BTC asset on-chain liquidity has become the focus of major ecosystems.

Recently, with the continuous evolution of the BTCFi concept, the on-chain liquidity of Bitcoin assets has gradually become a focus of attention for major ecosystems and protocols. With the launch of BTC scaling solutions and the rise of the BTC liquidity staking token (LST), Bitcoin is transforming from a mere value storage tool into an asset that can participate in more on-chain yield scenarios, enhancing its application potential within the overall DeFi ecosystem.

Core, BOB, and Corn are representative growth cases in the BTCFi field for the second half of the year: Core focuses on leveraging large BTC LST assets during the growth period; Corn collaborates with Pendle to launch derivative gameplay for points to quickly capture the incremental market; BOB attracts liquidity through a rich ecosystem and liquid staking services. Various ecosystems have significantly activated the liquidity of BTC assets through a series of actions centered around "yield generation." In the future, as the liquidity of BTC is gradually released, there remains huge growth potential for the on-chain accumulation of assets in the BTCFi ecosystem.

Current Status of the BTC Asset Market

From the issuance of BTC-pegged assets on the Ethereum, Arbitrum, and BNB networks, it can be seen that centralized custodial issued wrapped BTC still occupies the vast majority of market share, with WBTC and BTCB together accounting for over 75% of the total circulation of BTC-pegged assets. In addition, LBTC and SolvBTC.BBN and other BTC LSTs have rapidly grown in recent months under the promotion of the BTC (re) staking narrative, becoming another emerging force in the BTC-pegged asset market.

As the highest consensus and the largest market cap asset, BTC's anchor token's main application scenarios are concentrated in lending protocols. For the largest in scale, WBTC and BTCB, their largest downstream applications are in Aave v3 and the Venus protocol respectively, with TVL accounting for over 20% of their total supply, reflecting the demand for relatively stable returns in the BTCFi sector from large funds.

Currently, the total market volume of BTC LST is approximately 25.1K BTC, with the two major protocols, Lombard and Solv Protocol, accounting for over 70% of the market share. The absorption and issuance of BTC LST directly affect the liquidity and accumulation of BTC assets on each chain. Among them, Solv has a particularly significant impact on the TVL of each chain, bringing a net inflow of $309.7M and $177.8M to Core and Scroll respectively, significantly increasing the asset scale of these two chains.

Compared to the wrapped BTC issued under centralized custody models, BTC LST as an income-generating asset has expanded a richer application scenario. In addition to lending protocols, the points trading market has become another important downstream application for BTC LST. Avalon and Pendle are the protocols with the highest accumulation of BTC LST funds in the "lending" and "points derivative market" sectors, achieving win-win growth alongside the development of BTCFi and BTC staking narratives.

Asset Accumulation Strategy of the BTCFi Ecosystem

Core: Focusing on incremental assets and token incentives to drive ecological growth in dual wheels.

Core is an L1 scaling solution powered by BTC, allowing users to earn passive income through non-custodial Bitcoin staking without the need to transfer or wrap BTC. Since its launch in April 2024, over 7,500 BTC have been staked on Core, and the network's security has been safeguarded by BTC's security. In July 2024, Core introduced a dual staking mechanism for BTC and CORE. Users can not only stake BTC to earn risk-free basic returns but also stake the native token CORE for additional rewards, which will be distributed based on the amount of CORE staked and the staking duration. The dual staking mechanism has further driven the growth of Core's TVL since its launch.

As of now, Core's TVL has reached $591.5M, a growth of 4757.9% over six months, ranking it as the 16th blockchain by TVL. The growth of Core's TVL shows several key milestones: In June, the launch of the native lending protocol Colend and the integration with Solv Protocol's derivative assets drove a TVL increase of $51.1M that month, a rise of 202.2%. In July, the introduction of the dual staking mechanism attracted new capital inflows, leading to a TVL increase of $92.6M that month, a rise of 121.3%. In August, the integration of the leading BTC Restaking protocol Pell Network into Core further triggered a larger scale of capital accumulation.

The growth of Core TVL is primarily driven by the following factors: ( focusing on the incremental market of BTC-pegged assets to enhance ecological Liquidity, attracting rapidly growing Solv derivative assets ) constructing supporting native protocols such as Colend and quickly integrating with projects like Pell Network, establishing a complete ecological application ( utilizing the airdrop of the native token $CORE and market performance to support the incentive structure, forming a multi-dimensional ecological synergy.

Deep integration and cooperation with Solv derivative assets

SolvBTC.BBN and SolvBTC are currently the fifth and sixth largest BTC derivative assets in the market, with a total issuance of 15.6K BTC, and they are still in a stable growth phase. Since June, SolvBTC has expanded to the Core ecosystem and has been deeply integrated with two major protocols, Colend and Pell Network, driving a $51.1M increase in TVL that month. Currently, Solv derivative assets account for 65% of Core's TVL, which is not only due to the stable yield scenarios provided by the DeFi module construction of the Core ecosystem for underlying assets, but also includes high incentives offered by Core for the application of SolvBTC and the airdrop expectations supported by the performance of the $CORE token. This shows that the development of the Core ecosystem is not limited to its own BTC native staking mechanism, but focuses more on introducing and incentivizing high-quality large-scale BTC assets to enhance the overall network's activity and locked amounts. Through deep integration and cooperation with Solv Protocol, Core has not only increased TVL but also provided diversified liquidity asset support for on-chain DeFi scenarios.

