Strategy Analysis Behind the Rise of the BTCFi Ecosystem

Recently, with the continuous development of the BTCFi field, the on-chain liquidity of Bitcoin assets has become the focus of attention for major ecosystems and protocols. With the launch of BTC expansion solutions and the rise of BTC LST, Bitcoin is transforming from a mere store of value to an asset that can participate in more on-chain yield scenarios, significantly enhancing its application potential in the DeFi ecosystem.

Core, BOB, and Corn are representative rise cases in the BTCFi field for the second half of the year: Core focuses on large BTC LST assets during the growth period; Corn collaborates with Pendle to launch points derivative gameplay to quickly capture the incremental market; BOB attracts liquidity through rich ecosystems and liquidity staking services. Various ecosystems have greatly activated the liquidity of BTC assets through a series of actions centered around "yield generation." In the future, as BTC liquidity is gradually released, the on-chain deposit scale of assets in the BTCFi ecosystem still has huge growth potential.

1. Background

1.1 BTC asset flow path on the chain

The flow direction of BTC and its anchored assets on the chain can be divided into the following three layers:

• Layer One: Native BTC
• Second Layer: (1) Wrapped BTC issued based on centralized custody (2) Mapping assets running on BTC L2 and SideChain (3) liquidity staking BTC
• Layer 3: BTC derivative assets in various downstream DeFi scenarios

1.2 BTC asset market status

Overview of BTC Pegged Asset Issuance and Applications

From the issuance of BTC-backed assets on the Ethereum, Arbitrum, and BNB networks, it can be seen that centralized custody issued wrapped BTC still occupies the vast majority of market share, with WBTC (156.1K supply) and BTCB (65.3K supply) together accounting for over 75% of the overall circulation of BTC-backed assets. In addition, LBTC (10.5K supply) and SolvBTC.BBN (8K supply) have seen rapid growth in recent months driven by the BTC (re)staking narrative, becoming another emerging force in the BTC-backed asset market.

As the most widely recognized and largest market capitalization asset, the main application scenarios of BTC-backed assets are concentrated in lending protocols. In terms of the largest volumes, WBTC and BTCB, their largest downstream applications are in Aave v3 and Venus protocols respectively, with TVL accounting for over 20% of their total supply, reflecting the demand for relatively stable returns in the BTCFi sector from large funds.

Overview of BTC LST Issuance and Application

The current total market volume of BTC LST is approximately 25.1K BTC, of which the two major protocols, Lombard and Solv Protocol, account for over 70% of the market share. The absorption and issuance of BTC LST directly affect the flow and accumulation of BTC assets across various chains. Among them, Solv's impact on the TVL of various chains is particularly significant, bringing net inflows of $309.7M and $177.8M to Core and Scroll respectively, significantly enhancing the asset scale of these two chains.

Compared to wrapped BTC issued by centralized custody models, BTC LST as an income-generating asset has expanded into richer application scenarios. In addition to lending protocols, the points trading market has become another important downstream application for BTC LST. Avalon and Pendle are the protocols with the highest capital accumulation in the "lending" and "points derivative market" sectors for BTC LST, achieving win-win growth alongside the development of the BTCFi and BTC staking narratives.

2. BTCFi Ecosystem's Asset Accumulation Strategy

2.1 Core: Focus on the dual-driven ecological growth of incremental assets and token incentives.

Basic Information

Core is an L1 scaling solution powered by BTC that allows users to earn passive income through non-custodial Bitcoin staking without the need to transfer or wrap BTC. Since its launch in April 2024, over 7,500 BTC have been staked on Core, with the security of the network protected by the safety of BTC. In July 2024, Core introduced a dual staking mechanism for BTC and CORE. Users can not only stake BTC to earn risk-free basic returns but also stake the native token CORE to receive additional rewards, which will be distributed based on the amount of CORE staked and the duration of the stake. Since the introduction of the dual staking mechanism, it has further driven the rise of Core's TVL.

Currently, Core's TVL has reached $591.5M, with a rise of 4757.9% over the past six months, ranking it as the 16th blockchain by TVL. The growth of Core's TVL shows several key points: In June, the launch of the native lending protocol Colend and the integration with Solv Protocol's derivative assets drove a TVL increase of $51.1M that month, with a rise of 202.2%. In July, the introduction of the dual-staking mechanism led to new capital inflows, driving a TVL increase of $92.6M that month, with a rise of 121.3%. In August, the integration of the BTC Restaking leading protocol Pell Network into Core further triggered larger-scale capital accumulation.

rise strategy

The rise of Core TVL is mainly driven by the following factors: ( focusing on the incremental market of BTC-pegged assets to enhance ecological liquidity, absorbing rapidly growing Solv derivative assets ) building supporting native protocols such as Colend and rapidly integrating with projects like Pell Network to establish a complete ecological application ( utilizing the airdrop and market performance of the native token CORE to support the incentive structure, forming a multi-dimensional ecological synergy.

