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New Bitcoin DeFi revolution: Frax as a serious competitor!
New developments in the Bitcoin DeFi sector: The Frax project enables Bitcoin integration on other blockchains.
New Bitcoin DeFi revolution: Frax as a serious competitor!
The connection between Bitcoin and DeFi (decentralized finance) is becoming increasingly important. At Bitcoin 2025 in Las Vegas, the Frax project was presented, which aims to integrate Bitcoin applications on other blockchains. This is done in a manner reminiscent of Wrapped Bitcoin (wBTC). BTC ECHO reports that smart contract developer Thomas Clement explained the advantages of such solutions. He emphasizes that DeFi is not necessarily necessary on Bitcoin, but can leverage Bitcoin's strengths in the financial sector.
Bitcoin is called “ultra sound money” and is valued for its reliability and scarcity. Clement describes that on the Frax platform, users can leverage Bitcoin-backed assets without using BTC as native gas. The process is similar to depositing Bitcoin on an exchange: users receive a wallet address to send their BTC to, and in return receive a wrapped token for DeFi applications.
Growth in the BTCFi space
The space of Bitcoin-backed DeFi protocols, also known as BTCFi, has experienced tremendous growth over the past year. According to a report by Forbes The Total Value Locked (TVL) in BTCFi protocols rose from $307 million in January 2024 to a remarkable $6.6 billion in February 2025 – a 2,050% increase. This development shows that Bitcoin is increasingly emerging as a serious player in the DeFi space, which has traditionally been dominated by Ethereum and other platforms.
BTCFi allows users to earn returns, trade and use their Bitcoin without central intermediaries. This is done through mechanisms such as restaking, lending-borrowing and the tokenization of assets, including stablecoins. A significant novelty in this context is the integration of USDT with the Lightning Network, which contributes significantly to liquidity in this sector.
Competition and challenges
Frax competes with existing solutions such as Wrapped Bitcoin (wBTC) and Coinbases BTC (cbBTC). Clement highlights that this competition comes with higher counterparty risk. In contrast, projects like Frax offer a safer way to transact smaller amounts during the withdrawal process, which also allows everyday users to benefit from these financial solutions.
The risks posed by wrapped assets based on custodial or semi-centralized bridges are another important issue. The introduction of the Threshold Signature Scheme (TSS) enables controlled use of Bitcoin wallets without disclosing private keys, promoting non-custodial cross-chain applications.
Overall, the development of BTCFi is still in its early stages, but progress is promising. Such platforms not only increase the usage of Bitcoin but also help diversify the DeFi landscape.