BeWater Research: What did BTCFi ecosystem do right behind the rise of '生息'?

Written by: Maia, BeWater Venture Studio

TL; DR

• In terms of the issuance and application of BTC-anchored assets, centralized wrapping of BTC still accounts for over 75% of the dominant position. However, at the same time, BTC LST represented by LBTC and SolvBTC.BBN has rapidly risen in recent months with the launch of Babylon, becoming another emerging force in the BTC-anchored asset market. Currently, the market size of BTC LST has reached 25.6K BTC. Driven by the demand for interest from underlying assets, the BTC Liquidity stake and points derivative market are gradually becoming new rising points in the BTCFi field.
• @Coredao_Org is an L1 network driven by BTC, which provides users with stable returns through non-custodial stake solutions and double stake mechanisms. Its TVL has risen 4757.9% in half a year, reaching $591.5M. Core’s rise strategy includes: (1) focusing on incremental markets anchored by BTC to improve ecosystem liquidity, quickly absorbing BTC and LST assets that rise rapidly (2) building a supporting native protocol and integrating it quickly with the BTCFi project to establish a complete ecosystem application (3) using Airdrops and market performance of native Token $CORE to support the incentive structure, further promoting participation and asset retention.
• @use_corn is an emerging ETH L2 network, with a cumulative TVL of $425.9M in Corn Kernels activity, laying the foundation for Mainnet launch. Corn’s rapid rise is due to its effective capital accumulation in the incremental market of BTC LST. Through the interest-bearing properties of focusing on liquidity staking tokens and the derivative gameplay of points, the five pools launched by Corn in collaboration with Pendle have attracted a total TVL of $290.3M, accounting for 11.4% of the total BTC LST market.
• @build_on_bob is a hybrid L2 network combining BTC and ETH that attracts a large number of assets through extensive BTCFi project integrations as well as a one-click liquid stake service. At present, BOB TVL has reached $65.7M, and the asset composition mainly comes from the stock part of the BTC anchored asset $WBTC. BOB’s performance is mainly due to: (1) the trust-minimized bridge architecture opens up asset channels from most networks and solves the problem of Liquidity fragmentation, and (2) the one-click flow stake entrance and the supporting strong ecosystem, building a convenient stake entrance and complete application scenarios

This year, as the narrative of BTCFi continues to evolve, on-chain Liquidity of BTC assets has gradually become the focus of major ecosystems and protocols to follow. With the introduction of BTC expansion plans and the rise of BTC LST, BTC is transitioning from a static store of value to an asset that can participate in more on-chain revenue scenarios, enhancing its potential applications in the entire Decentralized Finance ecosystem.

@Coredao_Org, @build_on_bob, and @use_corn are representative rise cases in the BTCFi field in the second half of the year: Core focuses on leveraging the large volume of BTC LST assets during the rise period; Corn collaborates with Pendle to quickly seize the incremental market by introducing point-based derivative gameplay; BOB attracts Liquidity through enriching the ecosystem and providing liquid stake services; the series of actions around ‘Liquidity’ by various ecosystems greatly activate the Liquidity of BTC assets. In the future, as BTC Liquidity gradually releases, there is still great rise potential for on-chain accumulation of assets in the BTCFi ecosystem.

1 Background

1.1 BTC on-chain Asset Flow Path

BTC and its anchored assets can be divided into the following three layers in terms of on-chain flow direction:

• Layer 1: Native BTC
• Layer 2: (1) BTC wrapped based on centralized custody issuance (2) mapped assets running on BTC L2 and SideChain (3) liquid staking BTC
• Layer 3: BTC derivative assets in various downstream Decentralized Finance scenarios

1.2 BTC Asset Market Status

BTC Anchored Asset Issuance and Application Overview

From the issuance of BTC anchored assets on the Ethereum, Arbitrum, and BNB networks, it can be seen that the centralized custody issuance of wrapped BTC still occupies the majority of the market share. Among them, $WBTC (156.1K supply) and $BTCB (65.3K supply) together account for over 75% of the total circulating supply of BTC anchored assets. In addition, BTC LST tokens such as $LBTC (10.5K supply) and $SolvBTC.BBN (8K supply) have risen rapidly in recent months, driven by the narrative of BTC (re)staking, becoming another emerging force in the market of BTC anchored assets.

