Successful Strategies Behind the BTCFi Ecosystem Rise

The Bitcoin finance (BTCFi) ecosystem has achieved significant development in 2024. With the rise of BTC scaling solutions and BTC liquid staking tokens (LST), Bitcoin is transforming from a static store of value to an asset that can participate in more on-chain yield scenarios, greatly enhancing its application potential within the entire DeFi ecosystem.

Core, BOB, and Corn are representative rise cases in the BTCFi field for the second half of the year. These ecosystems have greatly activated the liquidity of BTC assets through a series of actions centered around "yield generation". As the liquidity of BTC gradually releases, there is still tremendous growth potential in the on-chain accumulation of assets within the BTCFi ecosystem.

1. Background

1.1 BTC asset flow path on the chain

The flow direction of BTC and its anchored assets on the chain can be divided into three layers:

• Layer 1: Native BTC
• Second Layer:
  1. wrapped BTC issued based on centralized custody
  2. mapping assets running on BTC L2 and sidechains
  3. liquidity staking BTC
• Layer 3: Various BTC derivative assets in downstream DeFi scenarios

1.2 BTC asset market status

From the issuance situation of BTC-pegged assets on the three major networks of Ethereum, Arbitrum, and BNB, it can be seen that centralized custody issued wrapped BTC still occupies the vast majority of the market share, with WBTC and BTCB accounting for over 75% of the total circulation of BTC-pegged assets.

LBTC and SolvBTC.BBN and other BTC LSTs have rapidly risen in the past few months under the narrative of BTC (re) staking, becoming another emerging force in the BTC anchored asset market. Currently, the total market size of BTC LSTs is approximately 25.1K BTC, with the Lombard and Solv Protocol accounting for over 70% of the market share.

2. Asset Accumulation Strategy of the BTCFi Ecosystem

2.1 Core: Focus on the dual-driven ecological growth of incremental assets and token incentives.

Core is an L1 scaling solution driven by BTC, allowing users to earn passive income through non-custodial Bitcoin staking. Currently, Core's TVL has reached $591.5M, with a rise of 4757.9% over the past six months.

Core TVL rise is primarily driven by the following factors:

1. Focus on the incremental market of BTC pegged assets to enhance ecological liquidity and absorb the rapidly growing Solv derivative assets.

2. Build supporting native protocols and quickly integrate with the BTCFi project to establish a complete ecological application.

3. The incentive structure is supported by the airdrop and market performance of the native token $CORE, forming a multi-dimensional ecological synergy.

2.2 Corn: The points derivative gameplay efficiently attracts BTC LST market liquidity

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as a gas fee and economic incentive tool. Currently, Corn has not launched its mainnet, but it has effectively attracted $425.8M in funds through a deposit activity initiated by multiple parties.

Corn's main rise strategy includes:

1. Leading the BTC LST points derivative gameplay in collaboration with Pendle, providing diverse strategy options for BTC LST holders.

2. attracted initial liquidity through the TVL BootStrap Campaign

2.3 BOB: Secure bridging and strong ecosystem support asset aggregation

BOB is an innovative hybrid Layer2 network that combines the advantages of Bitcoin and Ethereum. Currently, BOB's total TVL has reached $65.7M, with its asset composition mainly coming from WBTC.

BOB's main rise strategy includes:

1. launched the one-click liquid staking service BOB Stake, integrating multiple liquid staking service providers and DeFi platforms.

2. attracts users to participate in ecological construction through the BOB Fusion incentive program.

3. Summary

Core, BOB, and Corn have adopted differentiated strategies in asset accumulation. The key to effectively achieving ecological capital accumulation lies in connecting and incentivizing large-scale incremental anchor assets, and forming combinable yield strategies through diversified DeFi applications while providing multi-party incentive expectations.

Currently, the TVL of BTC-backed assets in L2 and sidechain expansion networks is approximately $1.6 billion, accounting for only 0.14% of the total market cap of BTC. As BTC liquidity is gradually released in the future, the scale of BTC assets on various chains and the application scenarios of the BTCFi ecosystem still have huge rise potential.