In this news:
Representation of Bitcoin cryptocurrency in this illustration photo taken in Krakow, Poland on ... [+] January 4, 2025. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
NurPhoto via Getty Images
For years, DeFi has been synonymous with Ethereum and other smart contract platforms. But Bitcoin, the biggest and most secure blockchain, is now emerging as an important player. This holds immense potential for the whole crypto space.
According to DefiLlama, the total value locked in BTCFi protocols has surged from $307 million in January 2024 to $6.6 billion in February 2025—a staggering 2,050% increase.
BTCFi allows users to earn yield, trade, and leverage their coins without relying on centralized intermediaries. Numerous BTCFi protocols already enable restaking, lending-borrowing, and asset tokenization on Bitcoin. The latter includes stablecoins, the lifeblood of DeFi. The recent news about USDT integration with the Lightning Network marks a significant milestone, potentially unlocking massive liquidity for the sector.
How BTCFi Works
The primary way of bringing bitcoin into DeFi has long been through wrapped BTC. This method involves locking BTC on Bitcoin and issuing a tokenized version on Ethereum and other chains. However, this approach carries risks. Wrapped assets rely on custodial or semi-centralized bridges, which are prone to hacks and governance failures.
An alternative approach is the Threshold Signature Scheme. This cryptographic method enables multi-party control over a Bitcoin wallet without exposing private keys. TSS allows native BTC custody without a single point of failure, making it a reliable solution for non-custodial cross-chain applications and yield protocols.
