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.

When people talk about zero-knowledge cryptography in 2024, they’re often referring to a privacy-focused use case that relies on a combination of blockchain technology, cryptocurrencies, digital wallets, and users with some degree of web3 knowledge. 

Zero-knowledge proofs have existed since the 1980s, long before the advent of web3. So why limit their potential to blockchain applications? Traditional companies can—and should—adopt ZK technology without fully embracing web3 infrastructure.

At a basic level, ZKPs unlock the ability to prove something is true without revealing the underlying data behind that statement. Ideally, a prover creates the proof, a verifier verifies it, and these two parties are completely isolated from each other in order to ensure fairness. That’s really it. There’s no reason this concept has to be trapped behind the learning curve of web3. 

Most organizations that could benefit from ZK technology aren’t using blockchains or are not even aware of web3. The industry is still young, with many just now familiarizing themselves with Bitcoin (BTC) and Ethereum (ETH), not to mention Layer 2s and 3s.

Despite all that, ZKPs can already be applied to a variety of real-world use cases, and they don’t need to integrate fully web3 rails to do so.

Do you trust your slot machine payout?

With zero-knowledge proofs, you don’t have to trust a gaming operator. You can just enjoy playing and have peace of mind knowing that the game is designed fairly. Every digital gambling machine in the world should be designed with ZKPs; it just makes sense for the operators and the players. The best part is that players can enjoy the benefits without the words “web3” or “crypto” even entering their minds. 

Recently, DraftKings and White Hat Gaming were fined $22,500 by the state of Connecticut for their online slot machine game, which failed to pay any winners over one week in August 2023—even though there were more than 20,600 spins that week. The game advertised that nearly 95 cents would be paid out for every $1 wagered, so the algorithm should have returned $19,570 to the players who wagered $20,600 in spins. Instead, players lost $20,600—all of which went to DraftKings. 

This is where zero-knowledge proofs can make a big difference. A ZKP could prove that a game paid out a certain amount of money over a given period and at a specific hit rate without revealing individual spins or player identities. 

This is great, but there is still the problem of verifying the proof. Someone needs to ensure that DraftKings, or any gaming operator, constructed the proofs correctly based on all the required data. It could be DraftKings themselves, but we shouldn’t trust them to handle their own verification. A regulator or auditor could do it, but this would likely cost DraftKings a lot of money, which would then be passed on to the customer.

In this situation, the best option is a public and decentralized network built specifically to verify proofs in a quick and cost-effective manner. Instead of the user being asked to trust a centralized entity, they can trust a decentralized protocol that ensures nefarious actors (i.e., those who may try to verify an incorrect proof) are punished if they misbehave.

AI output and trustworthiness 

AI’s potential for deception is well-established. However, there are ways we can harness AI’s creativity while still trusting its output. As artificial intelligence pervades every aspect of our lives, it becomes increasingly important that we know the models training the AIs we rely on are legitimate because if they aren’t, we could literally be changing history and not even realize it. With ZKML, or zero-knowledge machine learning, we avoid those potential pitfalls, and the benefits can still be harnessed by web2 projects that have zero interest in going onchain. 

Recently, the University of Southern California partnered with the Shoah Foundation to create something called IWitness, where users are able to speak or type directly to holograms of Holocaust survivors. 

This is an undeniably powerful use of machine learning. There’s something so strangely moving about interacting with a hologram of a Holocaust survivor and feeling like you’re having a real conversation. But with a subject this sensitive, it’s even more crucial that the algorithm underlying the hologram is generating factual information. 

Enter zero-knowledge proofs. If we were to reimagine this project, we might consider adding a “proof of algorithm output” where the user is able to see evidence that the responses they are seeing are based on a Natural Language Processing algorithm that was correctly trained on troves of historical transcripts and interviews with Holocaust survivors, ensuring that the information presented is accurate. 

ZKPs make it possible to get proof of this input data and AI training without revealing the underlying information. Fact-checking the Holocaust information would also require perusing vast amounts of data, potentially requiring the end user to download or access large data sets and then spend hours reading or watching interviews. ZKPs allow the user to forgo this tedious and resource-intensive process.  

In this case, we might trust USC to verify proofs for this particular project, but there are certainly more use cases with AI where the end user may not want to trust a centralized entity to both create and verify proof. When incentives to construct “fake” proofs and have them verified align, decentralized proof verification makes the most sense.

ZK is a trustless, decentralized system for all

We don’t need to trust companies or robots to tell us the truth because we have ZK. Many industries can level up with zero-knowledge blockchain solutions, even if they know nothing about the web3 space. 

By tapping into ZK proof verification, companies and institutions can essentially keep doing everything they have been infrastructure-wise. They just need to create a simple system for proof creation and then use a decentralized system like zkVerify to handle the proof verification. Even though a blockchain is used, the users don’t need to worry about that. 

The future of ZK will be massive, and organizations won’t have to change much to reap the benefits. They can just plug and play. 

John Camardo

John Camardo is the head of product management at Horizen Labs, where he focuses on applying zero-knowledge cryptography to solve real-world problems. He currently leads the product side of zkVerify, a chain-agnostic modular blockchain dedicated to efficiently verifying ZK proofs.

