Institutional interest in Bitcoin is shifting beyond passive exposure as infrastructure for yield generation and activities in decentralized finance (DeFi).
As new platforms like Rootstock and Babylon build bridges between Bitcoin and yield-bearing protocols, some asset managers and corporate bond holders have come to view the asset as something more than digital gold.
“People holding bitcoin BTC$107,305.13 – both on the balance sheet and as investors – are increasingly seeing it as a pot that just sits there,” says Richard Green, director of Rootstock Institutional, a new team created by the Bitcoin sidechain project to focus on the institutional market. “They still want it to be a used asset. It can’t just sit there and do nothing; it must add revenue.”
That mentality marks a notable evolution from Bitcoin’s early institutional story of value preservation. Green said in an interview with CoinDesk that professional investors now expect their investments to “work as hard as possible” within their risk mandates, reflecting the return expectations that have long driven adoption in other digital asset ecosystems such as Ethereum or Solana.
The shift is made possible by Bitcoin-native solutions that enable return generation without leaving the network. Rootstock, which powers smart contracts secured by Bitcoin’s hashing power, has seen increasing demand for collateralized products and tokenized funds that deliver Bitcoin-denominated returns.
“Our role is to guide institutions in this,” says Green. “We see demand for BTC-backed stablecoins and credit structures that allow miners, lenders and government bonds to unlock liquidity while remaining in Bitcoin.”
For many companies, the issue is both practical and philosophical. “If you’re a treasury company and you’re holding bitcoin in custody, you’re losing 10 to 50 basis points on those fees,” Green noted. “You want to negate that. Now the options are safe and secure enough that you don’t have to dive into some crazy DeFi looping strategy.”
Such bitcoin-denominated return options – sometimes delivering 1-2% annual returns – are increasingly seen as acceptable by conservative investors looking to offset the drag of custody without taking on exposure to wrapped or bridged assets.
Bitcoin recovery and the return problem
Still, the returns remain meager compared to Ethereum’s betting economics. “We reviewed 19 different protocols or technology platforms that had advertised bitcoin staking or yielding,” said Andrew Gibb, CEO of Twinstake, a staking infrastructure provider. “The technology is there, but the institutional demand takes time to come through.”
Twinstake manages the infrastructure for Babylon, a project that enables Bitcoin-based withdrawals for proof-of-stake networks. While technically functional, Gibb says the often trivial returns make for a tough sell. “If you’re holding Bitcoin, are you really holding it because you want an extra 1% return? That’s the psychological hurdle,” he told CoinDesk in an interview.
Some services try to overcome this by treating return generation as non-lending, using mechanisms such as time-locking Bitcoin for returns without remortgaging.
“You still have it – it’s just time sensitive,” Gibb said. “That’s how some projects sell it, but then the revenue has to be meaningful to justify that lock-up.”
Even if adoption is gradual, it appears that institutional bitcoin holders are no longer satisfied with passive appreciation alone. As secure, Bitcoin-based yield products proliferate, the world’s largest digital asset is moving toward productivity – without compromising its core principle of self-management.
“It’s about operating in a world where the return on bitcoin is clear,” Green said. “And get that return in BTC.”