As the anchor Token with the highest Consensus and the largest market capitalization, the main application scenarios of BTC anchored assets are concentrated in the lending protocol. In terms of the largest volume $WBTC and $BTCB, their largest downstream applications are in Aave v3 and Venus protocol, with TVL accounting for more than 20% of their respective total supplies, reflecting the demand for relatively stable returns in the BTCFi field by large funds.

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BTC LST issuance and application overview

Currently, the total market supply of BTC and LST is about 25.1K BTC, with Lombard and Solv Protocol accounting for over 70% of the market share. The absorption and issuance of BTC and LST directly impact the flow and deposition of BTC assets on various chains. In particular, Solv has a significant impact on the TVL of various chains, bringing in net inflows of $309.7M and $177.8M for Core and Scroll respectively, significantly increasing the asset size of these two chains.

Compared to the centralized custody mode issuance of BTC, BTC LST expands the application scenarios of interest-bearing assets. In addition to the lending protocol, the points trading market has become another important downstream application of BTC LST. Avalon and Pendle are the protocols with the most accumulated funds in the lending and points derivative market zones respectively, achieving a win-win rise along with the development of BTCFi and BTC staking narrative.

2 Asset Deposition Strategy of BTCFi Ecosystem

2.1 Core: Focusing on the dual-wheel drive ecosystem of incremental assets and Token incentives rise

Basic Information

Core is an L1 expansion solution driven by BTC, which allows users to obtain passive income through non-custodial BTC stake without the need to transfer or encapsulate BTC. Since its launch in April 2024, more than 7,500 BTC have been staked on Core, and the network security of Core has been protected by the security of BTC. In July 2024, Core introduced a dual staking mechanism for BTC and CORE. Users can stake BTC to obtain risk-free basic income, and also stake the native Token CORE to obtain additional rewards, the distribution of which will be linked to the quantity and duration of CORE staking. The dual staking mechanism has further driven the rise of Core’s TVL since its introduction.

Currently, Core’s TVL has reached $591.5M, a rise of 4757.9% in six months, making it the 16th leader in TVL ranking in the blockchain industry. The rise of Core TVL presents several key Nodes: In June, the launch of the native lending protocol @colend_xyz and its integration with @SolvProtocol derivative assets drove a TVL rise of $51.1M in that month, an increase of 202.2%. In July, the introduction of a dual stake mechanism attracted new capital inflows, leading to a TVL rise of $92.6M in that month, an increase of 121.3%. In August, BTC Restaking leading protocol @Pell_Network’s integration with Core further triggered a larger scale capital lock-up.

rise策略

The rise of Core TVL is mainly driven by the following factors: (1) Focus on the incremental market of BTC-anchored assets to improve ecosystem Liquidity, rapidly absorb Solv derivative assets (2) Build supporting protocols such as Colend and quickly integrate with projects such as Pell Network to establish a complete ecosystem application (3) Utilize the Airdrop and market performance support of the native Token $CORE to form a multi-dimensional ecological synergy.

• Integration and cooperation with the Depth of Solv derivative assets

SolvBTC.BBN and SolvBTC are currently the fifth and sixth largest volume BTC derivative assets in the market, with a total circulation of 15.6K BTC, and are still in a stable rise phase. Since June, SolvBTC has expanded to the Core ecosystem, integrating with the Colend and Pell Network protocols, driving a rise in the TVL of $51.1M that month. Currently, Solv derivative assets account for 65% of Core TVL. This is not only due to the stable income scene provided by the Decentralized Finance module construction of the Core ecosystem for underlying assets, but also includes the high leverage incentives provided by Core for SolvBTC applications and the expected Airdrop supported by the $CORE Token. It can be seen that the ecological development of Core is not limited to its own BTC native stake mechanism, but also focuses on introducing and incentivizing high-quality large-volume BTC assets to enhance the activity and lock-up volume of the entire network. Through integration and cooperation with Solv Protocol’s Depth, Core has not only increased TVL, but also provided diversified on-chain Decentralized Finance scene support for liquidity assets.

• BTCFi ecosystem building led by Colend and Pell Network

Colend is the native lending protocol on CORE, undertaking the majority of asset stake in the ecosystem. Since the introduction of SolvBTC in June and providing maximum incentives, its TVL has risen significantly. Currently, 85% of the TVL in the Colend protocol comes from the inflow of Solv Protocol derivative assets, showing its strong synergy with Solv. In addition, Colend is also a core use case for wCORE and stCORE, absorbing $17.4M of wCORE and $5.2M of stCORE. The interest-bearing scenario provided by Colend for CORE LST has played a boosting role in increasing users’ willingness to stake CORE, while also providing support to maintain its value.

