Opinion: Brendon Sedo, early contributors at Core DAO
Bitcoin is growing the “digital gold” story. The main driver of this shift is the rise of Bitcoin defi (BTCFI), which goes beyond merely valuable use cases.
In 2024, Bitcoin (BTC) became a native yield generation asset and became the centre of the Ethereum-style decentralized financial ecosystem. 2025 is when its Kindling can cultivate flames with its innovative Bitcoin side chain.
Most past attempts to tap on Bitcoin’s value as a productive asset required significant changes to the base layer. That’s the big reason why they failed. Bitcoin Layer 1 is not designed for many changes, so most Bitcoiners simply become HODL and don’t do much else. As a result, Bitcoin remained unused as a network and asset.
The Bitcoin Sidechain has emerged as the perfect solution to all these problems, scaling Bitcoin utilities without being altered or restricted by the base layer. Naturally, these protocols are the most powerful catalysts for BTCFI growth, especially with BTC exceeding $100,000, accounting for more than 60% of the crypto market share, and entering a new regulatory environment with the first “pro-crypt” US government administration.
Scaling the productive asset Bitcoin
According to Hal Finney, “Bitcoin itself cannot scale all financial transactions (…) to include in the blockchain,” which is why, in his view, a secondary level of payment level is required.
For a long time, Blockchain Space ignored Finney’s call for action and prioritized innovations that quarantined Bitcoin. However, innovations previously limited to chains like Ethereum now surpass the world of Bitcoin. Sidechain, rollup and other scaling solutions offer more options for holders that require Ethereum-style utilities while aligning with Bitcoin. This has prepared the BTCFI rationale that allows holders to access a variety of revenue generation solutions, including staking, lending, and derivatives.
However, the industry is still in the early innings of this revolution in Bitcoin. According to Galaxy Digital, as of November 2024, only 0.8% of the circular supply was used in Defi use cases. Of Bitcoin’s roughly $2 trillion market capitalization, less than $7 billion is made up of BTCFI TVL.
This may seem out of the way, but it highlights the remaining opportunities on a large scale. Bitcoin L2 infrastructure expanded seven times from 2021 to November 2024.
Recent: Bitcoin Defi TVL Increases 2,000% in BTC Price Bumper 2024
More importantly, in addition to institutional products such as Exchange Trade Funds (ETFs), it also holds a significant share of the new liquidity flowing into BTC.
According to Galaxy Digital, even if Bitcoin supply on the BTCFI platform and sidechain increases by 0.25% per year, it will still earn a total address market of $44 billion to $47 billion by 2030. However, as Bitcoiner knows, this is a conservative estimate and will be accelerated by the adoption of BTC Price Action or even more Bitcoin Defis.
According to Galaxy Digital, VCs are beginning to realize the potential of the Bitcoin sidechain, and have already invested more than $447 million. Of this, approximately $174 million was invested in the third quarter of 2024, setting the stage for more explosive growth in 2025. Increased funding for early-stage projects ensures more successful launches, innovation, user choices and overall value.
Bitcoin native solutions provide access to productive use cases for Bitcoin, eliminating the need for users to rely on trusted intermediaries and smart contract platforms that are not dependent on Bitcoin. The sacrifices needed to expand the utility of Bitcoin in the past are no longer needed. This allows you to unlock a considerable amount of value in the Principal BTC holder and the Bitcoin network itself.
Bitcoin Bitcoin Yield
So far, bridging Turing’s full Ethereum virtual machine (EVM) chain has been a go-to method to promote yields and other financial use cases in Bitcoin. For example, Ethereum’s wrapped Bitcoin (WBTC) market is over $10 billion. Solutions like WBTC are suitable for some, but many Bitcoin holders do not like to outsource capital to custodians or rely on chains like Ethereum.
BTCFI is a solution defined by Bitcoin Allind and Bitcoin-powered infrastructure that can benefit both WBTC users and Bitcoin purists. Users who are already used to refine Ethereum’s smart contracts can continue to enjoy its EVM experience while continuing to get closer to Bitcoin’s roots. If SideChain matches the base network, Principal Bitcoin users can increase the options for BTC’s utility.
Bitcoin holders also have access to better BTC derivatives than Ethereum-Native solutions like WBTC. BTC derivatives containing the yield on the sidechain tailored to Bitcoin are a 100x improvement, providing a non-independent yield source for Bitcoin holders.
Overall, BTCFI is much more important. Not only does it compare to its current location, it also compares Vis-A-vis EVM and SVM-based Defi. The Bitcoin sidechain has already driven this shift and will continue to do so throughout 2025. All you need is the right approach and consistency in development and product pipelines.
For BTCFI, the path is clear. Delivers Bitcoin-powered platforms to Bitcoin holders with use cases that fit the product market. This lays the foundation for creating more value for the Bitcoin community as a whole. And finally, there is a positive flywheel for Bitcoin adoption.
The institutional aspect led the headlines in 2024. Now it’s time for native on-chain camps to showcase their strength and deliver them.
Opinion: Brendon Sedo, early contributor of Core DAO.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
