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

Summary

As Bitcoin's position in the financial market becomes increasingly solidified, the BTCFi sector is rapidly emerging as the forefront of cryptocurrency innovation. This research report delves into multiple key segments of BTCFi, including stablecoins, lending services, staking services, re-staking services, and CeDeFi. The report presents the market size and growth potential of BTCFi and explores the impact of institutional investor participation on the market. It provides a detailed analysis of various stablecoin mechanisms, lending platforms, staking services, etc., and compares the security, yield, and ecological richness of different asset classes. Finally, it predicts that the BTCFi sector will witness more innovations and capital inflows, further solidifying Bitcoin's leadership position in the financial domain.

Keywords: BTCFi, stablecoin, lending, staking, re-staking, CeDeFi, Bitcoin finance

BTCfi Track Overview

BTCFi is a series of financial activities centered around Bitcoin, including lending, staking, trading, futures, and derivatives. According to data predictions, the BTCFi market size could reach 1.2 trillion USD by 2030. The BTCFi market has shown significant growth potential over the past decade, attracting more and more institutional participation, leading to increased capital inflow, market liquidity, and stability.

This article will delve into several popular areas within the BTCFi market, including lending, stablecoins, staking services, re-staking services, and CeDeFi, analyzing their operational mechanisms, market development, major platforms and products, risk management measures, and future development trends.

BTCFi Track Segmentation

1. Stablecoin track

Stablecoins are a type of cryptocurrency designed to maintain a stable value, typically pegged to fiat currencies or other valuable assets. They achieve price stability through backing by reserve assets or algorithmic adjustments to supply, and are widely used in scenarios such as trading, payments, and cross-border transfers.

Stablecoins can be divided into centralized stablecoins ( like USDT, USDC ) and decentralized stablecoins ( like DAI, FRAX ). In the BTC ecosystem, the decentralized stablecoin projects that are worth paying attention to are mainly decentralized stablecoins.

Project 1, Bitsmiley Protocol

Bitsmiley is the first native stablecoin project in the BTC ecosystem. Users can over-collateralize native BTC on the BTC network to mint the stablecoin bitUSD. The project also includes lending and derivatives protocols, aiming to provide a new financial ecosystem for Bitcoin.

Project Two, Bamk.fi(NUSD)

Bamk.fi is the issuer of NUSD ( Nakamoto Dollar ), and NUSD is a synthetic dollar on Bitcoin L1. NUSD circulates on the BRC 20-5 byte and Runes protocol.

Project Three, Yala Labs

Yala, through its self-built modular infrastructure, allows its stablecoin $YU to flow freely and securely among various ecosystems, releasing BTC liquidity. Core products include the over-collateralized stablecoin $YU, Metamint, and insurance derivatives.

Project Four, Satoshi Protocol

Satoshi Protocol is the first CDP stablecoin protocol in the BTC ecosystem, based on the BEVM ecosystem. Users can mint the USD stablecoin $SAT by depositing BTC and other BTC-based yield-bearing assets with a minimum collateralization ratio of 110%.

Project Five, BTU

BTU is the first decentralized stablecoin project in the Bitcoin ecosystem, using a collateral debt position ( CDP ) model that allows users to issue stablecoins based on BTC assets. BTU addresses the liquidity issues faced by Bitcoin holders in the existing DeFi ecosystem through seamless decentralized design.

2. Lending track

Bitcoin lending is a financial service that involves obtaining loans by using Bitcoin as collateral or earning interest by lending Bitcoin. This model provides liquidity for Bitcoin holders while offering investors a new source of return.

Project One, Liquidium

Liquidium is a P2P lending protocol running on Bitcoin that allows users to use native Ordinals and Runes assets as collateral to lend and borrow native Bitcoin.

Project Two, Shell Finance

Shell Finance is a stablecoin protocol based on BTC L1, supporting the use of BTC, Ordinals NFT, Runes, BRC-20, and ARC-20 assets as collateral to obtain $bitUSD.

3. Staking track

Staking is usually recognized for its characteristics of security and stable returns. Staking occurs at the network level and is solely used to protect the network. The assets of staking are often linked to DeFi liquidity, yield rewards, and governance rights.