The BTCFi ecosystem construction led by Colend and Pell Network

Colend is the native lending protocol on Core, which holds most of the asset accumulation in the ecosystem. Since the introduction of SolvBTC in June and the provision of maximum incentives, its TVL has grown significantly. Currently, 85% of the TVL in the Colend protocol comes from the inflow of derivative assets from the Solv Protocol, demonstrating its strong synergy with Solv. In addition, Colend is also the core application scenario for CORE token derivative assets, attracting $17.4M of wCORE and $5.2M of stCORE. The yield-generating scenario provided by Colend for CORE LST has boosted users' willingness to stake CORE, while also supporting the maintenance of its value.

![BeWater Research: What did BTCFi do right behind the growth of the ecosystem in response to "interest"?])https://img-cdn.gateio.im/webp-social/moments-61b26689e6d418f02053b88a94f634f4.webp(

In addition, BTC Restaking has become a stable staking yield scenario for BTC derivative assets. In August, Pell Network, the leading project of BTC Restaking, rapidly drove the growth of ecosystem TVL after launching on Core, with inflow assets still mainly coming from Solv Protocol, accumulating a value of $108.3M in Solv derivative assets. In terms of project incentives, Pell Network provides the highest multiplier in points reward support for SolvBTC on Core, while Core also offers a 5X Ignition Drop reward for Pell Network, further enhancing the participation and application of BTC LST in the Pell Network protocol within the Core ecosystem. As of now, the cumulative TVL of Pell Network has reached $271.7M, with nearly half of the contribution coming from the Core ecosystem.

The incentive structure supported by the airdrop and market performance of the native token $CORE.

In May 2024, Core launched the Sparks incentive program, aiming to accelerate the adoption and expansion of the ecosystem by rewarding on-chain contributors. The second season is currently underway. Unlike projects that rely on point incentives and have unclear token distribution expectations, Core launched its native token $CORE back in 2023 and successfully completed its initial airdrop, laying a solid community foundation. $CORE, as the ecosystem's native token, is primarily used for paying transaction fees, network staking, obtaining rewards, and participating in on-chain governance. According to the Tokenomics design, user rewards account for 25.029% of the total supply of $CORE, totaling 525.6 million tokens. Previously, Core's airdrop activities conducted through the Satoshi App distributed a large number of tokens to ecosystem participants, increasing users' long-term attention and ongoing contributions to its ecosystem. The second season airdrop plan will unlock 24.7 million $CORE, of which 17 million will be used to reward participants, continuously driving user engagement in the Core ecosystem.

![BeWater Research: What did BTCFi do right behind the growth of the ecosystem in response to "earning interest"?])https://img-cdn.gateio.im/webp-social/moments-6f4f1a1d1f64a49ea11c757eea6166d3.webp(

) Corn: Efficiently attracting BTC LST market Liquidity through point derivative gameplay.

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as gas fees and economic incentive tools, aiming to unify the interests of users, developers, and liquidity providers. The core of the Corn incentive mechanism lies in the veCHAIN model, where the stakers of the CORN token will determine the distribution of network rewards.

Currently, Corn has not yet launched its mainnet, but it has effectively absorbed $425.8M in funds through a deposit activity launched by multiple parties, significantly exceeding the BTC scaling layers that are already online, such as Merlin and BSquared. These deposits are mainly concentrated in the pools jointly launched by several BTC LSTs, including LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, on Pendle, accounting for 85% of the current total TVL.

![BeWater Research: What did BTCFi do right behind the growth of the ecosystem in response to "yield"?]###https://img-cdn.gateio.im/webp-social/moments-466f956fe5644dbe555357a318321c3c.webp(

Leading BTC LST point derivative gameplay in collaboration with Pendle

The points derivatives market is one of the key strategic scenarios for BTC LST as an income-generating asset. As the leading protocol in this sector, Pendle took the lead in integrating various BTC LSTs at the beginning of September. Currently, the collaboration between Corn, Pendle, and BTC LST supports five major BTC LST assets: LBTC ) $41.5M TVL, $1.1M 24h Volume (, SolvBTC.BBN ) $97.5M TVL, $300K 24h Volume (, eBTC ) $20.2M TVL, $658.4K 24h Volume (, PumpBTC ) $60.5M TVL, $437K 24h Volume (, uniBTC ) $70.6M TVL, $20.8K 24h Volume (, which accounts for 11.4% of the total BTC LST market. The collaboration has generated a good synergy effect.

For BTC LST holders, the points leverage market offers a variety of strategic gameplay, with Pendle becoming a major application scenario accounting for 10%-30% of the total supply of BTC LST. In addition, Corn also provides maximum multiplier point incentives for these pools, further attracting more holders to participate. For Corn, BTC LST is a core contributing factor to driving TVL growth in its early stages. Currently, these pools are the only applications generating external benefits in Corn's point mining activities, laying the foundation for its future mainnet launch.

![BeWater Research: Responding to "Interest" - What Did BTCFi Ecosystem Growth Get Right?])https://img-cdn.gateio.im/webp-social/moments-0817ed85ab282f6a0ef63e08c086a765.webp(

TVL BootStrap Campaign

In the existing points mining design of Corn, users can earn 1 Kernel point for every $1 worth of assets deposited every 210 minutes. These deposits can be withdrawn at any time without incurring any penalties or fees, providing great flexibility. The goal of this activity is to attract initial Liquidity through incentives of Kernel points. However, currently, apart from the BTC LST pool created in collaboration with Pendle,