The following is a guest post and opinion of Hong Sun, head of institutional bee Core Dao.
Traditional financial institutions have started to take advantage of Bitcoin’s price evaluation – but they do this in suboptimal ways. Most are on Bitcoin as if it is cash, content with price -bblowing while overlooking its productive potential. That will not take. Sooner or later, Wall Street will look for more efficient use for their Bitcoin companies.
But in Crypto, caution is crucial. We have seen how the pursuit of yield – without understanding the underlying risks – can be counterproductive. Fortunately, safe, sustainable Bitcoin yield products that minimize the most important risk are no longer theoretically. They are available today.
The lessons of 2022: not all proceeds are the same
Settings for holding Bitcoin should think about recent crypto history. The collapse of 2022 exposed the danger of proceeds -seeking strategies built on shaky foundations. A number of once prominent companies voyager, blockfi, Celsius, three arrows capital and FTX applications now that the crypto-kerkhof, which have fallen prey to poor risk management and untenable promises.
The lesson? Not all proceeds have been made equal. Many so-called yield products introduced new risk-contradictions, guardianship forefassies, oblique mechanisms and smart contract procedures. These proved fatal for companies that were incorrectly calculated.
The core problem is that Bitcoin, unlike Ethereum, does not offer a native strike rewards through its proof of work model. So to earn the proceeds, holders are historically in the loans, rehypothecation or liquidity determination pushed all with trust considerations.
Bitcoin holders are confronted with a dilemma: on the one hand they enjoy self-spices and uncompromising safety. On the other hand, the temptation of yield. But bridging that gap should not require a jump of faith.
Timelocking: Bitcoin’s Native Hodl function
Bitcoin does not support smart contracts as Ethereum does, but it does have a powerful native function: Timelocking. Designed to enable users to “hodl” with mathematical certainty “by locking BTC, so that it cannot be moved to a certain future block – Timelocking has long been underhanded.
Now the same HODL mechanic is unlocking a new limit: yield generation without giving up guardianship.
The innovation is in a new postponement model that Bitcoin uses – no packed version – if the study stable asset. Via the Bitcoin’s Check Lock Time Verify (CLTV) function, holders can lock their BTC and participate in securing blockchain networks to earn yield, all by maintaining full control. Their bitcoin remains in their own wallet. It cannot be moved, again hypotheses or lost – and yet it becomes productive.
This is precisely the level of security that financial institutions demand. No new trust assumptions. No slash. No smart contract complexity. Only Bitcoin – used as it was designed – with an extra stimulus.
Settings are already on the move
Institutional acceptance of this model is already underway. Valor Inc., a subsidiary of Defi Technologies, recently launched the world’s first yield-bearing Bitcoin ETP using this mechanism of combining the immutability of Bitcoin guardianship with the performance benefits of safe deployment.
With these solutions, institutions can go beyond risky loans and speculative trade strategies. For the first time, Bitcoin can not only serve as a storage of value but also as a productive, yield-generating activa class.
From passive companies to active participation
For institutions that hold Bitcoin through preservators or ETFs, Bitcoin is a negative active one today. Detention and management costs chip away from the return, in contradiction with Bitcoin’s core thesis as an inflation department and value storage.
Secure bitcoin output changes that comparison. Institutions can now generate yield and decentralized networks supporting a meaningful bridge between traditional financial and blockchain-native systems.
This evolution is still in the early stages, but the direction is clear: the future of Bitcoin is not inactive. It is active, integrated and institutionally aligned.
The collection meals
Bitcoin – yield – well done – no longer requires new trust assumptions or exposure to non -tested products. It is based on Bitcoin’s own security model, with the help of Timelocks – originally a HODL mechanism – to protect the principal while the return generates.
As financial institutions catch up with this development, the competitive advantage goes to those who act early. The question is no longer if institutional Bitcoin yield is possible. It is: what are you going to do with it?
