Bitcoin (BTC) has always been the face of crypto, the first thing that comes to mind when you think of this market. But for years, its role has been largely static—held as a store of value, yet rarely used for anything else. Then BTCFi entered the scene: unlike traditional DeFi, which has been dominated by Ethereum (ETH) and other smart contract platforms, BTCFi is built around Bitcoin as the core asset.

In the last quarter of 2024, BTCFi’s total value saw a massive surge—from $800 million all the way to $6.5 billion. The momentum is impressive, to say the least. More institutional players are taking notice, and analysts predict that by 2030, roughly 2.3% of Bitcoin’s circulating supply (about $47 billion) could be actively used in decentralized finance. 

So clearly, BTCFi is not just a passing trend. But why is it gaining so much traction? Can it really be called the future of Bitcoin’s utility as a financial asset?

Let’s try to figure it out.

What is BTCFi, and why is it growing now?

BTCFi represents the intersection of Bitcoin and decentralized finance, with the first crypto playing the role of the core asset in this case. Typically, DeFi platforms have been built on blockchains like Ethereum, while Bitcoin holders had to wrap their BTC into ERC-20 tokens (like wBTC) to participate in this field.

This kind of tokenization started picking up the pace around 2020, allowing BTC holders to access DeFi services that are typically not available on the Bitcoin blockchain. These “wrapped” tokens are built in a way that makes them compatible with other blockchain networks. And so, they effectively extended Bitcoin’s functionality.

However, advancements in Bitcoin L2 solutions and LRTs, or layered rollup technologies, are now changing the rules. It is becoming unnecessary for Bitcoin to use “second class citizen” ERC-20 tokens anymore.

BTC LRTs, for example, operate on Ethereum and other chains as well, but use Bitcoin as the primary collateral in transactions. This means unlocking the use of Bitcoin as a yield-generating asset in other networks beyond its native chain.

The emerging Bitcoin L2s, meanwhile, are tackling this blockchain’s long-standing scalability issues, allowing for faster and more cost-efficient transactions. These innovations are going to fundamentally redefine Bitcoin, turning it from a passive store of value to an actively utilized financial asset.

Why is BTCFi the gateway for Bitcoin whales in 2025?

Large Bitcoin holders—miners, in particular—have often used CeFi loans backed by their BTCs to fund their operations since they didn’t want to outright sell those assets. This practice is still going on today, but BTCFi promises to make some changes. And that’s where everything will start from, really: by BTCFi enabling new opportunities for Bitcoin holders to put their assets to work.

Soon enough, Bitcoin whales will start looking at BTCFi as a powerful gateway that can be used to enter the DeFi space. And the way I see it, there are two key factors in 2025 that will influence that perception.

The first is the rise of Bitcoin ETFs. BTC ETFs currently account for almost 6% of all Bitcoin supply, having crossed $100 billion in holdings at the beginning of 2025. With them gaining mainstream traction, Bitcoin is increasingly perceived as the safest and most stable cryptocurrency asset.

This makes it a prime choice for DeFi, attracting large-scale holders who want to use their BTC without selling. Earlier in February this year, Goldman Sachs announced that it had invested $1.63 billion in Bitcoin ETFs. That’s easy proof right there.

The second major factor is the appearance of BTC L2 technologies, which we’ve already covered earlier. Until recently, the lack of scalability and transaction efficiency held Bitcoin back from DeFi adoption. Now, we are going to see a surge of L2 solutions that will enhance the network’s performance. And here’s the important part: they will do so while preserving Bitcoin’s core principles of decentralization and simplicity (and, hence, its robustness).

What DeFi platforms need to do for proper BTCFi integration

There are several challenges that will need to be overcome before BTCFi can achieve truly seamless integration. The biggest technical issue will be ensuring that Bitcoin-based L2 solutions become genuinely trustless. At the present time, they are not quite there, often relying on intermediaries and centralized elements, which goes against Bitcoin’s core philosophy.

The good news is that there’s a lot of R&D going on to make it happen. If successful, it could make the vast amounts of BTCs that are currently just lying there “collecting dust” be useful in DeFi.

Another big challenge is going to stem from people’s trust. Among Bitcoin holders, there are many who do not quite trust Ethereum and the existing Bitcoin tokenization methods. The key to winning them over will lie in creating robust and cost-effective solutions on the native Bitcoin network. Having a fully trustless and inexpensive execution layer on the BTC blockchain could really become the dealbreaker for these people.

