The Rise of Bitcoin-Based DeFi: Projects and Prospects
Date: 2025-07-03 Author: Gabriel Deangelo Categories: BUSINESS
DeFi applications provide users with the ability to exchange assets, lend, issue stablecoins, and manage capital without intermediaries and trust in centralized organizations. Although Bitcoin was not originally created for such solutions, by mid-2025 it took third place in terms of funds in DeFi after Ethereum and Solana. According to Defillama, since the end of 2024, the total amount of deposits in Bitcoin-based DeFi has grown more than sevenfold and reached $6.45 billion.
Despite Bitcoin's limited functionality for running smart contracts, interest in BTCFi (this is what Bitcoin-based DeFi protocols are often called) continues to grow. While Ethereum and Solana have hundreds of active projects, Bitcoin has only 61 apps so far, but their combined TVL is impressive.
One of the key players is Babylon Protocol. In early 2024, the project raised $70 million in investment led by Paradigm, and also received an additional $18 million in December 2023 from Polychain Capital and Hack VC. Babylon allows Bitcoin owners to participate in staking on networks that support Proof-of-Stake, such as Ethereum or Cosmos. At the same time, users retain full control over their funds. Today, Babylon controls about $4.9 billion in TVL, which is a significant part of the entire BTCFi market.
Another promising solution is Lombard Finance. This protocol is based on the Babylon architecture and offers users the LBTC token, a liquid staking tool. LBTC can be used to generate income across multiple blockchains and DeFi applications. The project was launched in the spring of 2024, and in the summer it attracted $16 million in investments with the support of Polychain Capital and other large funds. By June 2025, Lombard's TVL reached $2 billion.
Solv Protocol develops the idea of decentralized bitcoin management through the SolvBTC token. Thanks to it, users can use BTC in staking and lending, as well as work with other protocols, including Babylon and EigenLayer. Solv Protocol attracted funding from Binance Labs and Blockchain Capital, which helped to achieve a TVL of $ 1.8 billion, of which $ 0.5 billion is directly related to the Bitcoin network.
An interesting development was the Botanix network. This platform uses the Proof-of-Stake architecture and integrates the capabilities of Ethereum smart contracts with Bitcoin. Botanix does not use synthetic tokens, which guarantees the use of exclusively native BTC. In early July 2025, the mainnet was launched, managed by a federation of operators, which included companies such as Alchemy, Fireblocks, and Galaxy. By 2026, Botanix plans to expand the number of participants to 100.
Despite technical limitations, the BTCFi segment is rapidly developing, opening up new ways to use Bitcoin. The decentralized finance ecosystem based on the main cryptocurrency is just starting to gain momentum, but is already demonstrating significant interest from users and investors.