• Deep integration and cooperation with Solv derivative assets

SolvBTC.BBN and SolvBTC are currently the fifth and sixth largest BTC derivative assets in the market, with a total issuance of 15.6K BTC, and they are still in a stable rise phase. Since June, SolvBTC has expanded to the Core ecosystem and has been deeply integrated with two major protocols, Colend and Pell Network, driving a TVL increase of $51.1M that month. Currently, Solv derivative assets account for 65% of the Core TVL, which is not only due to the stable income scenarios provided by the DeFi module construction of the Core ecosystem for underlying assets but also includes the high incentives provided by Core for the application of SolvBTC and the airdrop expectations supported by the performance of CORE tokens. This shows that the ecological development of Core is not limited to its own BTC native staking mechanism but focuses more on introducing and incentivizing high-quality large BTC assets to enhance the overall network's activity and locked volume. Through deep integration and cooperation with the Solv Protocol, Core has not only increased its TVL but also provided diversified liquid asset support for on-chain DeFi scenarios.

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• Led by Colend and Pell Network for BTCFi ecosystem construction

Colend is the native lending protocol on Core, accounting for a significant portion of asset accumulation in the ecosystem. Since the introduction of SolvBTC in June and the provision of maximum incentives, its TVL has risen significantly. Currently, 85% of the TVL in the Colend protocol comes from the inflow of derivative assets from the Solv Protocol, demonstrating its strong synergy with Solv. In addition, Colend is also the core application scenario for CORE token derivative assets, absorbing $17.4M of wCORE and $5.2M of stCORE. The yield-generating scenario provided by Colend for CORE LST has boosted users' willingness to stake CORE, while also providing support to maintain its value.

Moreover, BTC Restaking has become a stable staking and yield-generating scenario for BTC derivative assets. In August, the leading project of BTC Restaking, Pell Network, quickly boosted the ecosystem's TVL growth after launching on Core, with the inflow of assets still mainly coming from Solv Protocol, which has accumulated a value of $108.3M in Solv derivative assets. In terms of project incentives, Pell Network provides the highest multiple of point rewards support for SolvBTC on Core, while Core also offers a 5X Ignition Drop reward for Pell Network, further enhancing the participation and application of BTC LST in the Pell Network protocol within the Core ecosystem. As of now, Pell Network's cumulative TVL has reached $271.7M, with nearly half of the contribution coming from the Core ecosystem.

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• Incentive structure supported by the airdrop and market performance of the native token CORE

In May 2024, Core launched the Sparks incentive program, aimed at accelerating ecosystem adoption and expansion by rewarding on-chain contributors. The second quarter is currently underway. Unlike projects that rely on point incentives and have unclear token issuance expectations, Core launched its native token CORE as early as 2023 and successfully completed its initial airdrop, laying a solid community foundation. As the ecosystem's native token, CORE is primarily used for paying transaction fees, network staking, earning rewards, and participating in on-chain governance. According to the Tokenomics design, user rewards account for 25.029% of the total CORE supply, totaling 525.6 million tokens. Previously, Core conducted an airdrop activity through the Satoshi App, distributing a large number of tokens to ecosystem participants, increasing user long-term attention and continuous contribution to its ecosystem. The second quarter airdrop plan will unlock 24.7 million CORE, of which 17 million will be used to reward participants, continuously driving user enthusiasm for participation in the Core ecosystem.

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) 2.2 Corn: Points derivative gameplay efficiently attracts BTC LST market liquidity

Basic Information

Corn is a recently launched ETH L2 network that uses a hybrid tokenized Bitcoin (BTCN) as gas fees and an economic incentive tool, aiming to unify the interests of users, developers, and liquidity providers. The core of Corn's incentive mechanism lies in the veCHAIN model, where the stakers of the CORN token will determine the distribution of network rewards.

Currently, Corn has not yet launched its mainnet, but it has effectively attracted $425.8M in funds through a joint deposit activity, significantly surpassing BTC scaling layers that have already gone live, such as Merlin and BSquared. These deposits are mainly concentrated in pools launched on Pendle together with several BTC LSTs including LBTC, SolvBTC.BBN, eBTC, PumpBTC, and uniBTC, accounting for 85% of the current total TVL.

rise strategy

• Leading BTC LST point derivative gameplay in collaboration with Pendle

The points derivatives market is one of the key strategic scenarios for BTC LST as interest-bearing assets. As the leading protocol in this sector, Pendle began integrating various BTC LSTs at the beginning of September. Currently, the collaboration between Corn, Pendle, and BTC LST supports five major BTC LST assets: LBTC ### $41.5M TVL, $1.1M 24h Volume (, SolvBTC.BBN ) $97.5M TVL, $300K 24h Volume (, eBTC ) $20.2M TVL, $658.4K 24h Volume (, PumpBTC ) $60.5M TVL, $437K 24h Volume (, uniBTC ) $70.6M TVL, $20.8K 24h Volume (, which accounts for 11.4% of the total BTC LST market volume, and the multi-party cooperation has generated a positive synergy.

For BTC LST holders, the points leverage market offers a variety of strategic gameplay, and Pendle has become a major application scenario, accounting for 10%-30% of the total supply of BTC LST. In addition, Corn provides the maximum multiplier point incentives for these pools, further attracting more holders to participate. For Corn, BTC LST is a core contributing factor to driving the TVL rise in its early stages. Currently, these pools are the only applications generating external benefits in Corn's point mining activities, laying the foundation for its future mainnet launch.

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• TVL BootStrap Campaign

  In the existing point mining of Corn