The future of Bitcoin: More than just ‘digital gold’

For years, Bitcoin has been carrying the moniker of “digital gold”—a safe-haven asset meant for holding rather than using. These days, this is becoming increasingly untrue. As more institutional players enter the crypto space, the potential for BTCFi to become Bitcoin’s next-level evolution is very real.

The demand is on the rise, and the infrastructure is already being built. For Bitcoin whales looking to maximize their assets without selling, BTCFi could become the perfect answer.

Michael Egorov

Michael Egorov is a physicist, entrepreneur, and crypto maximalist who stood at the origins of DeFi creation. He is a founder of Curve Finance, a decentralized exchange designed for efficient and low-slippage trading of stablecoins. Since the inception of Curve Finance in 2020, Michael has developed all his solutions and products independently. His extensive scientific experience in physics, software engineering, and cryptography aids him in product creation. Today, Curve Finance is one of the top three DeFi exchanges regarding the total volume of funds locked in smart contracts.

PwC Italy and blockchain consultancy SKChain Advisors are developing a digital identity solution for the European Union using blockchain technology.

The product, built on the World Mobile Chain, a Layer 3 network on Coinbase’s Base, aims to provide a secure, self-sovereign identity framework that allows users to control their personal data without relying on centralized authorities.

The initiative aligns with the European Digital Identity Wallet introduced under the eIDAS 2.0 regulation, which aims to standardize digital identity across the EU, according to a press release shared with crypto.news. 

PwC Italy and SKChain Advisors have completed a feasibility study to determine the optimal SSI framework and are now moving forward with development. 

The solution will act as a gateway for users to access both traditional and Web3 platforms.

Data privacy and security

SSI technology is gaining traction as a way to enhance data privacy and security while complying with regulations such as the EU’s Markets in Crypto-Assets framework.

According to a company note, the new digital identity product will support authentication, verification, and interactions with digital asset services. 

This is expected to help enterprises and consumers navigate an increasingly digital economy while ensuring compliance with evolving regulatory standards.

“There has been talk for a long time about whether the EU’s digital identity scheme would use blockchain,” Rob Viglione, CEO of Horizen Labs told crypto.news. “The fact this has been confirmed is a positive step forward. The fact it’s using self-sovereign identity technology is also a positive step.”

World Mobile Chain, the infrastructure supporting the project, is designed to facilitate blockchain adoption among European businesses. As a Layer 3 protocol on Base, it provides scalability and efficiency for decentralized applications. 

The digital ID solution will allow companies to implement blockchain-powered identity verification without compromising privacy.

Viglione emphasizes the importance of privacy in digital identity systems, stating that: “Users need privacy and security guarantees. Any digital ID scheme should be using zero-knowledge proof technology to ensure data remain ‘usable but invisible.’”

The product is expected to streamline digital access across various sectors while giving users greater control over their online identities.

World Liberty Financial (WLFI), a DeFi project backed by President Donald Trump’s family, has acquired substantial amounts of Mantle’s MNT token following last week’s major technological upgrade of the network.

WLFI purchased about 3.54 million MNT for nearly $3 million USDC for an average purchase price of 84 cents, according to data sources Lookonchain and Arkham Intelligence.

The recent purchase has increased WLFI’s coin holdings, which include tokens like ETH, WBTC, TRX, LINK, AAVE, ENA, and others, to over $340 million. However, the Trump family-backed outlet still faced a paper loss of $111 million as of writing.

MNT is the native cryptocurrency of the Mantle Network, serving as a utility token for gas fees and a governance token for the layer 2 ecosystem focused on scaling Ethereum.

The Mantle Mainnet hard fork, or backwards-incompatible upgrade, took effect on March 19, activating EigenDA on the network. EigenDA is a secure, high-throughput, decentralized data availability service on Ethereum.

The EigenDA integration is said to boost Mantle Network’s scalability without hitting data rate limits, reportedly resulting in a 15 MB/s throughput. In other words, the network can process more transactions per block. Additionally, the upgrade has made the Mantle Network better compatible with Ethereum’s impending Pectra upgrade.

MNT traded at 6% higher on the day at 83 cents at press time, according to data sources CoinDesk and TradingView.