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BitcoinFi: The revolution of the financial system – This is how BTC is actively used!
Learn how BitcoinFi is revolutionizing new financial applications that combine stability and DeFi potential.
BitcoinFi: The revolution of the financial system – This is how BTC is actively used!
Bitcoin has evolved in recent years from a more passive store of value to a dynamic component in decentralized finance (DeFi). For a long time, Bitcoin was considered a safe haven and hedge against inflation. The idea of using Bitcoin as a counter-model to traditional financial systems shaped its early image. But while Ethereum and other platforms flooded the DeFi world with innovative protocols, Bitcoin remained stagnant. However, this has changed with the advent of BitcoinFi (Bitcoin Finance), like MoneyToday reported.
BitcoinFi includes a number of new protocols that actively incorporate Bitcoin into financial transactions. These include decentralized lending, Bitcoin staking, BTC-based stablecoins and liquidity protocols. The focus is on profitably leveraging the over 2.9 million BTC that sits on centralized exchanges and sits there with no return. In addition, over 30% of all Bitcoins have been inactive for five years, which offers potential for change.
The development of BitcoinFi
As of February 2025, over $32 billion in Bitcoin was tokenized on other blockchains, representing about 1.74% of Bitcoin's total market capitalization. The development of Layer 2 protocols, such as Stacks and BitVM, brings smart contracts and scalable solutions to the Bitcoin blockchain without compromising its security. These technologies offer new functionalities and enable Bitcoin staking, where BTC can be used as collateral for other networks, with annual returns between 3 and 12%.
Particularly notable is the increase in Total Value Locked (TVL) in BitcoinFi protocols, which reached an all-time high of $7.48 billion in December 2024. Projects like Babylon, which is now the largest BTCFi protocol with a TVL of $5.4 billion, are gaining traction and attracting institutional investors. USDT’s integration with the Lightning Network is proving to be a crucial step for market liquidity.
Growth potential and risks
The surge in the DeFi space is impressive: the total capital locked in BTCFi protocols increased from $307 million in January 2024 to $6.6 billion in February 2025 – an increase of 2,050%. These developments show that Bitcoin is emerging as a serious player in the DeFi sector, which was previously dominated by Ethereum and other smart contract platforms such as Forbes notes.
However, wrapped assets that tokenize Bitcoin on other blockchains carry some risk as they often rely on centralized solutions. The new Threshold Signature Scheme (TSS) also enables decentralized control over Bitcoin wallets, further promoting non-custodial applications.
Market analysts estimate that with an adoption rate of 2.87% of the Bitcoin holdings in BitcoinFi, a realistic market volume of $47 billion would be possible. This combination of stability and innovation could make BitcoinFi the next evolutionary stage for Bitcoin. The potential analysis of BTCFi is underpinned by its rapid growth and increasing acceptance by both individual and institutional investors.