Bitcoin-based decentralized finance (BTCFi) shows significant growth but faces challenges related to trust and security among users.
Overall Growth of BTCFi
According to DefiLlama data, the total value locked (TVL) in BTCFi protocols rose from $304.66 million on January 1, 2024, to $6.5 billion by December 31, 2024. As of publication, the TVL stands at $7.05 billion, representing an increase of more than 22 times. A report from Arch Network attributes this growth to new protocol launches, emerging token standards, institutional inflows, and a price rally pushing Bitcoin to an all-time high.
Development Challenges in BTCFi
Developing on Bitcoin is still perceived as harder than on altcoins like Ethereum. 44% of the users who chose BTCFi mentioned security and decentralization as key motivations. However, 43% noted Bitcoin’s limited smart contract support as the main challenge. 45% suggested that better infrastructure is needed to scale BTCFi.
Using Bitcoin in BTCFi
Among respondents, 36% hold their Bitcoin in cold storage, 33% trade on centralized exchanges, and 31% use Bitcoin for payments. About 29% of users utilize Bitcoin as collateral in DeFi protocols, while 22% bridge their Bitcoin to other blockchains as wrapped tokens.
Bitcoin-based decentralized finance continues to grow, but public trust and security issues remain significant barriers to its further development.
