BTCFI, shortly before Bitcoin -decentralized finances, refers to financial services such as loans, borrowing and acting that are performed on Bitcoin or its layers. These innovations are meant to let you do more with your BTC than just HODL. In this guide you will learn what BTCFI is, how it works, the most important protocols and how it relates to Defi on Ethereum.
In this guide:
- What is BTCFI?
- How Bitcoin makes decentralized finances possible
- Main protocols in the Defi -Ecosystem of Bitcoin
- BTCFI. vs. Ethereum Defi in a nutshell
- What is the next step for Bitcoin Defi?
What is BTCFI?
Simply put, it’s about unlocking Ethereum-like Defi options for Bitcoin. Traditionally, Bitcoin was purely seen as a store of value or for simple payments, while block chains such as Ethereum took the lead in Defi with smart contracts and complex Dapps.
However, the interest in Bitcoin-based Defi is increasing for a few important reasons. These include:
Huge capital
Bitcoin is the largest cryptocurrency due to market value, and even a small percentage of BTC that Defi imports, can unlock massive liquidity.
So far, many Bitcoin holders have used packed BTC on Ethereum to chase yields. So if Defi becomes viable on Bitcoin itself, there may be a good chance that part of that activity can shift back from Ethereum.
Security and resilience
The blockchain from Bitcoin is known for its reliability and has never been violated at the protocol level. Remarkable malfunctions on other chains (such as the five -hour Solana stop in February 2024) argue for building Defi on the more resilient Bitcoin network.
The idea is that Bitcoin’s conservative design can offer a stable basis for Defi apps – it actually exchanges some flexibility for security.
Impact of new technical breakthroughs
The early restrictions of Bitcoin fade thanks to scaleup grades and smart contract layers.
For reference, Rootstock’s total value was locked around (TVL) $ 172 million from April 9, 2025. This figure reflects the overall activity in the root network-not only BTCFI but underlines how Bitcoin-Native Ecosystems still follow Ethereum in total liquidity. The decline of TVL reflects wider market conditions instead of only signaling the weakness in Bitcoin Defi.
Rootstock TVL (General): Defillama
Yet there are strong signs of Momentum. Bitcoin’s offer kept by holders in the long term continues to rise, whereby the increased institutional importance in creating an American strategic bitcoin reserve.
BTCFI has one 2,767% increase in TVL in the past yearPowered by new protocols, cross-chain integrations and demand for native bitcoin-based financial infrastructure-in place from BTC to run to Ethereum or other chains.
BTCFI TVL: Defillama
If the interest rates are reduced in 2025, this could further support the appetite for assets with a higher risk, in particular Bitcoin, which now has a substitute for the usefulness of the chain.
Meanwhile, integrations with platforms such as Low And Meson Finance Also point to long -term potential. Together, these developments position Bitcoin to support more complex financial applications directly on its own network – not as a proxy by wrapped tokens elsewhere.
How Bitcoin makes decentralized finances possible
Is Bitcoin not too limited for Defi? It is true to a certain extent, since the base layer of Bitcoin has never been built for smart contracts. In contrast to Ethereum, Bitcoin uses a limited script language that does not support the complex logic required for Defi apps such as loans or decentralized fairs.
So here is how BTCFI works:
It all depends on the external layers and side states that expand the possibilities of Bitcoin without changing the core.
- Lightning network: This Layer-2 protocol makes BTC payments almost at low costs by processing transactions off-chain and only arranging the last balance on the Bitcoin Mairnet. Although lightning is not built for defi-contracts, it lays the foundation for BTC transfers with a large volume on which other protocols can build.
- Sidechains and connected chains: These are independent networks that are pressed in Bitcoin. Some, such as Rootstock (RSK), use a 1: 1 linked token (RBTC) to bring Bitcoin into a smart contract environment. Others, such as stacks, write smart contracts and arrange their final state on Bitcoin. This allows you to use BTC in Defi-like systems without changing Bitcoin’s core protocol.
Main protocols in the Defi -Ecosystem of Bitcoin
The Bitcoin defi-ecosystem is growing due to protocols that add smart contract and asset-layer functionality without changing the basic chain.
Pile: Stacks is a separate blockchain that settles on Bitcoin with the help of proof-of-transfer. It supports smart contracts, NFTs and Defi apps via the Clarity Language. STX is used for gas and governance, and STX holders can earn BTC by “stacking”. Although BTC is not directly programmable, Stacks apps can observe and respond to Bitcoin activity.
Rootstock (RSK): RSK is a Bitcoin Sidechain merge with Bitcoin, with an Ethereum-compatible EVM. BTC is locked and displayed on the chain as RBTC, which feeds smart contracts. Developers can be the solidity apps port, which regulates loans, trade and more in BTC.
Sovryn: Built on RSK, Sovryn offers Bitcoin-Native Defi with margin trade, BTC loans, stablecoin swaps and automated strategies. BTC and RBTC are used as a basic currency. Sovryn also launched Bitcoin-supported Stablecoins such as DOC and DLLR, who further expand the use of BTC in Defi.
Lightning Network + Taproot -Activa: Lightning makes direct BTC transfers possible via off-chain channels. Taproot -Activa (formerly Taro) builds on lightning to publish tokens such as Stablecoins on Bitcoin. In 2025, Tether confirmed that it would spend the USDT using this protocol. This makes fast, cheap, stablecoin transfers possible on Bitcoin rails.
BTCFI. vs. Ethereum Defi in a nutshell
What is the next step for Bitcoin Defi?
BTCFI is still early, but ripens quickly. What started as a few experiments has become a growing ecosystem from Sidechains, Laag-2s and apps that expand the possibilities of Bitcoin. Today you can borrow, borrow and trading on BTC in decentralized ways once impossible. The ecosystem is smaller than that of Ethereum and is confronted with obstacles such as bridging and scales. But the progress is stable and tailored to the cautious, security first ethos of Bitcoin. If you investigate BTCFI, you carefully examine each platform, given that many of these platforms use new technology with unique trust models that differ from the core design of Bitcoin.
