publicly disclosing the specific details of the transactions, thereby protecting personal information. Through this innovative mechanism, iBTC enables Bitcoin holders to participate in decentralized finance (DeFi) activities while maintaining ownership and control over their assets.

iBTC is the most decentralized solution among all Wrapped BTC, capable of addressing the transparency issues of centralized custody in its commercialization process.

In addition to the above Wrapped BTC solutions, there are also various BTC solutions such as F BTC, M-BTC, Solv BTC, etc.

III. Conclusion:

Since its inception, Bitcoin has existed for 15 years. Bitcoin is no longer just digital gold but a $2 trillion financial system. A wave of Builders continues to expand the boundaries of Bitcoin, extending it into a new track—BTCFi. We have the following judgments:

1. The essence of finance is the allocation of assets across time and space, with typical cross-space allocations including lending, payment, and trading, and typical cross-time allocations including staking, interest, and options. As Bitcoin's market cap reaches $2 trillion, the demand for cross-temporal and spatial allocation around Bitcoin is gradually emerging, forming BTCFi scenarios.

2. Bitcoin is about to become a national reserve in the United States, further becoming an asset for national and institutional allocation, leading to a large amount of institutional-level financial demand around Bitcoin, such as lending and staking, generating institutional-level BTCFi projects.

3. The improvement of underlying infrastructure such as Bitcoin asset issuance, layer 2 networks, and staking has also paved the way for BTCFi scenarios.

4. The TVL of the Bitcoin network is approximately $2 billion (including L2 and sidechains), accounting for only 0.1% of Bitcoin's total market cap, while Ethereum is at 15.7% and Solana at 5.6%. We believe BTCFi still has tenfold growth potential.

5. BTCFi unfolds around two major directions: first, enhancing Bitcoin's earning attributes, represented by projects such as Babylon, Solv, Echo, Lombard, Lorenzo, and Corn; second, enhancing Bitcoin's liquidity, represented by projects such as Wrapped BTC, Yala, and Avalon.

6. With the development of BTCFi, Bitcoin will transition from a passive asset to an active asset; from a non-yielding asset to a yielding asset.

7. Comparing to the history of gold, the launch of gold ETFs 20 years ago drove gold prices up sevenfold. The essence is transforming gold from a passive asset into a financial asset, allowing for more financial operations based on gold ETFs. Today, BTCFi also endows Bitcoin with financial attributes of time and space, enhancing Bitcoin's financial scenarios and value capture, which will have a significant impact on Bitcoin's value and price in the long run.