In addition, BTC Restaking has become a stable stake income scenario for BTC derivative assets. In August, the leading project Pell Network of BTC Restaking quickly promoted the rise of ecological TVL after its launch on Core, and the inflow of assets still mainly came from Solv Protocol, which precipitated Solv derivative assets worth $108.3M. In terms of project incentives, Pell Network provides the highest multiple of point reward support for SolvBTC on Core, while Core also provides 5X Ignition Drop rewards for Pell Network, further enhancing the participation and application of BTC LST in Pell Network protocol in the Core ecosystem. As of now, the accumulated TVL of Pell Network has reached $271.7M, of which nearly half of the contribution comes from the Core ecosystem.

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• An incentive structure supported by the Airdrop and market performance of the native Token $CORE

In May 2024, Core launched the Sparks incentive plan, aiming to accelerate the adoption and expansion of the ecosystem by rewarding on-chain contributors, and is currently in its second season. Unlike projects that rely on point incentives and have unclear expectations for the launch coin, Core launched its native Token $CORE as early as 2023 and successfully completed the initial Airdrop, laying a solid community foundation. $CORE, as the native Token of the ecosystem, is mainly used for paying Money Laundering, network stake, obtaining rewards, and participating in on-chain governance. According to the Tokenomics design, user rewards account for 25.029% of the total supply of $CORE, totaling 525.6 million tokens. Previously, Core distributed a large number of Tokens to ecosystem participants through the Airdrop activity conducted through the Satoshi App, increasing users’ long-term follow and continuous contributions to its ecosystem. The second season Airdrop plan will unlock 24.7 million $CORE, of which 17 million tokens are used to reward participants, continuously driving the enthusiasm of users to participate in the Core ecosystem.

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2.2 Corn: Efficiently attracting BTC LST market Liquidity through point derivative gameplay

Basic Information

Corn is an ETH L2 network launched recently, using tokenized BTC (BTCN) as gas fees and economic incentive tools, aiming to unify the interests of users, developers, and liquidity providers. The core of the Corn incentive mechanism lies in the veCHAIN model, where the stakers of CORN Token will determine the distribution of network rewards.

Currently, Corn has not yet launched the Mainnet, but it has effectively attracted a total storage of $425.8M through a deposit activity jointly launched by multiple parties, significantly exceeding the BTC extension layers such as Merlin and BSquared that have already been launched. These deposits are mainly concentrated in the pools launched by Pendle, together with LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, accounting for 85% of the current total TVL.

rise策略

• Collaborate with Pendle to lead BTC LST token derivative gameplay

The points derivative market is one of the key strategic scenarios for BTC LST as an interest-bearing asset. As the leading protocol in this zone, Pendle started integrating various BTC LST at the beginning of September. Currently, the collaboration between Corn, Pendle, and BTC LST supports five major BTC LST assets: LBTC ($41.5M TVL, $1.1M 24h Volume), SolvBTC.BBN ($97.5M TVL, $300K 24h Volume), eBTC ($20.2M TVL, $658.4K 24h Volume), PumpBTC ($60.5M TVL, $437K 24h Volume), uniBTC ($70.6M TVL, $20.8K 24h Volume), absorbing 11.4% of the total market volume of BTC LST. The collaboration with longer has generated a good synergistic effect:

For BTC LST holders, the points leverage market provides a variety of strategic gameplay, Pendle has become a major application scenario, accounting for 10%-30% of the total supply of BTC LST. In addition, Corn also provides the highest multiplier points incentives for these pools, further attracting more holders to participate. For Corn, BTC LST is a core contributing factor driving the TVL rise in its early stages. Currently, these pools are the only applications generating external benefits in the Corn points Mining activity, laying the foundation for its future Mainnet launch.

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• TVL BootStrap Campaign

In Corn’s existing point-based mining design, users can earn 1 Kernel point every 210 minutes for every $1 worth of assets deposited. These deposits can be withdrawn at any time without incurring any fines or fees, providing great flexibility. The goal of this activity is to attract initial Liquidity by incentivizing with Kernel points. However, except for the BTC LST pool in collaboration with Pendle, no other deposits have brought more value to the network. The flexibility of withdrawing deposits at any time also brings short-term mining risks, which may lead to inflation of Corn points and dilute the expected value allocated to individuals.

