Comprehensive Interpretation of BTCFi: From Lending to Staking, Build Your Own Mobile Bitcoin Bank

As Bitcoin's position in the financial market continues to solidify, the BTCFi sector is rapidly becoming the forefront of cryptocurrency innovation. BTCFi encompasses a variety of financial services based on Bitcoin, 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.

Overview of the BTCfi Track

BTCFi( Bitcoin Finance) is a series of financial activities centered around Bitcoin, including Bitcoin lending, staking, trading, futures, and derivatives. According to industry data, the BTCFi market size reached approximately 10 billion USD in 2023. It is expected that by 2030, the BTCFI market will reach a scale of 1.2 trillion USD. Over the past decade, the BTCFi market has shown significant growth potential, attracting an increasing number of institutions such as Grayscale, BlackRock, and JPMorgan.

The participation of institutional investors not only brings a significant influx of capital, increasing market liquidity and stability, but also enhances market maturity and standardization, bringing higher recognition and trust to the BTCFi market.

BTCFi Track Segmentation

1. Stablecoin

Stablecoins are a type of cryptocurrency designed to maintain a stable value, typically pegged to fiat currencies or other valuable assets. They achieve price stability through reserve assets or algorithmic adjustments to supply, and are widely used in scenarios such as trading, payments, and cross-border transfers.

Stablecoins can be divided into centralized stablecoins ( such as USDT, USDC ) and decentralized stablecoins ( such as DAI, FRAX ) based on the level of centralization. According to the type of collateral, they can be classified into fiat/physical collateral, crypto asset collateral, and under-collateralized.

In the BTC ecosystem, the stablecoin projects worth noting are mainly decentralized stablecoins, such as Bitsmiley Protocol, Bamk.fi(NUSD), Yala Labs, Satoshi Protocol, and BTU, among others. These projects use different mechanisms to achieve the issuance and maintenance of stablecoins, such as over-collateralization, algorithmic adjustments, etc.

2. Lending

Bitcoin Lending(BTC Lending) is a financial service that allows users to obtain loans by using Bitcoin as collateral or to lend Bitcoin to earn interest. Borrowers deposit Bitcoin into the lending platform, which provides loans based on the value of the Bitcoin, while borrowers pay interest and lenders earn returns.

BTC Lending platforms typically adopt the following risk management measures:

1. Control collateral ratio and loan-to-value ratio (LTV)
2. Supplementary collateral and margin call
3. Forced Liquidation Mechanism
4. Risk Management and Insurance

Popular BTC Lending projects include:

• Liquidium: A P2P lending protocol based on PSBT and DLC technology
• Shell Finance: A stablecoin protocol that supports multiple assets as collateral.

3. Staking

Staking ( is usually recognized for its characteristics of security and stable yield. Users lock their tokens in the network and gain access, privileges, or rewards over time.

In the BTCFi space, Babylon is an important staking protocol. It allows users to lock BTC on the Bitcoin mainnet, providing security for other PoS consumption chains, while earning staking rewards on the Babylon mainnet or PoS consumption chains. Babylon enables Bitcoin to leverage its unique security and decentralization features to provide economic security for other PoS chains.

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) 4. Restaking

Restaking refers to the act of using liquid staking token assets for staking on other networks and blockchains to obtain additional returns. Through Restaking, investors can earn returns from both the original network and the Restaking network.

The main Restaking projects include:

• Chakra: Modular settlement infrastructure, integrating decentralized Bitcoin liquidity.
• Bedrock: Multi-Asset Liquidity Re-staking Protocol, supports staking and re-staking of various assets.

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) 5. Decentralized Custody

With concerns about centralized wrapped Bitcoin products like WBTC, some decentralized custody solutions have emerged:

• tBTC: Cross-chain from BTC to ETH via DeFi protocols
• FBTC: A synthetic asset supporting the circulation of BTC across all chains.
• dlcBTC: Non-custodial BTC certificate based on DLC technology

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) 6. CeDeFi

CeDeFi combines the features of centralized finance ### CeFi ( and decentralized finance ) DeFi (. Users lock Bitcoin in third-party custodians to obtain tokens for various operations on the CeDeFi platform. Major projects include:

• Solv Protocol: Unified Bitcoin Liquidity Matrix
• Bouncebit: BTC Restaking chain with CeDeFi product design
• Lorenzo protocol: BTC liquidity financial layer based on Babylon

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) 7. DEX AMM Swap

The development of DEX in the Bitcoin ecosystem is relatively lagging, but it is rapidly catching up. Major projects include:

• Bitflow: A DEX built on Stacks, supporting multiple asset trading.
• Dotswap: Native AMM DEX on the BTC mainnet, supporting various inscription assets.
• Unisat AMM Swap: A trading platform focused on Ordinals and BRC-20.

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Comparison of Different Asset Classes

) Security Comparison

The BTC ecosystem places much more emphasis on "security" compared to other ecosystems. Unlike the systemic risks that PoS networks like ETH and Solana may face, BTC's PoW mechanism offers greater security. However, excessive accumulation of risks from FI protocols may still lead to significant fluctuations in BTC prices, affecting the entire BTCFi ecosystem.

Yield Comparison

The revenue sources of the BTCFi project include staking rewards, DeFi product earnings, and the protocol's own earnings. Compared to ETHFi and SolFi, BTCFi, being in the early stage, has higher yield expectations.

Ecological Richness

Although the ETH and Solana ecosystems are already quite mature, BTCFi is in a period of explosive growth. In addition to BTC itself, assets based on the BTC network such as inscriptions and runes have emerged, along with various wrapped and staked BTC derivatives. A large number of innovative projects and protocols are constantly emerging, covering multiple fields including Layer 2, lending, stablecoins, staking, and re-staking.

Conclusion

BTCFi is rapidly evolving into an innovation engine in the field of crypto finance, driving the Bitcoin network towards higher levels of financial applications and global participation. With technological advancements and market expansion, BTCFi is expected to become a bridge connecting traditional finance with the cryptocurrency world, providing global users with richer, safer, and more efficient financial services.

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