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 a frontier of cryptocurrency innovation. BTCFi encompasses a range of Bitcoin-based financial services, including lending, staking, trading, and derivatives. This article will delve into several key tracks of 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 in 2023. Over the past decade, the BTCFi market has gradually shown significant growth potential, attracting more and more institutions to participate, such as Grayscale, BlackRock, and JPMorgan beginning to enter the Bitcoin and BTCFi market.

BTCFi Track 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 (represented by USDT, USDC, FDUSD) and decentralized stablecoins (represented by DAI, FRAX, USDe).

Notable BTCFi stablecoin projects include:

• Bitsmiley Protocol: The first native stablecoin project in the BTC ecosystem, where users can over-collateralize native BTC on the BTC network to mint the stablecoin bitUSD.
• Bamk.fi (NUSD): A synthetic dollar on Bitcoin L1, circulating on the BRC 20-5 byte and Runes protocol.
• Yala Labs: Through its self-built 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 the BEVM ecosystem.
• BTU: The first decentralized stablecoin project in the Bitcoin ecosystem, using a collateralized debt position (CDP) model.

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. Main projects include:

• Liquidium: A P2P lending protocol running on Bitcoin that supports borrowing and lending native Bitcoin using native Ordinals and Runes assets as collateral.
• Shell Finance: 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 often recognized for its characteristics of safety and stable returns. An important staking project in BTCFi is Babylon.

Babylon is a Bitcoin staking protocol, and its core component is a POS public chain compatible with Cosmos IBC, which allows for the locking of 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 act of using liquid staking token assets to stake with validators on other networks and blockchains to earn additional rewards. Major projects include:

• Chakra: An innovative modular settlement infrastructure that utilizes zero-knowledge proof technology to ensure trustless security and efficiency.
• Bedrock: A multi-asset liquidity re-staking protocol supported by a non-custodial solution designed in collaboration with RockX.

5. Decentralized Custody

Recently, BitGO, the organization behind wBTC, announced the transfer of control of wBTC, sparking discussions in the market about the security of WBTC. Related projects include tBTC, FBTC, and dlcBTC.

6. Cedefi

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

• Solv Protocol: A unified Bitcoin liquidity matrix designed to aggregate the trillion-dollar liquidity of Bitcoin through SolvBTC.
• Bouncebit: BTC Restaking chain, fully compatible with EVM, featuring CeDeFi product design.
• 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. The main projects include:

• Bitflow: Focused on sustainable BTC yield, utilizing PSBT, atomic swaps, AMM, and Layer-2 solutions like Stacks for trading.
• Dotswap: A native AMM DEX on the BTC mainnet, supporting assets including Runes, BRC 20, ARC 20, and the latest CAT 20.
• Unisat AMM Swap: Focused on wallets for Ordinals and brc-20, utilizing an order book to facilitate trading in the inscription market.

Comparison of Different Asset Classes

In terms of security, yield, and ecological richness, BTCFi has advantages over ETHFi and SOLFi. BTCFi has higher security, potential yield, and its ecosystem is in a period of explosion, with immense future development potential.

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.