Analysis of the Driving Forces Behind the BTCFi Ecosystem Growth

The liquidity of BTC assets on the blockchain is becoming the focus of attention for major ecosystems and protocols. With the launch of BTC scaling solutions and the rise of BTC LST, BTC is transitioning from a static store of value to an asset that can participate in more on-chain yield scenarios, enhancing its application potential within the entire DeFi ecosystem.

Core, BOB, and Corn are representative rise cases in the BTCFi field in the second half of the year: Core focuses on leveraging large BTC LST assets during the growth period; Corn collaborates with Pendle to launch a points derivative play 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."

1 Background

1.1 BTC asset flow path on the chain

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

• First Layer: Native BTC
• Layer 2: ( wrapped BTC issued based on centralized custody ) operates as mapped assets on BTC L2 and SideChain ( liquidity staking BTC
• Layer 3: BTC derivative assets in various downstream DeFi scenarios

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) 1.2 BTC asset market status

Looking at the issuance of BTC-pegged assets on the three major networks of Ethereum, Arbitrum, and BNB, the centralized custody issuance of wrapped BTC still occupies the vast majority of the 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 seen rapid rise in recent months, becoming another emerging force in the BTC-pegged asset market.

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

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Currently, the total market volume of BTC LST is approximately 25.1K BTC, with the two major protocols, 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 by centralized custody models, BTC LST, as a yield-bearing asset, expands a richer range of application scenarios. In addition to lending protocols, the points trading market has become another important downstream application of BTC LST.

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2 BTCFi Ecosystem Asset Accumulation Strategy

) 2.1 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 six months. The growth of Core's TVL is primarily driven by the following factors:

1. Focus on the incremental market of BTC-backed assets to enhance ecological liquidity and absorb the rapidly rising Solv derivative assets.
2. Build supporting native protocols such as Colend and quickly integrate with projects like Pell Network to establish a complete ecological application.
3. Utilize the airdrop of the native token $CORE and market performance to support the incentive structure, forming a multi-dimensional ecological synergy.

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) 2.2 Corn: The points derivative gameplay 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 yet launched its mainnet, but it has effectively attracted $425.8M in funds through a deposit activity jointly launched by multiple parties. These deposits are mainly concentrated in pools launched on Pendle together with several BTC LSTs including LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC.

The growth strategy of Corn includes:

1. Collaborate with Pendle to lead the BTC LST point derivative gameplay.
2. Attract initial liquidity through the TVL BootStrap Campaign

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) 2.3 BOB: Secure bridging and a strong ecosystem help asset aggregation

BOB is an innovative hybrid Layer 2 network that combines the advantages of Bitcoin and Ethereum. Currently, BOB's total TVL has reached $65.7M, with assets primarily consisting of WBTC. The growth performance of the BOB ecosystem over the past six months is attributed to:

1. Launch one-click liquidity staking service and deeply integrate with multiple DeFi protocols.
2. Attract users to participate and launch ecological projects through the BOB Fusion incentive program.

3 Summary

By observing the three emerging forces in the BTC ecosystem: Core, BOB, and Corn, we can see the differentiated strategies in asset accumulation among different networks. The key to effectively realizing ecological capital accumulation lies in connecting and incentivizing large-scale incremental pegged assets, and forming combinable yield strategies through diversified DeFi applications while providing multi-party incentive expectations. The synergy effect will promote the activity and liquidity of BTC-pegged assets across various chains. Currently, the TVL of BTC-pegged assets in L2 and sidechain expansion networks is about $1.6 billion, accounting for only 0.14% of BTC's total market value. As BTC liquidity is gradually released in the future, there is still enormous potential for growth in the accumulation scale of BTC assets across various chains and the application scenarios of the BTCFi ecosystem.

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