Project 1, Babylon

Babylon is a Bitcoin staking protocol, with its core component being a POS public chain compatible with Cosmos IBC, which allows for locking Bitcoin on the Bitcoin mainnet to provide security for other POS consumption chains, while earning staking rewards on the Babylon mainnet or POS consumption chains.

4. Restaking track

ReStaking is the process of utilizing liquid staking token assets to stake with validators on other networks and blockchains to earn additional rewards, while also contributing to the security and decentralization of the new network.

Project One, Chakra

Chakra is an innovative modular settlement infrastructure that utilizes zero-knowledge proof technology to ensure trustless security and efficiency. By integrating decentralized Bitcoin liquidity, Chakra offers a more secure and seamless settlement experience.

Project Two, Bedrock

Bedrock is a multi-asset liquidity re-staking protocol supported by a non-custodial solution designed in collaboration with RockX. Bedrock leverages its universal standards to unlock liquidity and maximize value for PoS tokens, as well as existing liquid-staked tokens.

5. Decentralized Custody

Recently, BitGO, the entity behind wBTC, announced the relinquishment of control over wBTC, sparking discussions in the market about the security of WBTC. As a result, some new decentralized custody solutions have emerged, such as tBTC, FBTC, and dlcBTC.

6. CeDeFi

CeDeFi is a financial service that combines the characteristics of centralized finance ( CeFi ) and decentralized finance ( DeFi ). In the CeDeFi model, users lock their Bitcoin in an off-exchange settlement network independent of the exchange managed by a third-party custodian, and these Bitcoins are mapped to tokens on the exchange side at a 1:1 ratio.

Project 1, Solv Protocol

The Solv protocol is a unified Bitcoin liquidity matrix designed to consolidate the trillions of dollars in dispersed Bitcoin liquidity through SolvBTC.

Project Two, Bouncebit

Bouncebit is a BTC Restaking chain, fully compatible with EVM, featuring CeDeFi product design, utilizing LCT( liquidity custody tokens ) for restaking and on-chain farming.

Project Three, Lorenzo protocol

Lorenzo is the BTC liquidity financial layer based on Babylon. Lorenzo tokenizes the staked Bitcoin into liquidity principal tokens (LPT) and yield accumulation tokens (YAT) for each staking transaction.

7. DEX AMM Swap

DEX AMM Swap is a decentralized trading mechanism that operates on the blockchain. It uses algorithms and liquidity pools to automatically provide liquidity for trading pairs, without the need for a centralized order book.

Project 1, Bitflow

Bitflow focuses on sustainable BTC yields, utilizing technologies such as PSBT, atomic swaps, AMM, and Layer-2 solutions like Stacks for trading BTC, stablecoins, and more.

Project Two, Dotswap

Dotswap is a native AMM DEX on the BTC mainnet, supporting assets including Runes, BRC 20, ARC 20, and the latest CAT 20.

Project Three, Unisat AMM Swap

Unisat is a wallet application focused on Ordinals and brc-20, utilizing an order book to facilitate trading in the inscription market.

Comparison of Different Asset Classes

Security Comparison

The BTC ecosystem's focus on "security" is much higher than that of other ecosystems. As PoS blockchains, ETH and Solana have some potential security risks, such as excessive centralization and the risk of bank runs. In contrast, BTC, as a PoW system, theoretically does not have these issues, but the accumulation of risks from too many FI protocols may lead to systemic risks.

Yield Comparison

BTCFi has greater potential compared to ETHFi and SolFi, as the latter two have already gone through the first phase of explosive growth in TVL, while BTCFi is still a blue ocean. From this perspective, BTCFi's products have a higher expected yield.

ecological richness

The ETH ecosystem includes multiple areas such as DeFi, NFT, RWA, and Restake. Solana also has a relatively mature ecosystem in DeFi and Liquid Staking. The BTCFi ecosystem is in an explosive phase, with a large number of projects continuously emerging, including Layer 2, and VC financing is on the rise, attracting market attention.

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. BTCFi is expected to become a bridge connecting the traditional financial world with the cryptocurrency space, providing global users with richer, safer, and more efficient financial services.