The Evolution of the Bitcoin Ecosystem: From Store of Value to Active Financial Tool

Bitcoin, as the largest and highest quality "funding pool" in the crypto world, is undergoing an important transformation. With the rise of emerging projects, Bitcoin is gradually evolving from a simple store of value to a more flexible and diverse financial instrument.

Recently, the largest on-chain lending protocol in the Bitcoin ecosystem completed a funding round in the tens of millions of dollars. This marks a growing confidence among investors in transforming Bitcoin into a more vibrant financial instrument. In fact, we have already seen the application scenarios of Bitcoin as a liquid asset and a niche asset continually expanding, and a unique and systematic BTCFi ecosystem is gradually taking shape.

From the perspective of sustainable development, if we can activate dormant Bitcoin assets and establish an efficient and secure liquidity network, it will open up a global DeFi application space for this trillion-dollar asset.

Industry Practices for Releasing Bitcoin Liquidity

Data shows that as of January 9, 2025, the total locked value on the Ethereum chain exceeds 64 billion USD, an increase of nearly 180% compared to January 2023. In contrast, although Bitcoin's market value and price growth outpace that of Ethereum, its on-chain ecosystem expansion still lags behind.

It is worth noting that if the liquidity of Bitcoin can be released by 10%, it will create a market of up to $180 billion. If it can reach a TVL ratio similar to that of Ethereum (about 16%), it will further release approximately $300 billion in liquidity. This is enough to drive explosive growth in the BTCFi ecosystem, and it even has the potential to surpass EVM networks, becoming the largest on-chain financial ecosystem.

In this context, some emerging Bitcoin liquidity platforms are rapidly rising. These platforms aim to allow everyone to benefit from Bitcoin lending and have become the largest lending protocols in the Bitcoin ecosystem. Reportedly, the TVL of a certain platform has exceeded 2 billion USD, and the Bitcoin stablecoin it launched reached a locked amount of over 500 million USD just one week after going online, setting the record for the fastest TVL growth of any lending protocol in DeFi history.

For current Bitcoin holders, how to make the most of the assets in hand while not taking on excessive principal loss risk is an urgent need. On-chain lending protocols based on Bitcoin precisely meet this demand, providing users with fixed-rate lending services and stablecoin supply, thereby increasing the liquidity of Bitcoin holders to participate in other ecosystem projects.

The Value of Bitcoin Stablecoins

From the perspective of stablecoins, on-chain decentralized stablecoins are still dominated by debt-collateralized positions (CDP) stablecoins. This model essentially expands the use of stablecoins through lending scenarios, creating additional liquidity trading pools for dormant assets.

Some emerging platforms have built a complete ecosystem that includes yield-bearing stablecoins backed by Bitcoin collateral, lending protocols, hybrid lending platforms, and decentralized lending protocols that support Bitcoin staking. This design not only addresses the stablecoin issue that has long plagued the Bitcoin ecosystem but also achieves multi-chain compatibility through cross-chain technology, allowing users to operate seamlessly across multiple DeFi ecosystems.

This innovation provides an efficient framework for the Bitcoin network to utilize assets and activate dormant Bitcoins, allowing more Bitcoin holders to safely participate in on-chain liquidity activities and confidently place large amounts of dormant Bitcoins into DeFi liquidity pools for exchange or earning yields.

Conclusion

As Bitcoin assets gradually awaken from their dormant state, BTCFi is expected to become a new DeFi asset direction with a scale of hundreds of billions of dollars, becoming key to building a prosperous on-chain ecosystem. By constructing diversified financial products and DeFi scenarios centered around Bitcoin, it will redefine Bitcoin's role in the global DeFi space. Whether the deep integration of Bitcoin in the DeFi field can reach a critical turning point is something we look forward to.