{"id":91328,"date":"2025-11-24T11:58:00","date_gmt":"2025-11-24T08:58:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=91328"},"modified":"2025-12-04T06:47:45","modified_gmt":"2025-12-04T03:47:45","slug":"btcfi-stalled-evolution-or-a-temporary-setback","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/btcfi-stalled-evolution-or-a-temporary-setback\/","title":{"rendered":"Assessing BTCFi: Is the Bitcoin DeFi Dream Hitting a Wall?"},"content":{"rendered":"

Bitcoin-based decentralised finance (BTCFi) was initially was seen<\/a> as a new growth engine and the next logical step in the evolution of the original cryptocurrency. Yet current market dynamics<\/a> invite a rethink.\u00a0<\/p>\n

A look at the numbers reveals a clutch of structural problems: from critically low adoption and stagnant financial metrics to a poor user experience. These factors cast doubt on the viability and near-term prospects of the entire niche.<\/p>\n

The user barrier: why bitcoin holders ignore BTCFi<\/h2>\n

User activity is the key gauge of any technology\u2019s health. Without a growing audience, even advanced solutions risk remaining niche.<\/p>\n

At first BTCFi grew briskly: in just the second half of 2024 the segment\u2019s TVL<\/span> rose more than tenfold, topping $7bn. By early 2025 the momentum had faded, giving way to stagnation and a retreat in the metric.<\/p>\n

\"1
As of 22 November, aggregate BTCFi TVL is just above $6bn, roughly in line with December 2024 levels. Source: DefiLlama<\/a>.<\/figcaption><\/figure>\n

BTCFi remains among the market\u2019s most underappreciated niches, given bitcoin\u2019s trillion\u2011plus market capitalisation, vast stores of \u201cdormant\u201d liquidity and the still\u2011unrealised potential of L2<\/a>.<\/p>\n

A recent GoMining survey of more than 700 respondents from North America and Europe \u0432\u044b\u044f\u0432\u0438\u043b<\/a> a telling statistic: 77% of holders of the original cryptocurrency have never interacted with protocols in this seemingly promising segment. The main barriers: lack of trust and the complexity of engaging with the ecosystem.<\/p>\n

40% of participants are unwilling to allocate more than 20% of their crypto to BTCFi. Two-thirds cannot name a single project in the nascent segment.\u00a0\u00a0<\/p>\n

Only 10% have any hands-on experience with such protocols. Just 8% use farming and lending tools on an ongoing basis.\u00a0<\/p>\n

These figures point to significant barriers, including poor awareness. When three-quarters of the target audience ignore the ecosystem, sector-wide financial metrics inevitably stall.<\/p>\n

Stalling TVL and lacklustre yields<\/h2>\n

BTCFi still sits in DefiLlama\u2019s top five, trailing only ecosystems built on Ethereum, Solana<\/a> and BNB Chain.<\/p>\n

\"2
Top five DeFi ecosystems. Source: DefiLlama<\/a>.\u00a0<\/figcaption><\/figure>\n

That the segment remains in the top five despite the absence of growth may signal stagnation across DeFi amid the crypto\u2011market correction.<\/p>\n

As before, BTCFi is dominated\u2014by a wide margin\u2014by the restaking<\/a> protocol Babylon. Its TVL exceeds $4.7bn.<\/p>\n

\"3
Top five largest BTCFi protocols. Source: DefiLlama<\/a> (as of 21.11.2025).\u00a0\u00a0<\/figcaption><\/figure>\n

A brief burst of activity in the final quarter of last year was likely linked to the dominant project. It did not alter the broader negative trend and proved a local episode.<\/p>\n

One likely reason for fading demand is extremely low yield. Staking BTC alone offers a mere 0.05% a year; locking bitcoin alongside the native BABY token yields 1.51%.<\/p>\n

\"4
Annual bitcoin staking yield (APR). Source: Babylon<\/a>.\u00a0<\/figcaption><\/figure>\n

Given crypto\u2019s particular risks (high volatility, hacks and smart\u2011contract vulnerabilities), such a low APR<\/span> is uncompetitive and unlikely to attract meaningful capital. By comparison, ten\u2011year Treasuries yield about 4% a year\u2014far above Babylon\u2019s rate.<\/p>\n

\"5
US Treasury yields. Source: Bloomberg<\/a>.\u00a0<\/figcaption><\/figure>\n

Using wrapped bitcoins such as WBTC<\/a> in mature DeFi protocols on other blockchains also looks the more attractive alternative.<\/p>\n

\n

\u201cIf you hold bitcoin, are you really doing it for an extra 1% yield? That\u2019s the psychological barrier,\u201d \u2014 \u043f\u043e\u0434\u0435\u043b\u0438\u043b\u0441\u044f \u043c\u044b\u0441\u043b\u044f\u043c\u0438<\/a> CEO of infrastructure firm Twinstake Andrew Gibb.<\/p>\n<\/blockquote>\n

Low yields and stagnating TVL are only symptoms of a deeper problem tied to the practical use of BTCFi products.<\/p>\n

The central challenge: usability<\/h2>\n

Market participants increasingly recognise the potential of bitcoin-based decentralised finance. Stacks co\u2011founder Muneeb Ali, for instance, stresses the need to build a \u201cthriving on\u2011chain economy\u201d.<\/p>\n

\n

bitcoin is different from crypto but we need to be better at creating a thriving on-chain BTC economy. frankly, some crypto projects are doing a better job of developer traction and usage of decentralized apps: https:\/\/t.co\/KKMzc8pbkG<\/a><\/p>\n

\u2014 muneeb.btc (@muneeb) October 19, 2025<\/a><\/p><\/blockquote>\n