Comprehensive Interpretation of BTCFi: From Lending to Staking, Build Your Own Mobile Bitcoin Bank

As Bitcoin's position in the financial market becomes increasingly solidified, the BTCFi sector is rapidly emerging as the forefront of cryptocurrency innovation. BTCFi encompasses a range of Bitcoin-based financial services, including lending, staking, trading, and derivatives. This article provides an in-depth analysis of several key tracks in BTCFi, exploring stablecoins, lending services, staking services, re-staking services, and the combination of centralized and decentralized finance.

BTCfi Track Overview

BTCFi is like a mobile Bitcoin bank, a series of financial activities centered around Bitcoin. According to data from CryptoCompare and CoinGecko, the BTCFi market size reached approximately 10 billion USD in 2023. It is expected that by 2030, the BTCFi market will grow to a scale of 1.2 trillion USD. Over the past decade, the BTCFi market has shown significant growth potential, attracting more and more institutions like Grayscale, BlackRock, and JPMorgan.

The participation of institutional investors has not only brought in a significant influx of funds, increasing market liquidity and stability, but also enhanced the maturity and regulation of the market, bringing higher recognition and trust to the BTCFi market.

BTCFi Sector Segmentation

1. Stablecoin

Stablecoins are a type of cryptocurrency designed to maintain a stable value. They are typically pegged to fiat currencies or other valuable assets to reduce price volatility. Based on the degree of centralization, they can be classified into centralized stablecoins (such as USDT, USDC, FDUSD) and decentralized stablecoins (such as DAI, FRAX, USDe).

In the BTC ecosystem, the stablecoin projects worth focusing on are decentralized stablecoins. The main projects include:

• Bitsmiley Protocol: The first native stablecoin project in the BTC ecosystem
• Bamk.fi (NUSD): synthetic US dollar on Bitcoin L1
• Yala Labs: By building its own modular infrastructure, its stablecoin $YU can flow freely and securely between various ecosystems.
• Satoshi Protocol: The first CDP stablecoin protocol in the BTC ecosystem, based on BEVM ecosystem
• BTU: The first decentralized stablecoin project in the Bitcoin ecosystem

2. Lending track

Bitcoin lending is a financial service that allows users to obtain loans by using Bitcoin as collateral or to earn interest by lending out Bitcoin. Major projects include:

• Liquidium: A P2P lending protocol running on Bitcoin
• Shell Finance: A stablecoin protocol based on BTC L1

3. Staking track

Staking occurs at the network level and is used entirely to protect the network. Major projects include:

• Babylon: A Bitcoin staking protocol, with its core component being a POS public chain compatible with Cosmos IBC.

4. Restaking Track

ReStaking is the use of liquid staking token assets to stake with validators on other networks and blockchains to earn more rewards. Major projects include:

• Chakra: Innovative Modular Settlement Infrastructure
• Bedrock: Multi-Asset Liquidity Re-Staking Protocol
• Lorenzo protocol: A BTC liquidity financial layer based on Babylon

5. Decentralized Custody

Recently, BitGO, the entity behind wBTC, announced the transfer of wBTC control, triggering discussions in the market regarding the security of WBTC. The main related projects include tBTC, FBTC, and dlcBTC.

6. Cedefi

CeDeFi is a financial service that combines the characteristics of centralized finance and decentralized finance. The main projects include:

• Solv Protocol: Unified Bitcoin Liquidity Matrix
• Bouncebit: BTC Restaking chain, fully compatible with EVM
• Lorenzo protocol: A BTC liquidity financial layer based on Babylon

7. DEX AMM Swap

DEX AMM Swap is a decentralized trading mechanism that operates on the blockchain. Main projects include:

• Bitflow: Focused on sustainable BTC yield
• Dotswap: Native AMM DEX on the BTC mainnet
• Unisat AMM Swap: Focused on Ordinals and brc-20 wallet applications

Comparison of Different Asset Classes

In terms of security, yield, and ecological richness, BTCFi has shown unique advantages and potential compared to ETHFi and SOLFi. The security of BTCFi stems from the strong security of the Bitcoin network itself, there is significant growth potential in terms of yield, and the ecosystem is in a period of explosion, with a large number of projects, including Layer 2, continuously emerging.

Conclusion

With the continuous development of the BTCFi ecosystem, we have witnessed healthy competition among protocols, which not only reduces the risks of centralization but also promotes the maturity and diversification of the entire BTC ecosystem. Looking ahead, BTCFi will continue to serve as an innovation engine in the field of crypto finance, driving the Bitcoin network towards higher levels of financial applications and global participation.