The Liquidity Revolution of the Bitcoin Ecosystem: A New Paradigm for the Trillion-Dollar Market

As the largest and highest-quality "funding pool" in the crypto world, Bitcoin's potential has yet to be fully tapped. Recently, the largest on-chain lending protocol in the Bitcoin ecosystem completed a $10 million Series A funding round, marking an increasingly evident trend of Bitcoin shifting from a mere digital store of value to a more active financial instrument.

In fact, Bitcoin is gradually extending towards richer on-chain structured yield scenarios, forming a unique BTCFi ecosystem. If the dormant BTC can be effectively activated and a high-efficiency and secure liquidity network can be built, it will open up a global DeFi application space for this trillion-dollar asset.

Bitcoin Liquidity Industry Practices

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 the market value and price increase of Bitcoin outperformed Ethereum, its on-chain ecosystem expansion speed has consistently lagged behind.

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

Currently, a certain Bitcoin liquidity platform has become the largest lending protocol in the BTC ecosystem, second only to DAI and lisUSD. The platform has created the record for the fastest-growing lending protocol in DeFi history, with a TVL exceeding $2 billion, and its launched Bitcoin stablecoin surpassed $500 million in locked value just one week after going live.

For BTC holders, making full use of the BTC assets they have is a necessity, while also hoping to convert fixed assets into a more liquid form. Therefore, on-chain lending protocols based on Bitcoin are facing significant opportunities. A certain platform offers a fixed lending interest rate of 8%, with Bitcoin collateral managed by professional institutions, while the stablecoins lent out are supplied in unlimited amounts, providing BTC holders with more ample liquidity to participate in other projects within the ecosystem.

The Value of Bitcoin Stablecoins

From the perspective of stablecoins, on-chain decentralized stablecoins are still dominated by collateralized debt position (CDP) stablecoins. CDPs essentially create additional liquidity trading pools for dormant assets. Taking a certain platform as an example, its ecosystem includes yield-bearing stablecoins based on Bitcoin collateral, lending protocols based on this stablecoin, a hybrid lending platform connecting DeFi and CeFi, and decentralized lending protocols supporting BTC staking.

This model 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 seamlessly operate stablecoins across multiple DeFi ecosystems, indirectly bringing liquidity from the Bitcoin ecosystem to other chains.

For a long time, a large amount of BTC has been idle, and holders lack the incentive to cross-chain it to other ecosystems. The emerging Bitcoin stablecoins fill the gap in the DeFi infrastructure within the Bitcoin ecosystem, while leveraging the advantages of CeDeFi lending platforms, allowing users to obtain USDT from centralized financial liquidity providers using stablecoins, effectively addressing the peg issue.

Future Outlook

As Bitcoin assets gradually activate, BTCFi is expected to become a new DeFi asset direction with a scale of hundreds of billions of dollars, becoming a key to building a prosperous on-chain ecosystem. By constructing diversified financial product forms and DeFi scenarios centered around BTC, it will redefine BTC's role in the entire DeFi field.

The deep integration of BTC in the DeFi space is reaching a critical turning point, which is worth the market's continuous attention. This trend will not only activate dormant Bitcoin assets but may also reshape the entire landscape of the crypto financial ecosystem.