Bitcoin Enters DeFi Mainstream As Programmability Unlocks New Use Cases And Ecosystem Growth
In Brief
Bitcoin is evolving beyond a digital store of value into a programmable asset, driving fast growth in native DeFi applications and expanding its role within the DeFi ecosystem.
Bitcoin, historically recognized as a digital store of value and hedge asset, is entering a new phase marked by enhanced programmability, which is gradually reshaping its position within the decentralized finance (DeFi) sector.
Over the past few years, several initiatives have expanded Bitcoin’s utility, enabling it to support more complex financial applications akin to those on Ethereum. In 2024, this trend accelerated significantly, with the total value locked across Bitcoin-based DeFi platforms increasing from roughly $307 million to around $6.5 billion by year’s end—a more than twentyfold rise.
A substantial portion of this capital, close to 80%, was attributed to a staking platform named Babylon, whose TVL grew from approximately $1.6 billion in October to around $5 billion, indicating heightened interest in yield-generating opportunities within the Bitcoin ecosystem.
Unlike earlier approaches where Bitcoin was often transferred to Ethereum-based protocols through wrapping mechanisms, recent developments in smart contract functionality now allow value to remain natively within the Bitcoin network. As a result, Bitcoin-centric DeFi, once considered contradictory, is now emerging as a tangible and expanding sector.
This growth has been supported by technical advancements, such as the rollout of native staking and restaking protocols, and favorable macroeconomic developments, including the approval of US spot Bitcoin exchange-traded funds (ETFs), which have contributed to increasing institutional involvement.
SatLayer Advances Bitcoin DeFi By Enabling Native Programmability And dApp Support
As the development of DeFi within the Bitcoin ecosystem progresses, SatLayer has emerged as a notable infrastructure platform contributing to this shift by extending the asset’s utility through programmability. The platform enables Bitcoin, once secured via Babylon, to be utilized in smart contracts supporting additional decentralized applications or services—referred to as Bitcoin Validated Services (BVS). This setup effectively creates a framework in which developers can leverage Bitcoin’s inherent security by gaining support from BTC holders who stake their assets in exchange for supplementary rewards, beyond typical staking yields.
SatLayer also incorporates programmable slashing mechanisms, allowing automatic penalties through smart contracts if a participating service or operator fails to meet predefined security standards. Unlike traditional approaches that required wrapping or custodial solutions to enable Bitcoin’s use in smart contracts—often moving the asset off its native chain—SatLayer maintains Bitcoin’s role at the protocol layer, preserving its decentralized integrity.
Initial participation has been substantial, with many development teams engaging after the platform’s Devnet rollout. A hackathon hosted by Babylon also saw over 70 developers experiment with early versions of SatLayer’s BVS system. These developments point to an expanding ecosystem of native Bitcoin applications, including use cases such as decentralized insurance and collateral-backed cross-chain infrastructure.
SatLayer Secures $8M To Advance Bitcoin Programmability As BTC Liquidity Expands Across DeFi Ecosystems
SatLayer’s growth appears to be supported by a combination of strategic investment and a clear technological roadmap. In August 2024, the platform secured $8 million in pre-seed funding from a mix of crypto-focused venture capital firms, including Hack VC and Castle Island Ventures, as well as established financial institutions such as Franklin Templeton.
Simultaneously, broader industry trends indicate a growing interest in integrating Bitcoin liquidity across various blockchain ecosystems. For example, networks like Solana have begun incorporating wrapped Bitcoin and Bitcoin-based liquid staking tokens. If these developments continue along their current path, Bitcoin’s involvement in DeFi could expand, potentially raising the total value locked across its ecosystem to the scale of hundreds of billions of dollars. Some analysts suggest that programmability may play a central role in this shift, positioning Bitcoin not just as a store of value, but as a foundational asset in the evolving DeFi infrastructure.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
