Bitcoin-based decentralized finance (DeFi), also known as BTCFi, is experiencing vital progress however nonetheless faces challenges.
In line with DefiLlama knowledge, Bitcoin-based (BTC) DeFi protocols’ whole worth locked (TVL) went from $304.66 million on Jan. 1, 2024, to $6.5 billion by Dec. 31, 2024. As of publication, DefiLlama knowledge reveals that BTCFi has a TVL of $7.05 billion.
This interprets to a rise of greater than 22 occasions. A report shared by Bitcoin good contract layer Arch Community means that “this surge was fueled by new protocol launches, rising token requirements, institutional inflows, a significant worth rally pushing BTC to an all-time excessive, and the rise of liquid restaking.”
The survey outcomes launched within the report present that regardless of some options already in the marketplace, 36% of the respondents don’t have interaction with BTCFi on account of an absence of belief. One-quarter keep away from interactions with BTCFi on account of threat and concern of losses. Most (60%) view good contract exploits as the highest safety threat.
Associated: Bitcoin L2 ‘honeymoon part’ is over, most tasks will fail — Muneeb Ali
The survey comprised a comparatively small pattern measurement of 125 respondents. It included builders, buyers and early customers, with participation from VoltFi, DPI Capital, Arkova, Ordbit and different Bitcoin-based DeFi groups.
BTCFi growth’s hardships
Growing on Bitcoin continues to be perceived as more durable than growing on altcoins like Ethereum. In line with the survey outcomes, 44% of the customers who selected BTCFi have been motivated by its purported safety and decentralization.
Nonetheless, 43% argued that Bitcoin’s restricted smart-contract assist is the most important problem of constructing on the protocol. About 45% of the respondents stated higher infrastructure was wanted to scale BTCFi, 43% pointed to wider Bitcoin layer-2 adoption for scalability and 34% cited liquidity.
Associated: Bitcoin DeFi surge might enhance BTC demand and adoption — Binance
How BTCFi specialists use Bitcoin
Amongst respondents, 36% maintain their Bitcoin in chilly storage. Moreover, 33% of the folks commerce on centralized exchanges and 31% use Bitcoin for funds.
About 29% of customers make the most of Bitcoin as collateral in DeFi protocols, and 22% bridge their Bitcoin to different blockchains as wrapped tokens. Wrapped Bitcoin is a tokenized model of BTC representing a local Bitcoin deposit in custody.
Journal: ‘Bitcoin layer 2s’ aren’t actually L2s in any respect: Right here’s why that issues