The dream of property ownership has become increasingly unattainable for the average earner, especially in Europe. While capital-rich investors purchase multiple properties, driving up housing prices, many potential buyers are priced out of the market, making homeownership an exclusive privilege for the wealthy.

The issue has become so severe for ordinary people that it is now causing a democratic backlash in major European countries. For instance, Spain’s Prime Minister Pedro Sanchez has suggested a 100 percent tax on any non-EU citizen buying a home in Spain. This is due to frustration over the monopoly foreign investors have created in the Spanish property market.

While the problem is continent-wide, Spain has faced the inequality of housing access on a unique scale. Speaking to an economic forum in Madrid, the Prime Minister outlined how social housing constitutes just 2.5 percent of Spain’s market, falling significantly below other major EU nations, such as 14 percent in France and 34 percent in the Netherlands.

Moreover, the Spanish coalition government plans to speed up the construction of new homes. The Bank of Spain has said that 600,000 new homes are needed by the end of 2025 but only 90,000 units are being built annually. This is an essential context to consider when people from outside the EU, including the post-Brexit UK, bought 27,000 houses a year in Spain, according to Mr Sanchez.

The proposal to introduce the 100 percent tax has, predictably, led to unease among many non-EU investors, such as Britons, who feel the Spanish government is unfairly targeting them. Industry insiders, such as Blacktower Financial Management Group, have warned that the property levy could only discourage investment in the country without solving the root problem of decreasing housing affordability and supply.

Existing hurdles to property investment

Significant obstacles are already in place for international investors, including notary fees, potential language barriers, and strict requirements for local financing. Therefore, tighter regulation of foreign investment alone may not effectively address this multifaceted issue.

Investing in new digital tools that broaden access and democratize property investment is one potential long-term solution to the European property affordability crisis for governments and industry leaders.

One of these new tools is tokenization, which is the process of turning a real-world asset, like real estate, into digital tokens that can be tracked, transferred, or traded on a blockchain. Each token represents a fraction of ownership in the asset, making it easy to divide, store, and exchange digitally. Assets in the physical world are converted into digital tokens and transferred or traded on a blockchain like Ethereum (ETH) or Solana (SOL). These tokens act as proof of ownership of the real-world asset.

Tokenization and property asset management

The tokenization of real estate can provide a fresh, innovative approach to addressing Europe’s property ownership crisis. In particular, it holds promise for tackling housing shortages and enabling broader access to property ownership.

Currently, to invest in property start-ups or real estate investment funds, one either needs to be an accredited investor or have an initial large amount of capital, which severely limits those with access to the property ladder.

Using blockchain technology, tokenization subverts the established paradigm. A property can instead be converted into digital tokens representing a fraction of legal ownership. With fractionalization, the tokenized property asset is split into smaller shares that enable all investors, no matter their portfolio size, to gain exposure to real estate.

One of the immediate advantages of tokenization in the real estate market is that it generates liquidity by making investment accessible and flexible to almost anyone with a laptop or mobile device. By enabling property investors to purchase a share of an asset instead of going through the tiresome and bureaucratic process of buying a property traditionally, tokenization negates the need for investors to put forward significant deposits upfront. This accomplishes two things: firstly, it immediately provides an avenue for local and global investors to own a piece of property. Secondly, it enables more investors to gain exposure to each asset.

Tokenization also opens properties to a global pool of investors. Since the property has been divided into multiple tokens that each represent a fraction of the asset, investors can buy or sell tokenized property on an exchange that is accessible to global players. With tokenization, complexities such as government regulations, cumbersome paperwork, and other localized inconveniences become almost nonexistent, removing much of the difficulties international investors might face in buying local assets.

However, rather than continue to price out would-be local investors, tokenisations simultaneously manage to open up access to those without existing large sums of capital as well as generate further revenue from international investors due to the reduction of barriers to entry.

Impact on fraud and malpractice 

Tokenization provides a streamlined pathway for all investors, whether they have low-risk appetites or smaller portfolios, to have a chance to own property, even if only pieces of it. Since tokenization platforms are built on blockchain ledgers, all tokenized real-world assets are managed by smart contracts, which facilitate how transactions and the ledger are managed. The real estate contracts are kept on-chain but remain separate.

Moreover, through the enhanced transparency and security of blockchain, each transaction or ownership transfer is recorded and cannot be altered, reducing the risk of fraud or corruption. This, in turn, leads to the building of confidence among investors who might be hesitant to enter a traditionally opaque real estate market. With more people trusting the system, this encourages market stability and accessibility to local and global investors alike.

A modern solution to a legacy problem

Considering that the issues facing the property market are multi-faceted and are not strictly limited to the domination of foreign investors in the market, taking advantage of these new forms of investment could open up pathways to property ownership that don’t come with the added concerns of dissuading potential fiscal injections into the country or encouraging capital flight.

European countries seeking to support more local citizens to invest in property must remove barriers and obstacles that make it difficult for smaller investors to compete with more established global buyers with bigger wallets. Rather than taxing wealthy overseas investors, which will only build distrust and drive away investment, European governments and real estate agents can embrace blockchain technology by tokenizing parts of a property on the market, fractionalizing the real-estate asset into smaller and more affordable pieces, which are available to all. By doing this, every investor now, both at home and abroad, has the chance to benefit from appreciation in their property markets as well.