2.3 BOB: Safe Bridge and Strong Ecology Help to Gather Assets

Basic Information

BOB is an innovative hybrid Layer2 network that combines the advantages of BTC and Ethereum. It leverages the features of Ethereum’s Smart Contract and EVM, and adopts rollup technology to improve transaction processing capacity and scalability. At the same time, BOB’s final transaction confirmation is completed on the BTC blockchain, enjoying the high security provided by BTC PoW Consensus Mechanism. The current total TVL of BOB is $65.7M, with the majority of assets coming from WBTC.

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rise策略

Based on the bridge architecture that solves the trust and Liquidity fragmentation issues, the rise of the BOB ecosystem in the past six months is also attributed to the launch of one-click liquidity stake service under the narrative of BTC (re)staking, strong market force and ecological cooperation, which together promote the rise of the ecosystem.

• Integrated Liquidity Staking Service and Ecosystem

BOB Stake integrates multiple liquidity stake service providers and Decentralized Finance platforms, utilizing the BOB gateway to achieve the functionality of completing multiple protocol stakes with a single BTC transaction. With BOB Stake, users can easily stake BTC to multiple LST protocols, reducing time and costs. Additionally, BOB Stake integrates the user-staked LST with the Depth of Decentralized Finance protocols, making BOB a convenient gateway for BTC liquidity stakes and Decentralized Finance applications.

In terms of ecosystem construction, BOB Stake integrates various stake protocols with Babylon stake as the core, supporting the liquidity stakeToken LST, including SolvBTC.BBN, uniBTC, and PumpBTC. BOB has also become the preferred BTC stake platform for multiple aggregators and Wallets, attracting over 3 million users on the Staking Rewards platform. In addition, BOB has integrated with dozens of Decentralized Finance protocols such as Avalon, Layerbank, and Segment, providing diversified interest-generating applications for BTC LST and continuously enhancing market influence. Currently, Avalon, as the main lending protocol within the BOB ecosystem, attracts 35.6% of on-chain assets, almost entirely composed of SolvBTC.BBN’s supply. However, the utilization rate is only 8.9%, indicating a low actual borrowing demand in the BOB ecosystem, and the aggregation of Liquidity and ecosystem protocols needs to be strengthened.

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• Incentive Plan BOB Fusion

BOB Fusion is the core incentive program in the BOB ecosystem, which aims to incentivize users to earn points through Cross-Chain Interaction assets, Lock-up Position participation, ecological project interaction, and referral mechanism. Supported deposit assets include BTC anchored assets, stablecoins, and ETH LST, etc. In the current plan of BOB Fusion Season 3, holding, borrowing, and trading interest-bearing assets such as SolvBTC.BBN are incentivized with the highest multiple compared to other assets. This incentive program has significantly promoted the development of the BOB ecosystem, attracting over 147,000 users, over 100 partners, and 60 ecological projects launched.

3 Summary

By observing the three emerging forces, Core, BOB, and Corn, in the BTC ecosystem, we can see different network strategies for asset accumulation. Core has successfully attracted a large influx of assets by integrating with the growth phase Solv Protocol’s Depth derivatives and innovatively introducing a dual stake mechanism to provide stable returns. Corn has successfully absorbed a large amount of BTC LST funds through the joint launch of point derivatives with Pendle, laying the foundation for its future Mainnet launch. BOB has attracted a large amount of assets through extensive BTCFi project integrations and one-click liquidity stake services.

From the perspective of the on-chain liquidity of BTC-anchored assets, the key to effectively realizing the ecological fund precipitation lies in connecting and incentivizing a large volume of incremental anchored assets, forming composable interest strategies through diversified Decentralized Finance applications, and providing longer incentive expectations. The synergistic effect will drive the activity and liquidity of BTC-anchored assets on various on-chain networks. Currently, the TVL of BTC-anchored assets on L2 and Sidechain expansion networks is approximately $160 million, accounting for only 0.14% of the total BTC market capitalization. With the gradual release of BTC liquidity in the future, there is still great potential for the scale of BTC assets precipitation on various on-chain networks and the application scenarios of the BTCFi ecosystem.