Bitcoin (BTC) as a network continues to lock in more value in DeFi projects. Over $8B in coins have been distributed to Bitcoin’s native DeFi protocols.
Bitcoin (BTC) is growing its DeFi influence, now surpassing the value locked on Solana (SOL). The Bitcoin network, through locked or staked BTC, carries over $8B in value, surpassing Solana’s $6.7B. Babylon Labs is still carrying 50% of all value locked in BTC after locking an additional 23,000 BTC at the end of 2024. Babylon Labs has remained relatively static, relying on its secondary layers of products based on the staked BTC used for security.
Demand for BTC staking continued despite the market fluctuations. Staking is one of the ways to tap value without selling while being able to recoup the initial stake. BTC DeFi may grow in value if BTC continues with the bull market. The recent valuation is at the current price of around $84,000, after a 27% drawdown from the peak price.
Top protocols grow BTC value through staking and reserves
The biggest DeFi growth comes from Lombard Finance, one of the expanding protocols in the past few months. Lombard Finance locked in over $1.59B in BTC, becoming the second-biggest BTC DeFi protocol.
In the past months, Lombard Finance grew its value locked by 158%, based on Messari data. Lombard Finance issues a new staking token, LBTC, used for passive yield. The protocol expanded after its recent launch on Sui Network in March. As with other Bitcoin-based DeFi protocols, Lombard uses Ethereum and other networks to carry out DeFi operations. Lombard Network uses restaked BTC to build its value and security.
Bitcoin-based DeFi is a mix of Ethereum and other chains, offering fast transactions. However, BTC works as a more stable collateral and reserve asset compared to ETH, which is still pressured by negative sentiment.
BTC is used mostly as a guarantee, either with non-custodial staking on Babylon Labs or in various wrapped tokens.
Overall, BTC-based DeFi has become the second-biggest hub for value locked based after Ethereum. In addition to Solana, BTC DeFi surpassed BNB Smart Chain, TRON, and other major networks.
Solv Protocol builds on-chain reserve
Solv Protocol became the third-largest protocol with BTC holdings, carrying $685 in value. The protocol will aim to repeat the model of Strategy, Mara Holdings and other leveraged corporate buyers, though by building a BTC reserve on-chain.
Solv has designated $100M to build a BTC reserve, potentially becoming on par with multiple corporate buyers. Some of the BTC DeFi protocols already surpass Metaplanet, even with its 3,000 BTC reserve.
Solv will use BNB Smart Chain for its DeFi activities when unlocking the value of BTC. On March 12, the protocol launched SolvBTC.BNB, a yield-bearing BTC-staking token. The yield requires a deposit of BTC to Venus Protocol, a form of staking. Users that staked BTC will receive various perks in the BNB Smart Chain ecosystem.
The value locked in various DeFi protocols with BTC as collateral may fluctuate. The one exception is Babylon Labs, where most users retain their tokens. Babylon Labs serves as a final deposit destination for other protocols, which lock BTC on behalf of smaller clients. Locks in BTC come from both Lombard Protocol and Solv.
Babylon Labs holders are relatively centralized, as other proxies lock up BTC on behalf of their clients. Non-custodial staking means all users retain their BTC with no risk of slashing, but can trade and use derivative assets within the DeFi ecosystem, mostly for earning yield.
Demand for BTC DeFi is one of the tools to lock up tokens for the long term. While some users can unstake or withdraw their support, the last few months show increased interest in tapping the value of idle BTC instead of selling.
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