Institutional investors are rushing toward Bitcoin, attracted by the potential for yield. The world of decentralized finance (DeFi) on Bitcoin is no longer just theoretical. Despite some early setbacks, momentum is building to unlock Bitcoin’s potential beyond its role as digital gold.
But let's be honest: few were paying attention until recently—and understandably so. The landscape has been fragmented and complex. While Ethereum developed a massive DeFi economy, Bitcoin remained on the sidelines, with over $1.5 trillion in liquidity locked away in cold storage. The absence of native DeFi smart contracts, a lack of decentralized bridging solutions like wBTC, and Bitcoin’s established identity as a store of value limited ecosystem growth around the original cryptocurrency.
However, that is changing. A new wave of protocols is emerging on and around Bitcoin, forming the foundation of a truly native BTC DeFi ecosystem. Projects like Babylon, Lombard, SatLayer, and Solv Protocol are leading the way both technically and in total value locked (TVL), each addressing a different part of the DeFi stack.
Babylon: The Staking Layer for Bitcoin
Think of Babylon as Bitcoin’s equivalent to Ethereum’s Beacon Chain. It is a native Bitcoin staking protocol with over $5 billion in TVL—the first of its kind.
What makes Babylon unique is that it enables users to stake BTC directly on the Bitcoin mainnet without bridging or wrapping tokens. The coins remain in place, stored in a non-custodial manner.
But Babylon isn’t just about staking for its own sake. Its core innovation lies in extending Bitcoin’s security to other blockchains—whether EVM chains, rollups, or appchains. Bitcoin holders can now help secure other networks by locking their coins and earn rewards from the chains they help protect.
Lombard: Enabling Liquid Staking for Bitcoin
Lombard serves as the Lido of Bitcoin. While Babylon handles staking, Lombard makes it composable.
With $1.9 billion in Bitcoin-related TVL, Lombard is built on top of Babylon. It lets users stake BTC via Babylon and receive LBTC in return—a liquid staking token that represents their staked position.
The key insight here is that BTC staked through Babylon remains locked on the Bitcoin network. Without actively participating in other networks' consensus mechanisms, these assets are illiquid and unusable in DeFi. That’s where Lombard comes in. Users can now hold LBTC and engage in trading, lending, yield farming, and more.
Lombard generates yield by delegating BTC to Babylon validators, who in turn help secure external networks and earn rewards. A portion of these rewards is shared with LBTC holders. Simply put, the more chains secured through Babylon, the higher the returns for stakers.
Lombard is active across ecosystems like Sonic, Sui, and Base, and has partnered with protocols including Aave, Pendle, and Ether.Fi, demonstrating its interoperability. It also played a major role in the Berachain liquidity event, helping bootstrap early TVL.
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SatLayer: The EigenLayer for Bitcoin
As the name implies, SatLayer can be thought of as Bitcoin’s answer to EigenLayer—built on top of Babylon.
Although it has the smallest TVL on this list, at $340 million, it introduces a novel restaking model. While Babylon uses locked BTC to secure external networks at the consensus layer, SatLayer enables users to restake LBTC to secure the application layer.
This opens up new yield opportunities directly from secured applications. For example, an oracle might pay restakers to ensure data integrity, a rollup could incentivize them for transaction validation, or a bridge might reward them for helping prevent fraud.
SatLayer supports restaking on both EVM and Sui networks.
How Everything Fits Together
- Babylon serves as the foundational staking layer for network consensus.
- Lombard provides liquid staking, unlocking the value of staked BTC.
- SatLayer introduces restaking to provide economic security at the application level.
The parallels with Ethereum, Lido, and EigenLayer are becoming clear. It’s worth noting, however, that both Lombard and SatLayer currently depend on Babylon—not the other way around. SatLayer does not strictly require Lombard, though the latter is currently its main liquidity solution due to its decentralized nature.
Solv Protocol: BTC Reserves and DeFi Vaults
Solv Protocol takes a different approach within the Bitcoin ecosystem. With a TVL of $524.27 million, it focuses on liquid staking for BTC but does not rely on Babylon.
Instead, Solv is building its own Bitcoin reserve strategies and DeFi products. The SolvBTC token acts as a liquid representation of its BTC reserve strategy. Users deposit wrapped versions of BTC, and Solv converts the majority into native BTC through institutional channels, storing them via centralized custodians.
Although Solv operates independently from Babylon, it still benefits from Babylon-related assets like LBTC. In turn, thanks to its DeFi vaults, it offers enhanced composability and yield opportunities across chains.
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Frequently Asked Questions
What is Bitcoin DeFi?
Bitcoin DeFi refers to decentralized financial applications built on or for the Bitcoin network. Unlike earlier efforts that required bridging BTC to other chains, new protocols enable native staking, lending, and trading without leaving the Bitcoin ecosystem.
How does Bitcoin staking work?
Through protocols like Babylon, users can natively stake their Bitcoin to help secure other proof-of-stake networks. This process does not involve wrapping or transferring BTC to other blockchains, maintaining self-custody and leveraging Bitcoin’s security.
What is liquid staking on Bitcoin?
Liquid staking protocols like Lombard issue a tokenized representation of staked Bitcoin (e.g., LBTC). This allows users to retain liquidity while earning staking rewards, enabling further DeFi activities like borrowing or providing liquidity.
Can Bitcoin be used in restaking?
Yes. Projects like SatLayer allow users to restake liquid staking tokens such as LBTC to secure additional services like oracles, bridges, or L2 networks, creating new yield streams while enhancing security.
Is Bitcoin DeFi secure?
While still emerging, these protocols are built with a strong emphasis on security and decentralization. However, as with any new technology, users should exercise caution and conduct thorough research before participating.
What’s the difference between wrapped BTC and native Bitcoin DeFi?
Wrapped BTC (e.g., wBTC) involves tokenizing Bitcoin on other chains like Ethereum, introducing trust in custodians. Native Bitcoin DeFi aims to keep BTC on its own chain while still enabling programmable utility and yield.
Conclusion
DeFi on Bitcoin is no longer a distant dream. With new protocols gaining traction and TVL growing, we may be witnessing the dawn of a new era for decentralized yield on Bitcoin.
This isn’t just about wrapping BTC and moving it to Ethereum—it’s about unlocking native Bitcoin DeFi. As more projects like Botanix launch EVM-compatible Bitcoin sidechains, the composability and potential value of these layers could soar. Billions of dollars in dormant BTC may soon become active collateral, used to validate networks, secure applications, and generate real yield.