Responding to "Interest": Analyzing the Strategies Behind the Growth of the BTCFi Ecosystem

As the most recognized and largest market capitalization cryptocurrency, Bitcoin's on-chain liquidity is gradually becoming the focus of attention for major ecosystems and protocols. With the launch of BTC scaling solutions and the rise of the BTC liquidity staking token (LST), Bitcoin is shifting from a static store of value to an asset that can participate in more on-chain yield scenarios, significantly enhancing its application potential within the entire DeFi ecosystem.

Core, BOB, and Corn are representative rise cases in the BTCFi field recently. Core focuses on large-scale BTC LST assets during the growth period; Corn has launched a points derivative gameplay in collaboration with Pendle to quickly capture the incremental market; BOB attracts liquidity through a rich ecosystem and liquid staking services. Various ecosystems have greatly activated the liquidity of BTC assets through a series of actions centered around "yield generation."

Background

BTC asset flow path on the blockchain

The flow direction of BTC and its anchored assets on the chain can be divided into three layers:

1. First layer: native BTC
2. Second layer:
   • Encapsulated BTC issued based on centralized custody
   • Mapped assets running on BTC L2 and sidechains
   • Liquidity Staking BTC
3. Layer Three: Various BTC derivative assets in downstream DeFi scenarios

BTC asset market status

Looking at the issuance of BTC-pegged assets on the three major networks of Ethereum, Arbitrum, and BNB, centralized custodial issuance of wrapped BTC still accounts for the vast majority of market share, with WBTC and BTCB combined accounting for over 75% of the total circulation of BTC-pegged assets. In addition, LBTC and SolvBTC.BBN and other BTC LSTs have risen rapidly in recent months, becoming another emerging force in the BTC-pegged asset market.

As the most widely recognized and largest market capitalization asset, the main application scenarios of BTC as a stablecoin are concentrated in lending protocols. In terms of the largest volumes, WBTC and BTCB, their biggest downstream applications are in Aave v3 and the Venus protocol respectively, with TVL accounting for over 20% of their total supply, reflecting the demand from large funds for relatively stable returns in the BTCFi space.

Currently, the total market volume of BTC LST is approximately 25.1K BTC, with the Lombard and Solv Protocol accounting for over 70% of the market share. The absorption and issuance of BTC LST directly affect the flow and accumulation of BTC assets across various chains. Compared to the wrapped BTC issued under centralized custody models, BTC LST, as an interest-generating asset, expands richer application scenarios. In addition to lending protocols, the points trading market has become another important downstream application of BTC LST.

Asset Accumulation Strategy of the BTCFi Ecosystem

Core: Focus on the dual-driven ecological growth of incremental assets and token incentives.

Core is an L1 scaling solution powered by BTC, allowing users to earn passive income through non-custodial Bitcoin staking. Core's TVL has reached $591.5M, with a rise of 4757.9% over the past six months. Its growth is primarily driven by the following factors:

1. Focus on the incremental market of BTC-backed assets to enhance ecosystem liquidity and attract the rapidly rising Solv derivative assets.
2. Build a supporting native protocol and quickly integrate with the BTCFi project to establish a complete ecosystem application.
3. Support the incentive structure using the airdrop and market performance of the native token $CORE.

The deep integration and cooperation with Solv's derivative assets are key to Core's rise. Currently, Solv's derivative assets account for 65% of Core's TVL. Colend, as the native lending protocol on Core, holds a large portion of the asset accumulation in the ecosystem. Additionally, the leading BTC Restaking project Pell Network rapidly boosted the ecosystem's TVL growth after its launch on Core.

Core has also launched the Sparks incentive program, which accelerates the adoption and expansion of the ecosystem by rewarding on-chain contributors. $CORE, as the native token of the ecosystem, is primarily used for paying transaction fees, network staking, obtaining rewards, and participating in on-chain governance.

Corn: The points derivative game efficiently attracts BTC LST market liquidity.

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as gas fees and economic incentive tools. Currently, Corn has not launched its mainnet, but it has effectively attracted $425.8M in funds through a deposit activity launched in collaboration with multiple parties.

Corn's rise strategy mainly includes:

1. Partnering with Pendle to lead the BTC LST points derivative gameplay
2. Launch TVL BootStrap Campaign

The collaboration between Corn, Pendle, and BTC LST supports five major BTC LST assets, accounting for 11.4% of the total BTC LST market. These collaborations provide BTC LST holders with diverse strategic play options, while laying the foundation for Corn's future mainnet launch.

BOB: Secure bridging and strong ecosystem help gather assets

BOB is an innovative hybrid Layer2 network that combines the advantages of Bitcoin and Ethereum. Currently, BOB's total TVL has reached $65.7M, with the asset composition mainly coming from WBTC.

BOB's rise strategy includes:

1. Launch liquidity staking services and ecosystem integration
2. Implement the BOB Fusion Incentive Program

BOB Stake integrates multiple liquid staking service providers and DeFi platforms, allowing for multi-protocol staking with a single Bitcoin transaction. BOB has also integrated with dozens of DeFi protocols such as Avalon, Layerbank, and Segment, providing diversified yield application scenarios for BTC LST.

BOB Fusion is the core incentive program within the BOB ecosystem, which encourages users to earn points through cross-chain assets, staking participation, interaction with ecological projects, and referral mechanisms. This program has significantly promoted the development of the BOB ecosystem, attracting over 147,000 users to participate.

Summary

By observing the three emerging forces in the BTC ecosystem: Core, BOB, and Corn, we can see the differentiated approaches of different networks in asset accumulation strategies. The key to effectively achieving ecological capital accumulation lies in connecting and incentivizing large-scale incremental anchor assets, and forming combinable yield strategies through diversified DeFi applications while providing multiple incentive expectations.

Currently, the BTC-pegged assets in L2 and sidechain expansion networks have a TVL of approximately 1.6 billion dollars, accounting for only 0.14% of the total market capitalization of BTC. As the liquidity of BTC is gradually released in the future, the scale of BTC assets on various chains and the application scenarios of the BTCFi ecosystem still have tremendous rise potential.